John C. Erickson III

This question may be asked for a variety of reasons. Is it time to renew an employment agreement with your group practice? Does your group practice need a basis to make an offer to a prospective physician? Or, as is often the case these days, are you wondering what a hospital might pay or do you need to analyze a hospital’s offer of employment?

The good news is that several resources provide guidance regarding market compensation. The most common resources are reports published by the Medical Group Management Association, the American Medical Group Association, and Sullivan, Cotter and Associates, Inc. Each of these entities conducts an annual survey of physician groups and hospitals that employ physicians. The survey data is reported by specialty and presented on both a national and regional basis. The reports typically state the 25th, 50th, 75th, and 90th percentile data points for total compensation, per-wRVU compensation, wRVU productivity, and other related measures.

As a result, an invasive cardiologist in Delaware could consult the National and Eastern survey data for invasive cardiologists to get an idea of the market compensation for invasive cardiology. The surveys, of course, do not state what an employer will or should offer/pay a particular physician. Instead, they reflect the compensation reported for the population surveyed. Each survey involves a different physician population (e.g., one has an emphasis on academic medical centers), so it requires some familiarity to determine whether a survey applies or how it should be weighted among other surveys to be relevant to a particular local market.

It is also important to know what data to look for in the reports. Considering that many hospitals will compensate physician employees on a per-wRVU basis - a “productivity basis” - per-wRVU data is often more helpful than total compensation data. An offered per-wRVU rate should be compared against relevant per-wRVU survey data to determine if the offered rate is at, above, or below the median rate. If the offered rate is deemed to be at market, then the expected clinical compensation will simply be the product of that rate multiplied by the expected annual wRVU production.

Regulations require that compensation paid by a hospital to an employed physician who might refer patients to such hospital must be consistent with fair market value. Appraisers use the survey data to determine whether compensation is consistent with fair market value. Most appraisers believe that per-wRVU compensation at the median of applicable survey data is by definition consistent with fair market value. A per-wRVU rate above the median might be consistent with fair market value based on specific factors. Alternatively, a hospital might elect to offer less than the reported median rate for business reasons. For example, the surveys might not accurately reflect the actual current market in a particular area. Regardless of what a hospital (or other employer) offers, a physician will benefit from using reported data to assess that offer.

Although the good news is that these resources exist, the bad news is that these resources are not publically available (without a charge). Therefore, if you are wondering “what is the market rate for my specialty,” then I recommend you use your attorney or accountant as a resource and see if they can get access to the relevant survey data (attorneys and appraisers who concentrate in the health care area will often have this data readily available). As always, it’s best to make these important life decisions with complete information.

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The good news is that several resources provide guidance regarding market compensation. Here’s how that information will help you.

John C. Erickson III

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What is the Market Rate for My Specialty?