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Compensation Levels Hold Steady, but Future Uncertain

Compensation Levels Hold Steady, but Future Uncertain

When it comes to compensation, psychiatrists have not had a lot to celebrate over the last few years. Managed care and discounted rates have held down revenues, as have Medicare reimbursements cuts. Meanwhile, fixed costs have continued to rise, and the prospect of ever-higher premiums for malpractice insurance has sent shudders through the entire physician community.

But things could be worse. In February, the U.S. Congress voted to replace a 4.4% cut in Medicare reimbursements that had been scheduled to take place on March 1 with a 1.6% increase. The rate change resulted from a move to correct the faulty estimations that had served as the basis for calculating Medicare rate cuts.

And compared to other physicians, psychiatrists enjoy a higher level of flexibility that could serve them well in weathering financially trying times, primarily through lower overhead costs.

However, while there has not been a lot of attention paid to compensation for psychiatrists, especially compared to surveys of overall physicians' compensation, enough data exist to create a picture of where most psychiatrists stand today.

The MGMA Survey

The Medical Group Management Association's (MGMA) latest physician compensation survey found a slight increase in compensation in 2001, the last year for which data were available, but those increases came at a price--longer work and more cost-cutting.

The 2002 "Physician Compensation and Production Survey" noted that its findings did not reflect the 5.4% cut to Medicare payments that took effect on Jan. 1, 2002.

When the findings were disclosed, MGMA's president and CEO, William F. Jessee, M.D., said in a press release that the Medicare cuts, coupled with industry-wide increases in medical liability premiums, would lead to a far different compensation picture for 2002. Those data are being analyzed now and will be issued in MGMA's survey later this year.

According to the MGMA, psychiatrists in 2001 earned a median salary of $154,239.

With the exception of capitation effects, there appears to be little variance in compensation levels received by psychiatrists in different practice settings and with different levels of experience, David N. Gans, director of practice management resources at MGMA, told Psychiatric Times. That does not occur in many other specialties. Often, economies of scale allow physicians in large practice settings to achieve higher compensation.

But psychiatrists traditionally do not have a lot of ancillary services or specialized equipment, Gans reminded PT. Consequently, more similarity than dissimilarity exists in compensation levels between behavioral medicine single-specialty practices and multi-specialty groups. And that gives psychiatrists more flexibility in choosing how to practice.

The ratio of collections to compensation is very high for psychiatry, a reflection of lower overhead, Gans said. "You don't have the equipment costs and some of the facility costs that other specialties will incur."

Because psychiatry is a cognitive specialty, limited by the number of patients any one doctor can see on a given day, compensation levels show a great deal of consistency, he explained to PT. The difference between the median compensation and the 90th percentile is less than $60,000. And starting salaries, which look at the first two years in practice, are nearly at the same level as salaries for established psychiatrists (Table 1).

Gross charges are a good measure for determining relative workload compared to compensation since they do not reflect discounted rates, Gans explained. In both single-specialty and multi-specialty practices, psychiatrists have basically the same amount of charge. But as capitation increases, workload increases in order to make up for declining collections.

Those declines are not only the result of capitation, however. Heavily capitated markets have a higher level of competition, and even non-capitated patients will have major discounts, according to Gans. In a city where 50% of patients are covered under capitated plans, a large portion of the remaining 50% of patients receive discounted care through Medicare, Medicaid and fee-for-service managed care.

In the past five years, compensation to psychiatrists has increased 13.3%, Gans said. However, on a per year basis, the increase is just over 2.6%, which has failed to keep pace with the cost of living (Table 2).

Other Compensation Findings

The American Medical Group Association, whose members generally belong to larger group practices than those who join the MGMA, listed the following median salaries for 2001:

  • Psychiatrists $158,275
  • Child psychiatrists $172,017
  • Psychologists $80,406

According to a 2000 survey conducted by the publication Psychotherapy Finances, psychiatrists in private practice on average received income from the following sources: Self-pay (46.2%), managed care (23.1%), indemnity insurance (15.3%) and other third parties (9.2%). Other sources accounted for 6.2% of income.

The Psychotherapy Finances survey also found that between 1997 and 2000, psychiatrists reported an income increase of 13.7%. Psychologists, on the other hand, reported a 0.7% decrease over the same period. Social workers saw their income rise 6.2%.

The survey also tracked the percentage of psychiatrists offering particular services:

  • Individual therapy 100%
  • Group therapy 50%
  • Chronic illness 34%
  • Substance abuse 34%
  • Psychological testing 32%

The survey found little difference in expenses for clinicians in different practice settings. Solo-practice clinicians spent 35.8% of their gross revenue on expenses, while group practices spent 34.7%.

A 2000 survey by the National Council for Community Behavioral Healthcare offers the most recent look at how community mental health care centers are compensating their psychiatrists (Table 3).

Psychiatrists working at community mental health care centers in New England had the lowest median salary, at $106,090. The Middle Atlantic and Mountain states also had median salaries below the overall median, at $115,000 and $113,000, respectively. The Pacific states had the highest median salary at $130,000.

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