Higher physician compensation driven by demand, not productivity

Physician compensation continues to grow despite no significant change in productivity, according to a recent survey from consulting firm SullivanCotter.

In fact, physician compensation has been evolving with changing models of care over the past few years, including addressing models focused on population health and value-based care. The looming shortage of physicians and higher demand is also driving up total cash compensation (TCC), according to the survey.

And those evolving compensation trends aren’t trending alongside higher productivity. From 2014 to 2019, TCC rose 14.7% for primary care physicians, while relative value units (RVU) productivity dropped 0.2%.

"With growing concerns regarding provider supply and demand, organizations are evolving their compensation programs to align with an increasingly competitive talent market,” Dave Hesselink, principal at SullivanCotter, said in a statement. “With a looming physician shortage placing pressure on organizational recruitment and retention strategies, this demand continues to push physician compensation upwards without being supported by corresponding gains in productivity or reimbursement––resulting in higher levels of organizational investment per physician.”

Higher demand is also driving up compensation for family medicine and internal medicine without productivity changes.

However, some care settings are adding means to evaluate productivity as compensation and physician demand rises. For example, hospital-based physicians saw median productivity rise 5.2% over the five-year period––this was the only specialty group with productivity increases higher than 1.5%.

Value-based care models that offer financial incentives for quality measures are increasingly becoming a part of physician compensation. The prevalence of these models jumped 5% to 7% across all four major specialties from 2018 to 2019. Among primary care, value-based models were up 5% from 2018, and 62% of organizations incorporating these models into their physician compensation programs.

However, the value-based performance amounts only made up a median of 6.2% of TCC for all physician specialties in 2019, up from 5.6% in 2018. Primary care physicians saw a higher proportion, at 7% of TCC in 2019, followed by hospital-based specialties at 6.3% and medical and surgical specialties at 6%.

"While reimbursement models continue to evolve and organizations are focused on incorporating more value-based components into their physician compensation programs, it is important to note that quality incentive payments still only comprise a small portion of TCC,” Mark Ryberg, principal at SullivanCotter, said in a statement. “We expect to see continued growth in value-based incentives as organizations work to further develop and refine these programs to ensure they have credible measurement and reporting systems in place before moving forward.”