Heart surgeon pay plans range from production to equal shares

Heart surgeon pay plans range from production to equal shares

Cardiac and thoracic surgery practices, buffeted by loss of business to interventional cardiologists and by steep cuts in reimbursement rates, have in many cases adopted equal shares pay plans or hybrid plans with significant equal shares and production elements.

“No specialty has been harder hit” by Resource-Based Relative Value Scale revisions than has cardiothoracic surgery, says Marty O’Neill, CEO of the Heart Group in Evansville, Ind. CMS engineered a massive shift of relative value unit (RVU) procedure values from surgery to office evaluation and management visits, he notes (PCR 5/02, p. 8).

Income has been falling for almost all heart surgeons for several years, says Donald Philip, FACMPE, administrator of Northwest Surgical Associates in Portland, Ore. Stents and other procedures performed by cardiologists have reduced caseloads. Reduced government reimbursement also hurts. For instance, says Philip, a recent change in Oregon Medicaid eligibility has resulted in “more zero-pays than we’ve ever had.”

However, a distinct shortage of cardiothoracic surgeons could develop over the next five to 15 years. Surgeons in the field have stuck with it despite income declines, Philip says, but enrollment for fellowships is way down in response to the declines. He adds that there probably will be many retirements from the field over the next 10 years. “It’s a life-saving, end-of-line service,” he notes.

A recent academic piece forecasts a 42% jump in cardiothoracic surgery procedures between now and 2020 (see story, p. 5), based on aging of the population and frequencies of various cardiothoracic procedures by patient age. Ronald Evans, CMPE, executive director of South Texas Cardiothoracic & Vascular Surgery Associates in San Antonio, predicts that despite the loss of procedures to cardiology, there will be plenty of demand for cardiothoracic surgery over the next 10 to 15 years unless a drug is developed that “wipes out atherosclerosis,” the disease syndrome that underlies most heart disease.

Recruiting: Buyer’s Market Now

Despite the long-term shortage potential, the current recruiting market in this specialty “is very favorable for groups that are looking for candidates, because there are some very good surgeons available,” O’Neill says. The abundance of good candidates stems from the revenue doldrums of the last few years, several administrators say. Some groups are shrinking and forcing surgeons to find new places to work, and some candidates simply want to find a better and more secure economic situation, they explain.

Even while cardiothoracic surgery is losing procedures and patients, it also is adding them, Evans says. A decade ago, heart surgery on patients over 80 years old was “almost unheard of,” he recalls, but now it’s fairly common. People are living longer and eventually needing heart surgery. Finally, he notes, new surgical techniques are being developed. The number of cases in Evans’ practice is down only about 3% from last year.

He adds that cardiothoracic surgery “has reinvented itself” several times over the years. Before antibiotics were developed, chest surgery was focused mostly on tuberculosis, says Evans. Then in the 1950s and 1960s, it re-focused on the heart. In more recent years, morbidity and mortality rates in heart surgery have gone way down except for the sickest and oldest patients.

Nearly all heart surgeons have branched out into lung and chest surgery, says Thomas Johnston, CEO of Cardiothoracic & Vascular Surgeons in Austin, Texas. That’s why most of them describe their field as “cardiothoracic” rather than “cardiovascular,” he explains.

Merging With Surgeons in Other Fields

In addition to adding procedures and patients, another way to deal with the loss of procedures to cardiology is to join with cardiologists in the same group. O’Neill’s group consists of 15 cardiologists and four cardiothoracic surgeons, as well as nine primary care physicians. Merging with cardiologists–and sharing a partially equal shares pay formula with them–“minimizes the effects” of the migration of patients to cardiologists for the heart surgeons in the group, O’Neill says.

Heart surgeons also have joined forces with surgeons in other fields. Of the 14 owners of Johnston’s group, eight are cardiothoracic and six are vascular surgeons. Philip’s group recently merged into the multispecialty, 90-surgeon Oregon Clinic, although the management and pay systems for the cardiothoracic surgeons remain largely separate from the overall group.

