Part #1: MGMA Physician Compensation | New Data Set Reveals the Latest Trends

Part #2: MGMA data set deep dive

Stock market…inflation…expenses…do you feel that visceral response instigated by these words given our current market?! This may directly impact how you are paid by your employer, so read closely! As some of you may recall, I’ve been reviewing for you the 2022 data reports MGMA has been publishing over the course of this year. In July, MGMA released the 2022 Cost and Revenue report, which we’ll review in more detail today. This dataset includes benchmarks on expenses, charges, and revenue, and is an eerie insight into the impacts of the recent inflation on the business of our practices, whether private or employed.

To provide a quick recap of the other reports released this year that I’ve reviewed: In May 2022 they published the 2022 MGMA Provider Compensation and Production report, which overall expressed promising improvements in physician compensation. In the report they addressed the data trends in productivity, physician compensation, advanced practice provider (APP) compensation, post-residency providers, and regional trends. Details surrounding this report were discussed in my blog, which I encourage you to check out. In June, MGMA released the 2022 Management and Staff Compensation report, “Competing for Talent and Building Culture amid the Great Reshuffle.” This report looks at compensation trends for C-suite to front desk positions and supplies a fascinating, enlightening, and somewhat horrifying insight into these trends across the workforce, and is discussed in this blog.

In short, inflation has impacted everyone. Combine that with staffing shortages and health systems have seen dramatic losses and/or very tight operating margins. This report outlines 5 areas with eye-opening data trends.

Productivity Gaps by Encounters

The recovery has not been equal for physician-owned versus hospital-owned practices since 2019. This report outlines differences in productivity based on encounters and work RVUs. Surgical and nonsurgical specialties have seen a large uptick in their encounters while physician-owned practices remain dramatically lower relative to their pre-pandemic levels. For example, nonsurgical specialists in hospital-owned practices are seeing 22.55% more encounters while their physician-owned counterparts are seeing -25.52%. Surgical specialists in physician-owned practices saw the most dramatic decline in encounters, of -34.25%.

Primary care continues to lag in encounters in both settings, interestingly. MGMA does not offer data or a hypothesis regarding why this has occurred. Perhaps hospitals generated greater efforts to recruit patients back to the office, while private practices may have lost some of their physicians to employed positions during the pandemic and/or are struggling to recruit patients back.

Productivity Gaps by work RVUs

In regards to work RVUs, again surgical specialties are lacking, but this time both on the hospital and physician-owned side (-1.65% and -1.38% overall). Primary care and nonsurgical specialists on the hospital-owned side both saw upticks (9.46% and 5.30% respectively), while physician-owned primary care specialists saw a decline (-4.87%) and physician-owned nonsurgical specialists were the only physician-owned group to see an increase (8.91%). The work RVU data doesn’t appear as dramatic as the encounters. Although this data set suggests supply chain and staffing shortages may contribute, I would imagine the Center for Medicare and Medicaid adjustments to RVU allocations may also impact the difference between encounter and wRVU data here. As many of you may have noticed in new compensation plans assigned from your employers, CMS adjusted the RVUs in 2021 and decreased reimbursement rates for many.

While those in private practice often desperately hope to stay in that setting, it’s hard to imagine how they can continue to endure these losses and maintain their financial wherewithal.

Recovery: physician-owned vs hospital-owned practices, not an equal course

Medical revenue

The total medical revenue (as submitted per FTE physician) from 2020 to 2021 showed an increase across the board, for both physician- and hospital-owned practices. This looks optimistic, however, when you consider the data trend from 2019 to 2021, physician-owned primary care and surgical specialists still lag (-$74,844 and -$71,480 respectively). Given that in the past year physician-owned primary care practices only saw a $3,258 increase in revenue, if they maintain a linear growth curve, it will take 23 years to recover! So primary care private practices are going to need to strategize rapid growth techniques to remain financially fit. If you are a provider in this position and have found strategies to share with our colleagues, please do so. Interestingly, 90% of medical practices reported costs have risen faster than revenues in 2022, of course an unsustainable trend.

Operating expenses

A combination of surging inflation, consumer prices and pipeline shortages in the wake of the COVID pandemic has resulted in a dramatic rise in operating costs. Specific factors that were ranked as contributing to rising operating costs included consulting fees, rising insurance premiums, and drug/medical/surgical supply costs. The highest trend has been in nonsurgical specialties. In the past year (2020-2021), physician- vs. hospital-owned practices have seen a 20.04% and 21.57% increase, respectively, while in the past three years (2019-2021) the trend was 36.01% and 17.52%. We’re beating national inflation averages here…not in a good way! Those that declined were primary care in hospital-owned practices (-10.91% over 2019-2021) and surgical specialists in physician owned practices (-10.20% from 2020-2021). The latter may be attributed to the halt in elective surgeries during the COVID-19 surges. MGMA offers no hypotheses to the decrease in primary care operating costs – are the consulting fees being directed towards identifying strategies for hospitals to maintain physician compensation on the lower end in order to mitigate other operating expenses they cannot control…?

Staffing shortages

As we all know, the Great Resignation has impacted multiple labor markets, including the health care system. Many of my physician colleagues have found themselves without an MA or an RN for extended periods of time, which may likely contribute to decreased job satisfaction, decreased productivity, and increased rates of burnout as we take on additional workplace responsibilities not previously expected. Hiring and retaining support staff – especially MAs and RNs – continues to be an issue, with decreases in support staff from 2019 to 2021 seen in primary care and surgical specialties, both for physician- and hospital-owned practices, while nonsurgical subspecialties have interestingly seen a flat rate or increase in numbers.

Key Takeaway

Overall, employers, whether those are hospitals or private practices, are feeling the pain of rising costs and resultantly dropping revenues. With increasing rates of labor costs both from wages as well as the use of travelers/locums, supply costs, rental rates for facilities, professional liability insurance rates (62% of practices shared their malpractice premiums have risen and of those, nearly half say that was a premium increase of 10-19%), one can clearly see how revenues have declined overall. As physicians we need to recognize when and how the purse strings may be tightened to best protect ourselves and advocate for fair compensation in the setting of rising costs of living, complexity of patients, malpractice, etc. Let us at Contract Diagnostics help you review your contract and support you to achieve your compensation and lifestyle goals.

Source: Cost and Revenue: An MGMA Data Report. “Maintaining Margin in the Inflation Era.” July 2022.

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