Trends in Rural Physician Compensation

As rural hospitals work to attract and retain the right mix of physicians in today’s health care environment, they face even stiffer challenges than their urban counterparts. On top of a labor shortage, inflation and supply chain issues, rural hospitals need to keep their compensation competitive to attract the right mix of physicians for their area.

Health care valuators assist hospitals and physicians in determining physician compensation that meets fair market value for regulatory compliance. Hospital administrators typically know what they want to pay, they know what physicians or physician groups are asking, they know what surveys say, and they may know what their peers might be paying.

But to accurately determine physician compensation in today’s environment, a health care valuator must take a variety of factors into account. Three key factors come into play:

  1. What are the requirements of the service the physician is going to provide?
  2. What is the utilization for this service, distinct from value or volume of referrals?
  3. What is the market-specific supply and demand for this service?

Current Trends

In general, rural hospitals have less funding available but physician compensation has not declined as a result. Labor shortages, supply chain disruptions and general inflationary pressures have led to higher costs for rural hospitals just as federal funding in response to the pandemic winds down. Even with these conditions, hospitals are still willing to pay higher rates to critical needs physicians to keep them in rural areas.

Certain specialties have trended upwards in rural areas more than others. Where there is a greater health care need, physicians are holding the line or even increasing their salaries. Notable specialties include urgent care, pulmonology, psychiatry, cardiology (invasive and electrophysiology), OB/GYN, gastroenterology, hospitalists, orthopedics, and general surgery. Moreover, commonality exists among these specialties in different types of arrangements.

  • Clinical compensation: The market is experiencing higher compensation in rural areas in terms of overall compensation and/or compensation per work RVU.
  • On-Call compensation: In rural areas, burdens such as more frequent call volumes per shift and coverage days per month continue to influence pay premiums.
  • Compensation Specialties On-Call Daily Rate (Per 24 Hrs) Calls Per Shift Coverage Days Per Month
      Count % Rural 25th Median 75th 25th Median 75th 25th Median 75th
    General Surgery 78 39.7% $938 $1,000 $1,500 3.3 7.5 10.0 3.0 5.0 7.0
    Cardiology - Invasive/Interventional 36 25.0% $500 $925 $1,125 1.0 3.0 5.0 4.0 5.0 7.0
    Obstetrics/Gynecology - General 26 19.2% $500 $625 $1,515 2.1 5.0 7.0 2.0 2.3 6.0
    Orthopedic Surgery - General 76 15.8% $960 $1,150 $1,725 3.0 5.0 8.5 2.0 4.0 5.0
    Gastroenterology 28 10.7% $588 $1,000 $1,225 2.8 10.0 15.0 3.0 4.8 7.0
    Family Medicine 12 58.3% $275 $600 $713 3.0 4.0 8.5 4.0 4.8 6.0
    Pediatrics - General 16 56.3% $338 $450 $521 0.9 2.0 4.0 7.0 8.8 10.0
    Weighted Averages 272 27.9% $744 $946 $1,394 2.6 5.7 8.7 3.0 4.6 6.5

 

  • Premium By Quartile On-Call Daily Rate (Per 24 Hrs) Calls Per Shift Coverage Days Per Month
      Count % Rural 25th Median 75th 25th Median 75th 25th Median 75th
    General Surgery 78 39.7% 1.1x 1.5x 2.3x 1.3x 1.7x 1.4x
    Cardiology - Invasive/Interventional 36 25.0% 1.9x 1.2x 3.0x 1.7x 1.3x 1.4x
    Obstetrics/Gynecology - General 26 19.2% 1.3x 2.4x 2.4x 1.4x 1.1x 2.7x
    Orthopedic Surgery - General 76 15.8% 1.2x 1.5x 1.7x 1.7x 2.0x 1.3x
    Gastroenterology 28 10.7% 1.7x 1.2x 3.6x 1.5x 1.6x 1.5x
    Family Medicine 12 58.3% 2.2x 1.2x 1.3x 2.1x 1.2x 1.3x
    Pediatrics - General 16 56.3% 1.3x 1.2x 2.3x 2.0x 1.3x 1.1x
    Weighted Averages 272 27.9% 1.4x 1.5x 2.3x 1.6x 1.6x 1.5x

    Source: BFMV Physician Call Coverage Burden and Compensation Survey 2022
    © 2022 Buckhead FMV, LLC. All Rights Reserved.

  • Medical director compensation: Recruitment and retention challenges have put pressure on rural Texas hospitals to increase rates for some of their most common departments such as clinics, respiratory therapy, ICU, labor and delivery, and cardiac care.
  • Medical Director Hourly Compensation Texas Rural Hospitals All Texas Hospitals
    Department Count Median High Count Median High
    Clinic Short Term Hospital 74 $175 $270 470 $150 $260
    Adults & Pediatrics Short Term Hospital 31 $155 $200 607 $155 $245
    Respiratory Therapy 21 $145 $250 202 $150 $235
    Cardiac Rehabilitation 13 $105 $255 130 $150 $230
    Intensive Care Unit 12 $150 $225 281 $150 $250
    Electrocardiology 9 $195 $215 174 $185 $265
    Labor & Delivery Room 7 $150 $205 153 $150 $230
    Wound / Hyperbarics 6 $185 $225 147 $145 $200
    Renal Dialysis 4 $200 $200 79 $150 $200
    Weighted Averages 177 $160 $245 2,243 $155 $245
    Source: CMS Cost Reports (Worksheets A-8-2), 2017-2021

On the Horizon

One of the most significant trends we’re seeing that is likely to affect physician salaries is acute and critical care being delivered outside of the hospital setting. This includes more remote physician care through at-home models including general acute, rehabilitation and skilled nursing. Additionally, we’ve recently evaluated value based arrangements allowing certain specialists, e.g. general orthopedics and extremities, to perform procedures in-office versus facility settings. These avenues may attract physicians to rural markets while alleviating stressors in traditional facility settings. When health systems and physicians adopt these alternatives in rural areas, valuators must consider the potential shifts in utilization, provider mix and economics that impact FMV of physician compensation.

For information about rural physician compensation and other health care valuation issues, contact us.

©2023

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