Survey Shows Revenue Generated by Physicians
July—Aug. 2007
Health care delivery today is based on a team model. A variety of providers — including physicians, registered nurses, CRNAs, imaging technologists, lab technologists, and therapists — all provide services and add value along a continuum of patient care. Despite the proliferation of provider roles, however, physicians remain at the core of the delivery system. Without physicians, patients cannot be admitted nor discharged from the hospital, tests cannot be ordered, nor complex procedures performed.
The physician’s primary role as provider team leader is to ensure a high level of patient care. Hospitals recruit physicians in order to maintain or enhance the quality of care in the communities they serve. Indeed, federal physician recruiting regulations require hospitals to demonstrate through a “qualitative analysis” that their physician recruiting activities are being conducted in order to bring needed medical services to the community.
Related to quality of care is the issue of financial viability. Hospitals cannot maintain a high level of services without also maintaining basic financial viability. Physicians contribute to the financial stability of hospitals through patient admissions and subsequent procedures, as well as any tests performed in the hospital. These physician-generated revenue streams allow hospitals to sustain their mission of providing care to their communities. While the rationale for physician recruitment must be based on quality-of-care considerations, as a practical matter, hospital executives and physician recruiters also must consider the financial impact physicians have on their facilities.
Survey Seeks Averages
In order to gauge this impact, Merritt, Hawkins & Associates periodically conducts a Physician Inpatient/Outpatient Revenue Survey. This particular survey asks hospital chief financial officers (CFOs) to indicate how much net inpatient and outpatient revenue physicians in a variety of specialties generated on average for their affiliated hospitals over the preceding 12 months. CFOs completing the survey can either indicate the precise amount of this average or they can indicate a range. In cases where CFOs indicate a range (for example, between one million and two million dollars), the mid-point of the range is taken to create a weighted average.
Merritt, Hawkins & Associates’ 2007 Survey of Physician Inpatient/Outpatient Revenue was mailed to hospital CFOs in February 2007, and 119 completed surveys were received. Fifty-one percent of responses came from hospitals of 100 beds or less, 19 percent from hospitals of 101 to 200 beds, 14 percent from hospitals of 201 to 300 beds, and 18 percent from hospitals of 300 or more beds. Two percent of respondents did not indicate number of beds at their facilities. Respondents could provide the average revenue numbers for 17 different medical specialties; however, not all responses included figures for all specialties.
Some Specialties Down
The average annual revenue generated
by all specialties surveyed was $1,496,432. The average annual revenue generated by primary care physicians (defined as family practitioners, general internists, and pediatricians) was $1,433,532. Average annual revenue generated by specialist physicians was $1,509,910.
Revenue generated by primary care doctors was down slightly compared to the $1,596,852 average reported in 2004, the last time this survey was conducted, but up compared to the $1,272,862 average reported in 2002, the first year this survey was conducted. Revenue generated by specialist physicians declined from the $1,915, 524 reported average in 2004 but was on par with the $1,587,355 average reported in 2002.
One reason for the decline of average revenue generated by specialist physicians was the addition of ophthalmology for the first time to the 2007 survey. With many ophthalmology procedures now conducted in the doctor’s office, ophthalmology is a relatively low revenue-producing specialty for many hospitals. In addition, the drop in average revenue generated by specialists could be a sign that hospitals are losing revenue to a growing number of surgery centers and physician-owned medical facilities.
Recruiting Cost/Benefits
The survey allows hospital executives and physician recruiters to examine the financial costs and benefits of physician recruiting. The accompanying chart featured in the Market Watch section of this issue compares the average annual revenue generated by physicians in various specialties to the average financial offer made to recruit these physicians. Average recruiting offers are derived from Merritt, Hawkins & Associates’ 2006 Review of Physician Recruiting Incentives.
In addition to the financial offer made to physician recruits, additional, mostly one-time costs must also be added: candidate sourcing expenses, the recruiter’s salary or fees, physician relocation expenses, etc. Even with these costs considered, it can be reasonably argued that the financial benefits of successful physician recruiting generally outweigh the costs.
While many aspects of health care delivery have changed, physicians remain key drivers of both quality and revenue. Effective physician recruiting, therefore, is central to maintaining both the services hospitals provide and their long-term financial viability.
Source: James Merritt is president of Merritt, Hawkins & Associates, a national physician search and consulting firm and a division of AMN Healthcare. He can be contacted at jmerritt@mhagroup.com.
