Psychiatrists' Median Net Income Increased in 1997

August 1, 1999

Income increased for psychiatrists in 1997, although it dropped for the combined all-physicians category. Dissemination of physician income data became a controversial issue at the AMA House of Delegates meeting last year (Baldwin, 1999; Booth, 1999). Angered by media reports of rising physician income without consideration of hours worked or differences between demographic groups of physicians, delegates voiced concern with the AMA's collection and release of physician income data.

Income increased for psychiatrists in 1997, although it dropped for the combined all-physicians category, according to the American Medical Association's Physician Socioeconomic Statistics, 1999-2000 Edition. Psychiatrists' median net income was at $130,000 in fiscal year 1997, up 6.6% from $122,000 in 1996 (Figure). The mean (average) net income (after expenses and before taxes) for psychiatrists was $135,700 in 1997, up 1.5% from $133,700 in 1996. In contrast, median net income for the all-physicians category was $164,000 in 1997, and the mean net income was $199,000.

"Median physician net income fell $2,000, or 1.2% in 1997," wrote James W. Moser, Ph.D., senior economist with the AMA's Center for Health Policy Research (Moser, 1999). "That marks the second drop in the last four years...After adjustment for inflation, median net income was 3.4% lower in 1997 than it was in the previous year. Average net income crept up just $600, or 0.3%, before adjustment for inflation."

Net income is defined in Physician Socioeconomic Statistics as earnings from medical practice after expenses have been deducted but before tax payments. Included are fees, salaries, retainers, bonuses and contributions into deferred compensation plans; excluded are earnings from investments or other nonpatient care sources.

The data in the publication is derived primarily from the 1998 Socioeconomic Monitoring System Survey of approximately 4,000 randomly selected patient-care physicians who have completed residency but are not employed by the federal government. The sample is considered representative of the entire physician population, both members and nonmembers of the AMA.

Dissemination of physician income data became a controversial issue at the AMA House of Delegates meeting last year (Baldwin, 1999; Booth, 1999). Angered by media reports of rising physician income without consideration of hours worked or differences between demographic groups of physicians, delegates voiced concern with the AMA's collection and release of physician income data. Consequently, this year only a two-page executive summary of the report (American Medical Association, 1999b) containing summarized physician income data was released to the press, despite media protests. Information about psychiatrists and other specialists was not included in that summary. Information for this article was obtained by reviewing a printed copy of the AMA report, and compensation and production reports of other health care organizations.

Status and Income Differentials

In the AMA report, a higher percentage of psychiatrists were either employees or independent contractors compared to the all-physicians category. Among psychiatrists, 59.5% were self-employed, primarily as solo practitioners; 37.6% were employees, primarily in state and local government facilities, private hospitals, group practices or freestanding centers or medical schools; and 2.9% were independent contractors. By comparison, in the all-physicians category, 62.3% were self-employed, 36.1% were employees and 1.6% were independent contractors.

The median net income for self-employed psychiatrists was $130,000 in 1997, $5,000 higher than for employed psychiatrists. Moser (1999) explained this difference in an essay in Physician Socioeconomic Statistics: "self-employed physicians tend to work more hours and see more patients, have more years of experience, are more likely to be certified by one or more specialty boards and are more likely to be male-all factors associated with higher earnings. Controlling for these factors, the income advantage of self-employed physicians would be much less than that reported in the tables."

When median net income was analyzed by physician age, psychiatrists who were between 36 and 45 years old earned $125,000, those between 46 and 55 earned $135,000, and those between 56 and 65 earned $150,000, according to the AMA survey.

The economic clout of managed care entities was tracked in the AMA survey by asking physicians to identify the percentage of their total practice revenues derived from managed care sources in 1998. The median was 40% for psychiatrists, substantially less than that of all physicians (51%), general surgeons (60%) and neurologists (55%). From a somewhat different perspective, the percentage of psychiatrists in practices with private managed care contracts was 76.6%; with Medicare managed care contracts, 55.8%; and with managed care Medicaid contracts, 50.2%. To compare, the percentage of all physicians in practices with private managed care contracts was 91%; with Medicare managed care contracts, 66.5%; and with managed care Medicaid contracts, 66.8%.

Other Organizations' Reports

A variety of reports from other organizations have sought to provide snapshots of physician income and revenue sources. The Integrated Health Networks Compensation Survey prepared by William M. Mercer Inc. looked at the total annual cash compensation (base salary plus bonus) for physicians employed by a hospital, health maintenance organization or group practice. The total annual cash compensation for psychiatrists averaged $121,500 in 1998, compared to $158,800 for physicians in general.

Most specialty physicians, including psychiatrists who work in hospitals or private practice, are experiencing a slight erosion in their overall cash compensation, said Mercer consultant Douglas Cardinal. Specialists are having to work harder, put in more time, increase their fees and adopt any strategy they can think of to maintain their compensation level.

In contrast, the compensation for primary care physicians over the last several years has been "increasing at a much greater rate than the rest of the medical specialties," Cardinal said. "We are seeing the primary care physicians' compensation increasing at a faster rate than their production is increasing, which means that they are actually receiving more dollars per unit of service than they were in the past."

More than 800 managed care organizations, hospitals and other health care providers provided data to the Integrated Health Networks Survey. Among those detailing their compensation methods for both primary care and specialty physicians, fully half indicated that they combine base pay with some form of variable compensation, 43% compensate their staff physicians by salary only and 7% use variable compensation only. More than three-quarters of the organizations that offer variable pay base it on the physician's productivity.

