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What’s happening with hospitalist compensation
Compensation continues to rise, but look for big pay differences among regions and practice settings

Keywords: Survey shows that physician compensation continues to rise, but pay and incentives differ greatly among regions and practice settings


by Edward Doyle



Published in the 2009 Today's Hospitalist Compensation & Career Guide

Despite a historically tough economy, overall compensation for hospitalists seems to have fared well over the last year.

The results of the 2009 Today’s Hospitalist Compensation & Career Survey are in, and mean compensation for all hospitalists rose from $190,923 in 2008 to $204,227 in 2009. That’s a gain of 7%, which isn’t too shabby considering the state of the economy.

Those numbers don’t mean, however, that everyone in hospital medicine is doing that well. According to survey data, hospitalists in big cities aren’t doing as well as their rural colleagues. And data from hospitalists working for locally owned groups seem to show that pay for many of those physicians has stalled in the last year.

Despite these bumps in the road, most hospitalists, whether they’re describing their local market or the nation as a whole, say they see solid growth for hospitalist compensation in the years to come. While the job market has cooled in some large urban markets, there’s still plenty of demand for hospitalists in the rest of the country.

Here’s a look at some of the trends this year’s survey data uncovered.

The urban-rural differential
If you’re looking for clear trends in hospitalist compensation, a good place to start is with geography.

While hospitalist programs in large cities may have more than enough physicians to choose from, that’s far from the case outside major metro centers. Because demand is outpacing supply in these areas, compensation remains well above the national average.

In rural areas, total mean compensation is just over $224,000, or about 12% higher than the $200,000 figure that many urban and suburban groups report.

According to hospitalists who regularly work with rural programs, those figures underestimate the differential that hospitalists working in these areas are being paid. Tarun Kapoor, MD, a hospitalist in southern New Jersey who’s a consultant with Clinical Colleagues Inc., a hospitalist management company, says that programs he’s worked with in the Midwest and Southwest have offered hospitalists nearly $300,000 to work 15 shifts a month. To further sweeten that rich pot, groups are offering productivity bonuses that start at $40,000.

“If you’re brave enough to leave your local confines and go somewhere off the beaten path,” Dr. Kapoor says, “you can make a killing.” Because most hospitals offering these packages are smaller, rural institutions, one hospitalist may provide 24/7 coverage for seven straight days. Dr. Kapoor says that patient volumes are usually reasonable enough that hospitalists aren’t expected to be on-site 24 hours a day.

“If you have 12 patients in the hospital,” he explains, “you come in, see your patients, then go home. If you’ve got an ICU admit, you’ve got to come back in. And if you’ve got someone who crashes on the floor and is revived by the ED, you’ve probably got to come back in again.”

Dr. Kapoor also points out that hospitalists don’t necessarily have to live in these rural areas to work there. He’s been approached more than once by hospitals offering him $1,500 to $2,000 a day to work in a hospital that is 100 miles or so from where he lives.

Shifting regional differences
When it comes to geography and physician pay, the Northeast has typically lagged behind the rest of the country. The reason, according to the conventional wisdom, is that the region has so many universities and medical schools, which tend to pay less, and because the area is generally so desirable.

That makes one result from this year’s data a little puzzling. In the survey, hospitalists from the Northeast reported an increase in compensation of 14%, a rate higher than any other region in the country. While hospitalists in the Northeast are still the lowest paid in the nation, they made significant headway this year in bridging that gap.

Hospitalists from the region say that a number of factors may be at play. Joseph Li, MD, director of Boston’s Beth Israel Deaconess Medical Center hospitalist program, says that if the numbers are right, they may mean that the number of community-based hospitalists in the Northeast may be on the rise. Because these jobs tend to pay more than traditional academic jobs, they could be pushing up the overall pay of hospitalists in the region.

In the Boston market, he adds, the large number of mature programs may also translate into a more mature workforce. Data show that hospitalists with 10-plus years of experience, for example, earn more than their younger counterparts.

One trend that may have contributed to the growing numbers of nonacademic hospitalists throughout the Northeast, Dr. Li says, is the number of teaching hospitals that have created nonteaching services so they can comply with resident work-hour rules. “At these groups, which are essentially hospitalist programs within teaching institutions,” Dr. Li explains, “pay to work on non-teaching services is generally higher than pay on teaching services.”

Dr. Li also says that in the Boston market, compensation for primary care physicians has gone up. That has created new workforce issues for hospital medicine, which has become accustomed to luring primary care physicians—a recruiting pool that may be shrinking.

