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