Compensation and production levels of physicians and mid-level providers in group practices were tracked in the Medical Group Management Association's (MGMA) Physician Compensation and Production Survey: 1998 Report Based on 1997 Data. More than 8,000 health care organizations and 20,000 individuals are MGMA members, representing nearly 192,000 physicians. Cejka & Co., a health care consulting and search firm, sponsored the report which showed that psychiatrists experienced a slight increase in median compensation of 1.85%, climbing to $138,999 in 1997 from $136,470 in 1996. By comparison, primary care physicians experienced a 0.86% increase to $135,791 from $135,217 in 1996. Psychologists experienced a 7.40% increase, with median compensation climbing to $66,993 in 1997 compared to $62,379 in 1996. Although trend data were unavailable for some provider categories, the report did list 1997 median compensation levels for child psychiatrists at $146,307 and for social workers at $46,405.

The survey is an annual census of MGMA's medical group practice members. In 1998, 1,675 practices (29.26%) responded to the survey. Factors affecting compensation, according to the report authors, include individual provider characteristics, such as years in practice and gender, as well as characteristics of the medical practice, such as group type, geographic region and the degree of at-risk managed care within the practice.

As expected, median compensation for psychiatrists increased by years in the specialty, beginning with a median of $118,791 for one to two years; $134,962, three to seven years; $142,426, eight to 17 years; $156,075, 18 or more years. Gender differences were reflected in males receiving a median compensation of $141,854 compared to $130,034 for females.

Out of the 364 psychiatrists reported on in the survey, 355 (97.5%) were in multispecialty groups and earning a median compensation in 1997 of $138,279. No compensation figures were provided for the nine psychiatrists practicing in single-specialty groups.

Looking at location, psychiatrists in the South earned the highest compensation ($146,200 median), followed by those in the East ($140,750 median), Midwest ($140,000 median) and West ($136,188 median). Psychiatrists working in small cities (population greater than 2,500 but less than 50,000) had higher median incomes ($142,000) than those in urban/central cities ($139,579), the suburbs ($136,437) or rural areas ($133,000).

Like that of the AMA, the MGMA survey examined the effects of managed care on physician compensation. The MGMA survey studied four levels of at-risk managed care: no at-risk managed care, 10% or less, 11% to 50% and 51% to 100%. When practices first accepted at-risk managed care contracts, the median income of psychiatrists gradually increased. Incomes were at $137,301 with no managed care, $138,922 with 10% or less, and $147,189 with 11% to 50% managed care. However at the 51% to 100% managed care level, median compensation for psychiatrists dropped back to $137,102.

In Context

To place the compensation data in context, Moser (1999) pointed out that physicians typically work about 40% more than the standard 40-hour week for wage and salary workers, and they must spend extended periods of time in education and training.

"Counting postgraduate education, many physicians are in their early 30s before starting to practice," he said. "Residencies can last up to eight years. Residency pay is low: the median stipend for 1996-1997 was about $36,000, in exchange for 80 to 100 hours of work per week."

Generally, physicians worked a median of 48 weeks per year in 1998 and 55 hours per week, of which 50 hours were devoted to patient care. Self-employed physicians spent 57 hours per week in professional activities compared to 51 hours for employee physicians (American Medical Association, 1999b). Psychiatrists also worked 48 weeks in 1998, but spent fewer hours per week in professional activities. The median was 50 hours of which 44 were devoted to patient care with a median of 35 hours in individual patient sessions and two hours in family group sessions (American Medical Association, 1999a).

In the MGMA survey of physicians in group practices, psychiatrists worked a median of 46 weeks per year, while child psychiatrists worked 48 weeks. Psychiatrists reported a median of 1,796 ambulatory patient encounters and 324 hospital encounters in 1997. Child psychiatrists reported a median of 1,695 patient encounters; their hospital encounters were not reported. In comparison, family practice physicians reported 4,416 ambulatory patient encounters and 293 hospital encounters; internists reported 3,309 ambulatory patient encounters and 607 hospital encounters.

Information in the cited surveys has been presented from several perspectives to address needs of physicians and various health care service providers, medical practice consultants, and hospital and group practice administrators, among others.

The AMA's survey report, for example, explained that "physicians might use this information in assessing the likely impact of such practice changes as relocating or joining a group practice on their earnings, patient volume and practice costs...Hospital administrators may find the volume useful in determining appropriate compensation levels and hours for their medical staff."

References:

References


1.

American Medical Association, Center for Health Policy Research (1999a), Physician Socioeconomic Statistics 1999-2000 Edition. Chicago: American Medical Association.

2.

American Medical Association (1999b), Highlights from the 1998 AMA Socioeconomic Monitoring System (SMS) Survey of Physicians. Supplied by the department of news and information, June 15.

3.

Baldwin G (1999), AMA finds physicians making less money. American Medical News. June 7.

4.

Booth B (1999), Delegates dismayed by income data collections. American Medical News. Jan. 11.

5.

Moser JW (1999), Recent developments in physician income. In: Physician Socioeconomic Statistics 1999-2000 Edition. Chicago: American Medical Association.

6.

William M. Mercer Inc. (1999), Staff physician compensation nearly $160,000, new survey reports. Feb. 19.