CEO SUMMARY: Information on the year-to-year change in average total cash compensation for physicians shows that income is not keeping pace with inflation. That is not news to the physician community. However, pathologists continue to earn compensation that is above the midpoint average for 16 specialties. Compensation is rising swiftly for those pathologists with specific subspecialty skills that are in high demand.
IN ITS 2006 SURVEY of physician income, Modern Healthcare Magazine reported on changes to pathologists’ income.
Modern Healthcare tracks the average total cash compensation by specialty. These numbers are compiled by obtaining information from multiple sources. These include recruitment firms, professional groups, and surveys among physicians. Modern Health reports that compensation for physicians overall is up 3.9% over the previous year.
This figure is less than the current rate of inflation and is top heavy with high-earning specialists like orthopedic surgeons. While compensation has remained fairly flat over the past few years, physicians are still among the most highly paid professionals in the nation, according to the Center for Studying Health System Change.
How did pathologists fare compared to the other disciplines? Annual compensation for pathologists was reported by 10 sources, with average annual total cash compensation ranging from a low of $183,253 (reported by Hospital and Healthcare Compensation Service, a New Jersey-based consulting firm that surveys employed physicians) to a high of $359,615 (reported by the Medical Group Management Association [MGMA], a Colorado-based professional group which does a nationwide survey of members).
Pathology Above Midpoint
When compared against the other listed medical specialties, average total cash compensation for pathology is above the midpoint. Taking the highest reported average compensation for each of the 16 categories reported, pathology ranks seventh. The midpoint between the high and low disciplines is $339,500, with pathologists $20,000 above the midpoint. Both measures put pathologists one level above general surgery on the income scale.
One physician recruiter with experience in placing pathologists notes that several basic trends currently drive pathologist compensation. “First, base salaries for pathologists are climbing,” stated Cathy Witherspoon, Recruiting Manager at System 1 Search in Greenville, South Carolina. “This is particularly true for dermatopathologists over the past several years and most recently for gastroenterology subspecialist pathologists. The reason is high demand for these clinical skills. Commercial laboratory companies have been increasing their compensation packages so as to compete with private pathology groups that hope to recruit the same candidates.
“Second, GI/GU pathologists, dermatopathologists, and hematopathologists are in the highest demand at the moment,” continued Witherspoon. “Accordingly, these subspecialist pathologists are receiving the highest compensation. At the moment there is a huge shortage in these three specialty areas of pathology.
Limited Supply of Fellows
“This problem is compounded by the fact that there are only a handful of fellowship training programs for GI/ GU pathologists,” she added. “Thus, the supply of fellows available each year is much less than demand. Laboratory companies and pathology groups are driving up compensation for these specialists as they compete to hire the few available subspecialist pathologists.”
Witherspoon notes that the trend in pathology is to offer a base with an incentive. “Typically, hospitals do not contract with their pathologists directly, but go through private practice groups or commercial laboratory companies,” noted Witherspoon.
“Laboratory companies typically offer a base salary with a required volume threshold for the number of slides that are read,” Witherspoon said. “An additional dollar amount is then paid to the pathologist for all slides read above that threshold, with no stipulation on an upper limit that may be read.
Productivity Drives Pay
“This system tends to favor companies and pathologists who take advantage of modern technologies and use sophisticated information systems to improve the quality of clinical services while boosting productivity,” observed Witherspoon. “These are attributes that contribute to a more productive work flow in the laboratory while supporting faster turnaround times for test results.”
Since 1995, Doctor Earnings Failed to Pace Inflation Rate
PHYSICIANS KNOW THEY EARN LESS MONEY than in past years and the statistics validate this fact. Based in Washington, DC, the Center for Studying Health System Change reports that, between 1995 and 2003, the average net income earned by physicians declined 7% after accounting for inflation during those years.
Reimbursement from both Medicare and private payers played roles in this outcome. While the cumulative rate of inflation for this eight-year period was 21%, Medicare payments increased by just 13%. In the private payer segment, commercial fees in 1995 averaged 1.43 times Medicare. That had declined to 1.23 times Medicare by 2003.
The private payer statistic demonstrates how private insurance plans are steadily adopting Medicare coverage and reimbursement policies for their own beneficiaries. Because the Medicare program is strapped for funding and likely to arbitrarily reduce physician payments in future years, the decision of private payers to base their own reimbursement levels on Medicare is not an auspicious development for the physician community.