Constraint Backlash has Radiology Pay on the Rise
Fewer Radiologists, Backlash to Managed Care Create Increases
By Julie Crawshaw
Financial compensation for radiologists is on the rise and established radiology practices are offering heftier compensation packages to get new hires. "I've polled small group practices of 30-100 physicians and large group practices of 150 and more, and all of them are facing the exact same issue," says Shawn D. Schwartz, MBA, FHFMA. "New radiologists are coming into these practices and demanding a fairly substantial compensation package that often exceeds the group practice's comfort level," Schwartz says.
Schwartz manages RSM McGladrey Inc., a consulting group that did a 2000 compensation and productivity survey for the American Medical Group Association (AMGA) of Alexandria, Va.
Comfort level notwithstanding, established practices are paying the price because they need the help, and the pool of new radiologists is smaller than it used to be. According to Schwartz, one 70-member physician group recently offered a diagnostic radiologist—admittedly one with some experience—a salary of almost half a million dollars.
The AMGA represents approximately 50,000 physicians in group practices from more than 40 states. The 2000 AMGA survey1 contains compensation and productivity data from more than 23,727 medical group physicians throughout the United States. The study is intended to assist various management levels in evaluating and comparing current physician compensation and productivity levels, trends, and relationships between compensation and productivity. Figures in the 2000 report show that median gross productivity increased in all categories from 1996 to 1999. Physicians specializing in diagnostic radiology (noninterventional) experienced the greatest increase at 38.63%.
Schwartz sees two factors as causes for the present compensation increase. The first is a backlash to the early 1990s' efforts to minimize diagnostic services. "Managed care really reduces the incentive for those, and it's likely that in so doing, it created a void for diagnostics," Schwartz says.
Now, with both patients and physicians demanding more diagnostic activity and intervention, Schwartz says the result is a greater demand for those types of services again.
The second factor is that medical schools have not been turning out specialists at the rate they did during the 15-20 years prior to the early mid-1990s. "Now there's an increased demand and a reduced supply and radiologists are able to garner a hefty premium," he says.
Schwartz doesn't see many compensation differentials between interventional and noninterventional radiologists. However, Jim Smith, senior vice president of Cejka & Co., a St. Louis, Mo-based physician recruiting firm, says compensation increases for radiologists are tied to the practice setting.
"In private practice, interventional radiologists receive more pay for the procedures they perform than diagnostic radiologists do," Smith says. In the institutional sector, Smith sees a lot of effort to blend compensations, so that one group of radiologists isn't disadvantaged compared to another. He observes that the more specialized a medical discipline becomes, the more differentiation there is in fee schedules, adding that payers have a leveling effect on any specialty.
"I would say the increases for radiologists are probably temporary, pending the government and payers deciding that fees are too high, and they're going to squeeze them down the lowest possible point."
Making a Little More Means Billing a Lot More
Kerri Kelly, director of financial consulting for Cejka, points out that a noninterventional diagnostic radiologist in the median of the 2000 AMGA survey had to bill $1,070,000 to receive compensation of $256,000. "That's a compensation-to-productivity ratio earnings of $24.20 on every dollar charged," Kelly says, "and to experience an 8% increase in production, they had to produce 26.8% more in charges." The median starting salary for noninterventional radiologists was $200,000.
In a recent AMGA letter, congressional representatives pointed out that many of its member medical groups care for a disproportionate number of the sicker Medicare population and have faced a sharp reduction in Medicare payments. The 2000 compensation and productivity survey was sent to more than 2600 medical groups, 172 of which returned valid responses. There are 23,727 physicians represented in the participating medical groups. Thirty-six of the groups are in the East, 66 in the North, 37 in the South, and 33 in the West. Fifty of the groups had fewer than 35 physicians, 36 had 35-70, 17 had 71-100, and 69 had more than 100. The study defined annual compensation as including deferred compensation, tax-deferred annuities, and any anticipated cash distribution during the next 12 months based on prior year performance. The definition excluded any payments under the normal retirement, pension, or profit-sharing plans.