The impact of practice setting
Another segment of compensation that appears to be in flux is pay in hospitalist groups that are locally owned. Hospitalists who work for locally owned groups reported such a low increase in their wages that they actually fell behind inflation.

Hospitalists working for locally owned groups report almost no increase for a gain of only $272. That’s compared to a gain of more than 10% for hospitalists working for national management companies and nearly 9% for hospitalists employed by hospitals.

Put another way, in last year’s survey, hospitalists working for locally owned groups reported a higher level of compensation than their colleagues in every other category. This year, however, they’re ahead of only one group in terms of total compensation: hospitalists who are employed by universities and medical schools.

What’s behind this apparent reversal of fortunes, and is it real or a statistical aberration? Hospitalists in locally owned groups we talked to say that a number of possible factors could be driving a trend toward reduced pay.

For those groups that accept financial support from the hospitals they serve, the brutal economy is one logical explanation. A number of locally owned hospitalist groups say that hospitals are scrutinizing the support they give hospitalists because of tough financial conditions. Put simply, hospital administrators are looking for ways to wring more value out of their physicians, and hospitalists are in their sights.

Pressure on local groups
Krishan Nagda, MD, founder and CEO of Central Florida Inpatient Medicine, a hospitalist group in central Florida with nearly 40 physicians, says his group is seeing the financial support it receives from hospitals starting to slip. At the same time, hospital administrators are pushing his group to keep adding services, tackling areas like post-discharge calls, and to improve performance on core measures and patient satisfaction surveys.

“To compete with hospital employed groups or national companies,” Dr. Nagda says, “local groups have to come up with systems to accomplish these things, and that costs money. What you see is that physician compensation, which was very rich a few years ago, is becoming strained.”

The economy isn’t the only factor driving this pressure in his market. A number of independent hospitalist groups are more than willing to do what hospital administrators ask if Dr. Nagda’s group doesn’t like the terms.

“When I started this practice nine years ago,” he explains, “we had five or six groups competing. Now we have 15 in the same area.”

In his area, at least, Dr. Nagda doesn’t see financial support from hospitals improving anytime soon. “We’re not seeing an increase in hospital support,” he explains. “We’re seeing a decline because hospitals are utilizing the extremely competitive market in this area to drive costs down to get other groups to perform.”

Ongoing hospital commitment
That’s not, however, the universal experience of locally owned groups around the country. Weston Chandler, MD, says that local groups in the area surrounding Newport Beach, Calif., where his 27-member hospitalist group serves two hospitals, haven’t seen any stagnation in pay. He points out that his group—Pacific Hospitalist Associates—is still paying more than a traditional type of HMO- or university-employed practice.

Dr. Chandler does agree that hospital support is being scrutinized “very closely” as hospitals take a close look at their investment portfolios. And while physician compensation in his area hasn’t been affected, there have been some changes at one of the hospitals where his group has a larger presence and receives financial support.

“We have been asked to do more work for the same pay,” Dr. Chandler says. “We’re being asked to see more patients with the same number of FTEs.”

While he acknowledges that the increased patient load affected physician morale, the story has a happy ending. When Dr. Chandler told hospital administrators that physician morale was being hurt—and that a physician was leaving as a result—they quickly relented and agreed to fund two more hospitalist positions. “They were then very supportive,” he explains, “and didn’t want to jeopardize the program.”

The issue of subsidies
When Wiley Robinson, MD, co-founder of Inpatient Physicians of the Mid-South, hears about the problems that groups are having dealing with diminishing levels of financial support from hospitals, he breathes a sigh of relief. That’s because his group, which works out of the Memphis area, accepts no financial support from the hospitals where it works. Dr. Robinson says the physicians at his group out-earn their colleagues, and that they saw a pay increase last year in the neighborhood of 5%.

He estimates that about half of locally owned hospitalist groups in the country receive some level of support from hospitals. But he has purposely chosen to avoid that mode.

“We chose no support because we didn’t want to be at the mercy of the parent institution,” Dr. Robinson says. His group has instead embraced a model in which physicians live solely off their billings. “We’ve looked for a variety of ways to enhance our income so we’re not whipsawed by factors that we can’t control.”

To produce the right mix of billings, the group’s physicians work in a variety of settings: five hospitals, three long-term acute care centers and three skilled nursing facilities.

The growing role of incentives
Another trend that isn’t necessarily news, but is significant anyway: the amount of compensation that hospitalists report receiving from incentives. Hospitalists treating adult patients say they receive an average of $33,555 of their compensation from incentives and bonuses.

