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Compensation up slightly but practice margins are ailing

Compensation in primary care practices edged up about 2.6% in 2010, a smaller increase than in the previous year but still slightly more than specialty practices, a recent survey found. Overall, however, the news was far from good—many practices were operating at a loss.

The American Medical Group Association’s (AMGA) 2011 Medical Group Compensation and Financial Survey reported that medical specialties other than primary care averaged an increase of 2.4% in 2010, whereas surgical specialties averaged around 3.8%. In 2009, both primary care and surgical specialties posted a 3.8% increase, whereas other medical specialties went up 2.4%.

The only types of practices with compensation increases of more than 6% were allergy, emergency medicine, and hospitalist-internal medicine. Two of the three are hospital-based and not private practice.

"The modest increases seen this year reflect the negative impact of declining reimbursements, competition for specialists, the cost of new technology, and other factors on practice revenues in most parts of the country," said Donald W. Fisher, PhD, CAE, president and chief executive officer of AMGA.

The AMGA survey includes responses from 239 medical groups with more than 50,000 providers. More than half of the groups reported having more than100 physicians.

In its financial section, the survey found wafer-thin operating margins among those physician practices. In 2010, only organizations in the western United States came closest to breaking even, with an average loss of $27 per physician. By contrast, the Eastern region averaged a loss of $1,597 per physician, whereas the Southern region averaged a loss of $1,870. The worst performance was in the Northern region, with a $10,669 loss per physician in 2010, which was even worse than the $9,943 loss per physician in 2009.

"In the face of the current economic climate, these medical groups continue to rise to the challenge of delivering the highest quality, coordinated care to the patients they serve," Fisher said. "Much of the losses we see in 2010 are supplemented by other nonclinical revenue sources and/or funding from health systems with which groups are associated."

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