| Table 1-Witt/Kieffer's Physician Placements by Job Type | |||||||
| Base Compensation | Bonus | Salary Increase | |||||
| Position Type | Number of Placements % of MD Placements |
Highest Base | Mean Average Base | # Reporting | Average Bonus | # Reporting | Average Salary Increase |
| Medical Directors | 15 (57%) | 300,000 | 206,385 | 10 (67%) | 23% | 7 (47%) | 14% |
| Clinical Department Heads | 8 (31%) | 1,000,000 | 259,000 | 4 (50%) | 13% | 5 (63%) | 19% |
| CEO | 3 (12%) | 385,000 | 370,000 | 1 (33%) | 10% | 1 (33%) | % |
| Table 2 Placements by Client Type* | ||||
| Organization Type | Number of Placements | Organization Type | Number of Placements | |
| Hospitals | 163 (37%) | Colleges and Universities | 80 (18%) | |
| Health Systems/Integrated Delivery Systems | 61 (14%) | Not-for-profit Institutions | 23 (5%) | |
| Teaching Hospitals | 36 (8%) | School | 1 (0%) | |
| Physician Groups | 23 (5%) | Other | 2 (1%) | |
| Managed Care/Insurance | 16 (4%) | Financial Institution (Bank) | 1 (0%) | |
| Post-acute Care | 15 (3%) | Health Group/Consortium | 11 (3%) | |
| Health System Agency | 4 (1%) | Health Related | 3 (1%) | |
| *The organization categories in the placements by client type chart above represent distinct, non-overlapping organization types. The job categories in the following sections, however, do overlap. For example, managed care placements include CEO and physician placements at managed care organizations. Similarly, CEO placements include those in managed care as well as physician CEO placements. | ||||
Physician CEOs Get Top Dollar
Radiologists who choose leadership and management careers can reap handsome financial rewards. Illinois-based Witt/Kieffer, a large U.S. executive search firm that specializes in health care, managed care, and insurance and education, recently surveyed 439 placements for its annual Executive Compensation Study.2 The study found that managed care and education markets offer tremendous career advancement potential for exceptional leaders serving in the executive or presidential suites.
Witt/Kieffer typically does research for prominent hospitals and health systems, including those with faith-based sponsorship. The firm also serves managed care and insurance companies, specialty, venture-capital-backed and e-Health corporations, physician group practices, colleges and universities, and not-for-profit community service and cultural organizations. The majority (59%) of Witt/Kieffer's executive placements are on behalf of hospitals, teaching hospitals, health systems, and integrated delivery systems. Additional Witt/Kieffer health care and related clients feature physician groups (5% of total placements); managed care/insurance (4%); post-acute care and health group/consortiums (3% each); and health system agency, health related, financial institutions, and other clients (about 1% each). College and university clients represent 18% of the firm's search placements, followed by not-for-profit institutions, comprising 5% of the firm's total placements.
Highlights of Witt/Kieffer's 1999 compensation study include:
• Physician executives who serve as chief executive officers (CEOs) garner the highest compensation. On average, a physician in a CEO role commands the highest average base compensation: $370,000. Physician executives at college or university medical schools earn, on average, $300,000 in base compensation, followed by those at health systems and integrated delivery systems ($225,000) and hospitals ($219,500), including teaching and nonteaching institutions.
• Top health care leaders hit $300,000, and leading clinical educators exceed $200,000. In 1999, 11% of Witt/Kieffer's health care placements received total compensation at or more than $300,000. The executives include 15 CEOs, seven chief operating officers (COOs), four CFOs, and one executive vice president, as well as two medical directors, three regional/division managers, three physician/medical specialists, and one financial planner.
• Hospital and system CEOs receive nearly $200,000 in average base compensation.
• Executives in health care, managed care, and education are well rewarded for their leadership experience and expertise. The single highest compensation package reported in 1999 is $1 million, awarded to a physician in a cardiothoracic surgery leadership at a teaching hospital in the Northeast. The next highest total compensation package—for a senior executive (nonclinician) at a prominent Eastern metropolitan medical center—is $685,000, including $450,000 in base salary, a $100,000 signing bonus, and an additional 40% bonus, as well as a two-year contract including 18 months severance.
• 11% of Witt/Kieffer's health care placements in 1999 earn $300,000 or more holding positions such as CEO/president, and COO. In education, 10% of executive placements earn $200,000 or more as CEO/president, vice president, and dean.
• Diversity gap still exists in executive ranks. While Witt/Kieffer placed minorities and women in 1999 in key executive positions such as CEO, COO, president, or academic dean at hospitals and health systems and at colleges, universities, and not-for-profit organizations, much remains to be done to achieve greater diversity in the executive suite.
