Primary care physician pay posts sharp gain

More doctors opt for employee status

Led by primary care physicians, income levels for the nation’s doctors posted solid gains during 1995. Median physician income climbed 6.7% for the year, rebounding from 1994’s first-ever decrease in physician pay, according to an annual survey by the Chicago-based American Medical Association (AMA).

Experts aren’t sure what to make of the results of the survey. Many who had viewed 1995 as a continuation of the trend which led to 1994’s 3.8% decrease in median income expressed surprise at the strong gains.

"We don’t know what happened," says James Moser, PhD, director of socioeconomic research at the AMA’s Center for Health Policy Analysis. Moser says that the volatility in the survey results reflects volatility in the market. He says the AMA is not speculating what the 1995 numbers mean for physician income in future years.

AMA Trustee Donald Lewers, MD, hypothesizes that 1995 may have marked the low-water mark for managed care and that there may be less pressure on physician reimbursement going forward.

"What you see is a combination of things," says Joe Frank Smith, MD, an orthopedist in Dothan, AL. Outside of the managed care arena, Medicare reimbursements climbed for many subspecialties, he says. "The other thing is that physicians are learning how to work in the managed care environment."

However, not everyone agrees with that assessment. Sam Romeo, MD, president/CEO of University IPA at the University of Southern California Medical School in Los Angeles, says there are real problems in reviewing average income levels. On the West Coast, there are huge discrepancies which tend to be overlooked in the process of compiling a statistical average, he says.

"The high-fliers are still flying high," he says. Meanwhile, many other physicians continue to struggle in the managed care environment. Specialist incomes continue to take a beating at the hands of primary care physicians, he says.

The survey confirms that notion. Primary care specialties reported generally higher increases than the average for all physicians. The only exception was internal medicine which showed no change. (See chart, p. 30.)

The managed care philosophy has been to direct the money to primary care and to keep patients away from the specialists, says Smith. That may change in the future, he says, because some managed care companies have decided that primary care physicians are not necessarily the most cost-effective way to provide care.

"What they have found in heavily managed care environments is that primary care docs don’t save money in the long run," Smith says.

The survey shows that physician participation in managed care contracts rose markedly. In 1995, 83% of physicians had negotiated contracts with one or more managed care organizations vs. 77% in 1994. The share of revenue derived from managed care contracts did not change significantly, however.

What may have the greatest long-term impact on physician earning power is the continuing trend toward physician acceptance of employee status. For 1995, 39% of the physicians surveyed were employees, up from 36% in 1994. Self-employed physicians composed 58% of the market in 1994 but only 55% in 1995.

Self-employed physicians surveyed earned about 50% more than physicians who worked as employees. Self-employed physicians reported median incomes of $199,000, an increase of 13.1% over 1994 levels. Employee physicians had median incomes of $136,000. Their year-to-year increase was 4.6%.

The survey also shows that physicians work hard for the money they earn. On average, physicians put in a 56.7-hour work week.

The AMA survey was conducted as a random sample of 4,000 practicing physicians from across the country.