MedCath, the Charlotte, N.C.-based facilities and management company in the heart care field, often partners with heart surgeons on heart hospitals and with cardiologists on catherization labs.

Despite the income problems in recent years, heart and chest surgeons remain among the best-paid physicians. The 2002 national median income for these surgeons in the new physician compensation survey of the American Medical Group Association is $400,500, down 0.24% from 2001. The national median income for this field in the Medical Group Management Association physician compensation survey was $459,000 in 2001, the most recent figure available at PCR’s deadline.

The principal national society for cardiothoracic surgeons is the Society for Thoracic Surgeons (www.sts.org).

From Equal Shares to Pure Production

Philip’s group, with 13 cardiothoracic surgeons, has had an equal shares pay formula for 30 years. It’s based on all of the surgeons’ revenues and expenses, minus an amount paid to the Oregon Clinic for overhead items such as billing.

At a northeastern practice with nine heart surgeons, the group paid its partners by equal shares until five years ago, when it introduced an important modification because it needed a pay differential for physicians who worked substantially less than the majority, says its administrator, who declines to be identified.

First, the group’s board sets a base salary that all the physicians receive. That salary is set in light of the group’s historical production and overhead, the administrator says. Then, the board sets a “physician target income” (PTI) that is equal to each surgeon’s share of base salary plus overhead. The overhead figure is comprehensive, including physician benefits and other expenses for the previous 12 months except doctor pay.

Generally, there is some money left over after overhead and base salaries are paid, and that goes into a bonus pool paid to the physicians in equal amounts. However, surgeons who don’t produce collections equal to the PTI don’t get a share of the bonus pool. Usually there are two physicians who don’t reach the PTI, the administrator says.

Only if a surgeon’s collections are so low that he or she doesn’t offset base salary plus his or her benefits does the group consider cutting the individual’s base salary or taking some other corrective action.

The physicians who receive a bonus share earn about $450,000, or roughly the MGMA median national income, says the administrator.

Surgeons, Cardiologists Use 60% Equal Shares

At O’Neill’s group, the 16 cardiologist and heart surgeon owners calculate a combined pay pool based on all heart care revenues and expenses (excluding primary care revenues and expenses). Of the pay pool, 60% goes out by equal shares to the owners. The other 40% is awarded based on each physician’s share of production.

Production shares are determined using a homegrown point system rather than collections or RVUs. The points are awarded for each procedure. O’Neill says the physicians find the point system confusing, and are examining alternatives. But they may stick with the 60/40 equal shares/production split, he adds.

Johnston’s group has essentially the same pay system, except that the equal shares portion of the pay pool is 25% and the production portion is 75%. The production share is figured by each physician’s charges. The charges for the previous four quarters are determined and divided by four to set the pay amount each calendar quarter in order to avoid ups and downs based on vacations and other personal factors, he explains.

Reductions in cardiothoracic surgeons’ charges in recent years–coupled with sizable increases for vascular surgeons–have caused incomes of the two kinds of specialists to merge, Johnston adds. The income range of the group’s physicians is from $350,000 to $600,000.

The nine cardiothoracic surgeons in Evans’ practice use a “pure production” pay system, he says. Production for each one equals his or her collections. On the expense side, a few costs (interest on notes and Evans’ salary) are paid equally, and a limited amount of costs, such as malpractice premiums, mobile phone and transcription, are allocated entirely to each doctor. All other costs are allocated by the physicians’ share of overall collections.

There is a very wide range of income in the group, from a low of $161,000 to a high of $835,000 in 2002. The mean income that year was $505,000. The two lowest earners are part-time.

Contact O’Neill at (812) 464-0542 or martyo@heartgroup.com; Philip at (503) 226-6321 or dphilip@msn.com, Evans at (210) 615-7700 or revans@heartlungsa.com, and Johnston at (512) 459-8753 or thomasj@ctvstexas.com.

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