Plastic surgeons affected by economy, paid on production

Plastic surgeons affected by economy, paid on production

Plastic surgeons in physician-owned groups divide compensation mainly by production, although a minority uses equal shares, much like pay structures in other surgical specialties.

“Plastic surgery” really means two kinds of surgery–cosmetic and reconstructive, explains Debbie Thacker, business manager of six-physician Plastic Surgery Group in Mason, Ohio, in the Cincinnati suburbs. Cosmetic surgery is not medically necessary and is therefore self-pay. As a result, Thacker continues, demand for cosmetic surgery is very sensitive to upturns and downturns of the economy.

Reconstructive surgery includes removals of both malignant and benign tumors, repairs of skin after cancer excisions, post-mastectomy reconstructions, hand and other repairs from injuries, and many other procedures. Such surgery is medically necessary and compensated mainly by commercial insurance, Thacker notes. Reimbursement is subject to insurers’ many payment calculation rules and to regional variation, she says.

Demand for plastic surgery has risen sharply in the last decade as new technologies, most of them using laser equipment, have made many more procedures possible, she adds. On the cosmetic side, in addition to longstanding procedures such as nose reshapings and face- and eyelifts, there now are hair replacements and removals, permanent makeup, and many others. The Web site of the largest national medical society in the field, the American Society of Plastic Surgeons (ASPS) in the Chicago suburbs (www.plasticsurgery.org), lists many cosmetic and reconstructive procedures, the numbers of times ASPS members have performed them in recent years, the revenues generated, and the average prices.

The supply of board-certified plastic surgeons is rising slowly. From September 2000 to September 2002, the number rose from 6,125 to 6,499, an increase of about 6% over two years, according to ASPS. Many other kinds of surgeons, including ENTs and dermatologists, also do some cosmetic and reconstructive procedures.

Training is a lengthy process, quite often 10 years or more after medical school. All board-certified plastic surgeons have done general and then plastic surgical residencies. Many have added other residencies and fellowships.

Pay High but Not Tops in Surgery

Pay levels are a particularly sensitive matter in plastic surgery, perhaps because the field has a high profile through advertising, and some fees are beyond the means of many consumers. None of the practice managers interviewed for this article would disclose pay levels in their groups.

The 2001 national median compensation levels for plastic and reconstructive surgery in the recently published AMGA and MGMA physician compensation surveys are quite close: $283,000 for AMGA and $286,000 for MGMA. Single-specialty groups pay more ($345,000 median) than do multi-specialty groups ($272,000), MGMA says. (Practically all AMGA data are from multi-specialty groups.)

The two surveys are again close at the lower percentile pay levels. AMGA’s 20th percentile plastic surgery level is $216,000, while MGMA’s 25th percentile is $214,000. At the high end (90th percentile), MGMA reports $567,000, reflecting the inclusion of single-specialty data; AMGA reports $377,000.

In both surveys, the plastic surgery median benchmarks are in the ballpark of several other surgical specialties such as ENT and ophthalmology, but well below orthopedics and heart and brain surgery.

Recruiting in plastic surgery generally is fairly tight, several practice managers say. A lot depends on location. Thacker says that because of the very low physician reimbursement in the Cincinnati area, it is difficult for her group to offer compensation competitive with other areas of the country. David Griffenhagen, CMPE, chief administrative officer of eight-physician Center for Plastic & Reconstructive Surgery in Ann Arbor, Mich., says the Ann Arbor area is attractive to many people who lived, went to school or trained there.

Most Plans Based on Production

Griffenhagen’s group bases pay on the profit contribution of each physician. Each is given credit for the revenue that he or she brings in. In charging overhead, only 10% to 15% of expenses are considered fixed, and charged equally to all physicians, he says. The rest of expenses are considered variable, and charged according to each physician’s percentage of overall receipts. The group also distributes profits from an in-house operating room according to the percentage of overall receipts.

Thacker’s group also uses a profit contribution calculation with collections on the production side. On the cost side, it has three categories. Fixed costs are divided equally and include rent, administration, advertising, phone and computer expenses. Group costs are divided according to the percentage of collections and include billing and reception expenses. Direct costs are charged to individuals and include clinical staff and surgery schedulers.

The Center for Plastic Surgery in Olney, Md., with three physicians, budgets a pay pool early in the year based on expected revenue and costs, says Administrator Stanley Zausmer. It allocates the pool 30% by equal shares and 70% by percentage of overall collections. Expenses are not allocated, except for personal expenses such as autos. Advertising is not a major cost, Zausmer says, because the group works mainly by word-of-mouth referrals.

At Charlotte (N.C.) Plastic Surgery, the longstanding pay plan among the 10 owners is equal shares, says Administrator Harry Marino. The group’s total of 13 physicians makes it among the largest plastic surgery practices in the nation.

Contact Thacker (513) 842-1510 or dthacker@tpsg.net, Griffenhagen (734) 712-2323 or dgriff@cprs-aa.com, Zausmer (301) 652-7700 or stan@cpsdocs.com, and Marino at (704) 971-1418 or hmarino@cltlasticsurgery.com.

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