Roger A. Heroux, PhD, MHA, a partner with the consulting firm Hospitalist Management Resources, says that at some programs he works with, between 20% and 30% of hospitalist pay comes from bonuses and some type of productivity incentive. While he says the 30% figure is on the high side, Mr. Heroux sees these programs migrating to incentive-driven compensation plans because programs are under so much pressure to expand to include co-specialty and surgical comanagement.

According to our survey data, productivity is the single most popular metric used to determine incentive pay. Nearly two-thirds of hospitalists (62.6%) say their incentives are based on factors like RVUs, number of admissions and the number of shifts worked.

Other measures used to reward physicians financially include compliance with core measures, performance on patient and clinician satisfaction surveys, and documentation.

Mr. Heroux thinks that the growth of incentive pay for hospitalists is a positive trend for the specialty because hospitalist programs are expanding very aggressively to meet the needs of both the hospital and the medical staff. He worked with a large hospital in Florida, for example, where hospitalists admit more than 95% of all patients because patients have so many medical issues that need to be addressed before specialists get involved. In addition, the majority of these patients are seniors, so the hospital needs to do well on Medicare quality measures.

“If you’re going to be successful in a Medicare environment,” Mr. Heroux points out, “you’ve got to be extremely efficient and effective. Hospitalists can help meet core measures and other quality indicators.” Hospitalist involvement throughout inpatient care also improves continuity of care and the planning for post-acute care placement, he adds. “This will become even more important as the CMS focuses more on reducing readmissions.”

Will base pay continue to rise?
Another veteran of hospital medicine who thinks that incentives are the wave of the specialty’s future is Stephen L. Houff, MD, founder and CEO of Hospitalists Management Group (HMG).

His group, which has more than 300 physicians in nearly 45 practices nationwide, incorporates bonuses based on quality and service goals. Dr. Houff says that last year, about half of all HMG groups generated an incentive bonus. In the first quarter of this year, all but one earned a bonus.

“Our physicians’ income is up substantially,” Dr. Houff explains, “but it’s on the basis of merit and not driven by local market factors.”

Dr. Houff sees hospitalist pay growing, but not necessarily from increases in base pay, which he thinks has started to plateau in certain markets. Instead, he sees the real growth coming from incentives pegged to factors like documentation, quality measures, and performing procedures such as airway management and line placement.

“Now that base physician compensation is at or above market in each of our practices, I don’t know that we can expect hospital clients to continue to contribute more on a per-physician FTE basis,” Dr. Houff says.

Not everyone, however, shares the view that base pay for hospitalists may have hit a ceiling. Dr. Chandler from Pacific Hospitalist Associates, for instance, says that in his area, hospitalist compensation appears to be growing, and not just in terms of incentives.

“When we’re interviewing candidates in this area,” he explains, “if I don’t talk about $200,000 at a minimum with the potential for increases, physicians go deaf and don’t want to hear anything else.” As long as other programs in his area compete on salary, Dr. Chandler adds, base pay for hospitalists will have to rise.

Edward Doyle is Editor of Today’s Hospitalist.




The Philadelphia story

According to Tarun Kapoor, MD, a hospitalist in southern New Jersey, increased competition between hospital medicine groups is one reason why hospitalists in the Northeast are seeing their compensation rise.

When Dr. Kapoor—who is a consultant with Clinical Colleagues Inc., a hospitalist management company—first started looking for a job in the Philadelphia area about five years ago, a prestigious academic center offered him a position that would have paid less than six figures. He turned down the offer, but he thinks that low number says something about the mindset of employers—and young physicians—in his area.

Teaching hospitals, he says, have a direct pipeline of residents who may be reluctant to look for jobs outside of those institutions. That may make some of these physicians a captive (and low paid) population.

“The only world these physicians know is where they were trained,” Dr. Kapoor says. “There’s a school of thinking that says that the only proper medicine you’ll ever learn is in your medical center.”

Dr. Kapoor says that in the Philadelphia market, a single event may have helped change the compensation landscape. A large national hospitalist management company came into town a few years back and promptly began paying its hospitalists salaries that were shockingly high for the Philadelphia market. Word about the group’s compensation spread quickly, says Dr. Kapoor, and helped raise the bar for hospitalist pay in the area.

In the five years since he began working in the Philadelphia job market, Dr. Kapoor has nearly doubled his pay. (Some of that bump comes from his informatics work in the hospital where he’s employed as a hospitalist.) While he thinks that good career choices can account for much of that rise in pay, he acknowledges that changing market conditions also played a role.
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