2014 REVIEW OF PHYSICIAN AND ADVANCED PRACTITIONER RECRUITING INCENTIVES

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1 2014 REVIEW OF PHYSICIAN AND ADVANCED PRACTITIONER RECRUITING INCENTIVES An Overview of the Salaries, Bonuses, and Other Incentives Customarily Used to Recruit Physicians, Physician Assistants and Nurse Practitioners 2014 Merritt Hawkins 5001 Statesman Drive Irving, Texas (800) merritthawkins.com

2 REVIEW 2014 OF PHYSICIAN AND ADVANCED PRACTITIONER RECRUITING INCENTIVES An Overview of the Salaries, Bonuses, and Other Incentives Customarily Used to Recruit Physicians, Physician Assistants and Nurse Practitioners Overview Key Findings Merritt Hawkins 2014 Review of Physician and Advanced Practitioner Recruiting Incentives: Recruiting Assignment Characteristics and Metrics Trends and Observations Summary For additional information about this survey contact: Phillip Miller (800) Statesman Drive Irving, Texas MerrittHawkins.com

3 Overview The 2014 Review is based on the 3,158 permanent physician and advanced practitioner search assignments that Merritt Hawkins and AMN Healthcare s sister physician staffing companies (Kendal & Davis and Staff Care) had ongoing or were engaged to conduct during the 12-month period from April 1, 2013, to March 31, Merritt Hawkins is a national healthcare search and consulting firm specializing in the recruitment of physicians in all medical specialties and other advanced practice clinicians. Now celebrating its 27th year of service to the healthcare industry, Merritt Hawkins is a company of AMN Healthcare (NYSE: AHS), the nation s largest healthcare staffing organization and the industry innovator of healthcare workforce solutions. This report marks Merritt Hawkins 21st annual Review of the search and consulting assignments the firm conducts on behalf of its clients. Merritt Hawkins Review is the longest consecutively published and most comprehensive report on physician recruiting incentives in the industry. The Review is part of Merritt Hawkins ongoing thought leadership efforts, which include surveys and white papers conducted for Merritt Hawkins proprietary use, and surveys and white papers Merritt Hawkins has completed on behalf of prominent third parties, including The Physicians Foundation, the Indian Health Service, Trinity University, Texas Hospital Trustees, and a Subcommittee of the Congress of the United States. The intent of the Review is to quantify financial and other incentives offered by our clients to physician and advanced practitioner candidates during the course of recruitment. Incentives cited in the Review are based on formal contracts or incentive packages used by hospitals, medical groups and other facilities in real-world recruiting assignments. Unlike other surveys, Merritt Hawkins Review of Physician and Advanced Practitioner Recruiting Incentives tracks starting salaries and other perquisites, rather than total annual compensation. It therefore reflects the incentives physicians and advanced practitioners are offered in the recruiting process, rather than total average compensation. The range of incentives detailed in the Review may be used as a benchmark for evaluating which recruitment incentives are customary and competitive in today s physician recruiting market. In addition, the Review is based on a national sample of search assignments and provides an indication of which medical specialties are currently in the greatest demand and the types of medical settings into which physicians and advanced practitioners are being recruited Review of Physician and Advanced Practitioner Recruiting Incentives 2

4 Key Findings Merritt Hawkins 2014 Review of Physician and Advanced Practitioner Recruiting Incentives reveals a number of trends within the physician and advanced practitioner recruiting market, including: Family Physicians For the eighth consecutive year, family physicians were number one on the list of Merritt Hawkins most requested recruiting assignments. General internists were second on the list, also for the eighth consecutive year, highlighting the continued nationwide demand for primary care physicians Combined, advanced practitioners, including physician assistants (PAs) and nurse practitioners (NPs), were fifth on the list of Merritt Hawkins most requested recruiting assignments, though neither were in the top 20 three years ago. The number of search assignments Merritt Hawkins conducted for PAs and NPs increased 320% over the last three years, underscoring the emerging shortage of these professionals. NPs PAs Demand also remains strong for physicians providing inpatient care. After family physicians and general internists, hospitalists ranked third among Merritt Hawkins top 20 search assignments. Lack of resources and diminished interest in inpatient psychiatry continues to stoke a staffing crisis in behavioral health. Psychiatrists were fourth on the list of Merritt Hawkins most requested search assignments, highlighting the ongoing critical shortage of physicians specializing in behavioral care. The decline of physician private practice continues. Fewer than 10% of Merritt Hawkins search assignments were for settings featuring private practice, compared to over 45% in % of Merritt Hawkins search assignments were for hospital-employed settings, while solo practice, which represented 20% of Merritt Hawkins search assignment settings in 2004, represented less than 1% of Merritt Hawkins assignments in the period covered by this Review. <10% 45% Review of Physician and Advanced Practitioner Recruiting Incentives

