Most practice managers’ pay rose in `01; hospital comp higher for many jobs

Most practice managers’ pay rose in `01; hospital comp higher for many jobs

Medical practice managers had a generally good year for pay hikes in 2001, logging an average 7.2% increase in compensation across MGMA’s three major job categories–physician executives, senior managers such as practice administrators, and general managers such as purchasing and lab directors.

MGMA’s Management Compensation Survey: 2002 Report Based on 2001 Data, released in conjunction with the association’s annual convention in late October, for the first time broke out pay levels for medical managers in hospitals and integrated delivery systems, based on increasing amounts of data submitted by such managers to the association. In many positions–including medical director, chief operating officer, chief financial officer, quality assurance/improvement director and human resources director–hospital/ IDS managers had median incomes of at least $20,000 more than nonhospital/IDS managers with the same titles. Some of the survey’s 7.2% jump in overall compensation is explained by the inclusion of higher-paid hospital/IDS managers.

Among nonhospital/IDS managers, the business managers in clinical areas, such as branch operations, labs and radiology, scored solid increases. Branch operation managers earned a median of $60,600 in 2001, up almost 9% from the year before. Dick Hansen, vice president of MGMA Health Care Consulting Group, notes that many branches are adding services such as labs and imaging centers that require greater management skills.

Public relations/communications managers at medical practices had an 8.67% jump in 2001 to a median pay of $50,740, MGMA says. Marketing directors lost 2.46%, to $49,958 in 2001–perhaps a surprising result given the emphasis in today’s market on generating new patients and revenue sources. The benchmarks in the survey are subject to variability caused mainly by limitations in sample size.

The largest increase among all nonhospital/IDS job titles in the survey was physician CEO/president, up 25.66% in 2001 to a median pay of $311,000. Pay levels of medical directors and nonphysician CEOs were down about 3% to approximately $180,000 and $140,000, respectively.

Median 2001 pay amounts and changes from 2000 levels for nonhospital/IDS practice administrators were: In groups with six or fewer full-time equivalent physicians: $69,000, up 4.27%.

* In groups with seven to 25 FTE physicians: $89,000, up 7.09%.

* In groups with 26 FTEs or more: $121,755, up 1.46%.

The overall survey reflects the pay, benefits, time-off provisions and pay determination factors for 5,491 management personnel in 1,316 practices.

Higher Technology Drives Higher Pay

The medical managerial work force is changing, says compensation consultant Robert Erra, head of physician services in the health care group of Clark-Bardes Consulting in Minneapolis. There are more physician executives, and they are pushing up benchmark levels in surveys such as MGMA’s, Erra says. Qualifications are generally increasing, with more managers having business degrees, he adds.

Most importantly, Erra notes a “transition from paper-to technology-based operations” in medical practices that require senior managers with more technological skills. For instance, medical records are going from paper to electronic. Under pressure to perform better because of Medicare and other revenue cuts, some of Erra’s clients in large practices and organizations are hiring fewer but more skilled managers at higher pay levels.

Although MGMA management pay data for 2002 will not be available for nearly a year, Erra says this year has been “more of the same”–higher pay levels for more technologically qualified or physician managers–“even though revenues are tighter.”

Increasingly, he says, practice administrators are being judged on revenues they bring in through new relationships and services, such as hospital joint ventures and agreements for physical therapy, imaging centers and other ancillaries. Adding physicians often is not adding to profit, he says.

Erra predicts most of these trends will continue in 2003. But, he adds, lay administrators who cannot pull in new revenues may see their pay levels stagnate next year, assuming the general reimbursement tightness continues.

Hospitals: Pay Differences Not Surprising

The pay differentials between hospitals and private practices detected by the MGMA survey are typical for pay scales in the two kinds of organizations, says Charles Peck, M.D., vice president for clinical consulting at VHA Inc. in Dallas, a cooperative of 2,200 nonprofit hospitals. “I’m surprised [the differential] is not more than $20,000,” he says, adding that with the higher benefits in hospitals, the differences would rise well above $20,000.

Peck lists a number of reasons for the differentials:

* Differences in job responsibilities. The human resources director of a hospital practice may be the human resources director for the whole hospital. Even if the hospital manager is focused only on medical practice employees, he or she often takes part in physician recruiting and other physician personnel functions, while human resource directors in private practices often handle strictly nonphysician employees.

* Hospitals’ deeper pockets. See article, this page, for a discussion of hospital subsidies of physician salaries. Nonmanagerial pay and benefit scales also are a lot higher in hospitals than they are in private practices.

* Larger practices. The average hospital-owned practice is larger than the average physician-owned one, Peck notes.

* Improved financial performance of hospital practices. Many hospital practices have gone from losing $100,000 or more per year per physician two or three years ago to losses in the $20,000 to $40,000 range or down to break-even today. In the process, hospitals have often rewarded the administrators who took their practices through these changes, or fired managers considered less competent and hired new ones at higher pay.

Commenting on the overall 7.2% pay hike for medical managers in the MGMA 2001 survey, Peck says that in general, 2001 was a good year for the health care industry. Business conditions that year for medical practices, he adds, “were much better than they were” in the two or three years immediately prior. Some managers who hadn’t gotten raises for several years got catch-up raises during 2001.

Contact Erra at (612) 337-1033 or, and Peck at (972) 830-0000, ext. 2454, or

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