| Table 3-CEO Placements by Client Type | |||||||
| Base Compensation | Bonus | Salary Increase | |||||
| Organization Type | Number of Placements % of CEO Placements |
Highest Base |
Mean Average Base |
# Reporting |
Average Bonus |
# Reporting |
Average Salary Increase |
| Hospitals | 31 (40%) | 365,000 | 173,448 | 24 (77%) | 21% | 26 (83%) | 25% |
| Health Systems/IDS' |
4 (5%) | 315,000 | 202,500 | 4 (100%) | 26% | 3 (75%) | 34% |
| Teaching Hospitals |
5 (7%) | 425,000 | 376,667 | 3(60%) | 40% | 2 (40%) | 16% |
| Not-for-profit | 10 (13%) | 315,000 | 170,625 | 6 (60%) | 19% | 7 (70%) | 33% |
| Post-acute Care | 8 (10%) | 200,000 | 148,333 | 8 (100%) | 15% | 7 (88%) | 30% |
| Colleges/ Universities/ Medical Schools |
7 (9%) | 370,000 | 142,000 | 0 | — | 6 (86%) | 38% |
| Physician Groups |
5 (6%) | 385,000 | 180,000 | 3 (60%) | 23% | 2 (40%) | 8% |
| Managed Care | 3 (4%) | 200,000 | 160,000 | 3 (100%) | 29% | 3 (100%) | 25% |
| Health Group Consortium |
2 (3%) | 125,000 | --- | 2 (100%) | 20% | 2 (100%) | 9% |
| Insurance | 2 (3%) | 250,000 | — | 2 (100%) | 40% | 1 (50%) | 13% |
| Schools | 1 (1%) | 240,000 | — | 0 | — | 1 (100%) | 2% |
| Table 4-Managed Care/Insurance Placements by Organization Type | |||||||
| Base Compensation | Bonus | Salary Increase | |||||
| Organization Type | Number of Placements Placements % of MC |
Highest Base |
Mean Average Base |
# Reporting |
Average Bonus |
# Reporting |
Average Salary Increase |
| Managed Care Organization |
8 (31%) | 260,000 | 157,500 | 7 (88%) | 28% | 7 (88%) | 16% |
| Physician Group | 4 (15%) | 250,000 | 140,000 | 2 (50%) | 120% | 3 (75%) | 19% |
| Insurance | 7 (22%) | 265,018 | 219,000 | 6 (86%) | 51% | 3 (43%) | 13% |
| Hospital | 2 (8%) | 116,700 | — | — | — | 1 (50%) | 23% |
| Health Systems/IDS' | 1 (4%) | 100,000 | — | 1 (100%) | 10% | 1 (100%) | 11% |
| Teaching Hospitals | 1 (4%) | 125,000 | — | — | — | 1 (100%) | 25%. |
| Health System Agency | 2 (8%) | 175,000 | — | 1 (50%) | 50% | 0 | — |
| Provider Services Organization |
1 (4%) | 200,000 | — | 1 (100%) | 30% | 0 | — |
CEO placements at hospitals, health systems/integrated delivery systems, and teaching hospitals account for more than half of Witt/Kieffer's total CEO assignments during 1999. On average, CEOs at teaching hospitals earn $376,667, followed by those at health systems/IDSs ($202,500) and hospitals ($173,448).
However, the highest reported base—$425,000 and a $58,333 sign-on bonus to take the job—went to a hospital CEO at a faith-based, not-for-profit hospital in the East. Perquisites for this CEO feature an automobile allowance, club membership, supplementary executive retirement plan (SERP), paid moving expenses, and an employment contract. CEO average base compensation for other organizations include physician groups ($180,000), not-for-profit entities ($170,625), managed care ($160,000), post-acute care ($148,333), and colleges/universities/medical schools ($142,000).
CEOs at colleges, universities, and medical schools report a 38% average salary increase when they take on a new job. In medically based educational placements, the highest reported base compensation was $370,000 for a medical school dean in the West, whose perqs include club membership, fully paid moving expenses, and a five-year employment contract.
Also according to the Witt/Kieffer research, CEOs at physician groups receive, on average, a 23% annual bonus and an 8% average salary increase. CEOs at not-for-profit organizations report a 19% annual bonus and a 33% average salary increase to make the career move. Managed care CEOs gain a 29% average bonus and a 25% average salary increase. A 15% average bonus goes to post-acute-care CEOs, who also earn a 30% salary increase, on average, when accepting a new career opportunity.
CEOs of not-for-profit community and cultural organizations (health care association and foundations) received an average base salary of $170,625. The average bonus and salary increase for these CEOs was 19% and 33%, respectively. The highest reported not-for-profit CEO, who leads a national nursing home association, receives $315,000 in base compensation along with a 10% annual bonus, automobile allowance, SERP, paid moving expenses, and a severance clause that features 12 months with full salary and benefits.
Finally, another recent survey done by the Lincolnshire, Ill.-based firm of Hewitt Associates in conjunction with Modern Healthcare Magazine,3 found that cash compensation increases for managerial, executive, and department head positions throughout the hospital industry rose an average of 6.7% between January 1999 and January 2000. This was nearly twice the 3.5% average increase that occurred during the prior year.
Judging from the above data, there are more highly compensated career possibilities for radiologists than ever before. Radiologists are also being better paid overall for their work than they were 10 years ago—but they're working a lot harder, too.
References
1. American Group Medical Association: 2000 Medical Group Compensation & Productivity Survey. Alexandria, Va.: 2000.
2. Witt/Kieffer. Executive Compensation Study: Compensation Report no. 6. Oakbrook, Ill.: May 2000.
3. Moore JD, Jr. Healthcare compensation rises. Modern Healthcare; July 17, 2000.
Sources
• Shawn D. Schwartz, RSM McGladrey, Inc., 801 Nicollet Avenue, Suite 1300, Minneapolis, MN 55402-2839, (612) 376-9523.
• Kerri Kelly, Cejka & Company, 222 S. Central, Suite 400, St. Louis, MO 63105, (314) 726-1603.
• Jim Smith, Senior Vice-President, Cejka & Company, 316 Tahlequah Drive, Loudon, TN 37774.
• Hewitt Associates, 100 Half Day Road, Lincolnshire, IL 60069, (847) 295-5000.
• Modern Healthcare, 740 N. Rush Street, Chicago, IL 60611, (312) 649-5372.
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