5 Concierge practice appears to be gaining momentum. Though only 1% of Merritt Hawkins search assignments were for concierge practice last year, two to three years ago Merritt Hawkins received virtually no requests to recruit into concierge settings. 1% A proliferating number of sites of service, including free-standing emergency departments, community health centers, retail clinics, and urgent care centers, are recruiting physicians, a sign that healthcare providers have adopted a strategy predicated on being everywhere, all the time. Like hospitals, these facilities also are employing physicians. Relative Value Units (RVUs) continue to be the most frequently utilized volume-based production incentive and were featured in 59% of Merritt Hawkins recruiting assignments in which a production bonus was part of the incentive package, up from 57% last year. Demand for physicians is not confined to traditionally underserved rural areas. Merritt Hawkins worked in all 50 states in, and 41% of the firm s search assignments took place in communities of 100,000 people or more. The use of quality/value-based physician incentives took a step back last year. Only 24% of Merritt Hawkins recruiting assignments featured production bonuses in which at least part of the bonus was based on quality/value metrics, down from 39% last year, signaling the difficulty many healthcare organizations are experiencing transitioning from volume-based incentives to quality/ value-based incentives. 24% 39% 2014 Review of Physician and Advanced Practitioner Recruiting Incentives 4

6 Merritt Hawkins 2014 Review of Physician and Advanced Practitioner Recruiting Incentives: Recruiting Assignment Characteristics and Metrics (All of the following numbers are rounded to the nearest full digit.) 1 Total Number of Physician/Advanced Practitioner Search Assignments Represented The Review is based on the 3,158 permanent physician and advanced practitioner search assignments Merritt Hawkins/AMN Healthcare s physician staffing companies had ongoing or were engaged to conduct during the 12 month period from April 1, 2013 to March 31, Practice Settings of Physician and Advanced Practitioner Search Assignments Hospital Group Solo Partnership Association Community HC/IHS Academics Concierge Other (493) 16% (29) 1% (94) 3% (28) 1% (305) 10% (153) 5% (20) 1% (1,975) 64% (2,006) 64% Hospital Group Solo Partnership Association Community HC/IHS Academics Concierge (436) 16% (28) 1% (220) 8% (29) 1% (152) 6% Other (135) 5% (1,710) 63% Hospital Group Solo Partnership Association Community HC/IHS Academics Concierge Other (505) 19% (54) 2% (344) 13% (82) 3% (187) 7% (1,495) 56% Review of Physician and Advanced Practitioner Recruiting Incentives

7 If Academic Medicine, what type of position?* (Of 188 Academic searches) Research Administration/ Leadership Teaching Clinical 38 (20%) 41 (22%) 26 (14%) 128 (68%) *Some Academic positions combine teaching, clinical and other roles, so the percentages exceed more than 100. If Partnership, time to partnership eligibility (of 93 searches offering partnership) Immediate / One Year 33 (36%) 29 (32%) 74 (34%) 158 (46%) Two Years Three Years Four Years Five Years 58 (62%) 54 (57%) 117 (53%) 158 (46%) 0 (0%) 6 (6%) 27 (12%) 23 (7%) 0 (0%) 4 (4%) 2 (1%) 0 (0%) 2 (2%) 1 (1%) 0 (0%) 3 (<1%) 3 50 States Where Search Assignments Were Conducted AK, AL, AR, AZ, CA, CO, CT, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MO, MN, MS, MT, NC, ND, NE, NH, NJ, NM, NY, NV, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, WY 4 Number of Searches by Community Size (1,044) 33% (819) 26% (1,295) 41% (804) 26% (775) 25% (1,518) 49% (1,001) 37% (784) 29% (925) 34% 0 25,000 25, , ,000 + (588) 22% (906) 34% (1,173) 44% (730) 26% (901) 32% (1,182) 42% 2014 Review of Physician and Advanced Practitioner Recruiting Incentives 6

8 5 Top 20 Most Requested Searches by Medical Specialty Family Medicine (includes FP/OB) Internal Medicine Hospitalist Psychiatry Nurse Practitioner Pediatrics Emergency Medicine OB/GYN Physician Assistant Neurology General Surgery Orthopedic Surgery Gastroenterology Hematology/Oncology Otolaryngology Cardiology Urology Neurosurgery Pulmonology Endocrinology Review of Physician and Advanced Practitioner Recruiting Incentives

9 6 7 Other Clinical Specialty Recruitment Assignments Addiction Medicine Allergy & Immunology Anesthesiology Anesthesiology/Pain Management Bariatric Surgery Bone Marrow Transplant Breast Surgery Certified Registered Nurse Anesthetist Chief of Community Medicine Clinical Genetics Clinical Lab Scientist Colon & Rectal Surgery Facial Plastic Surgery/ENT Genitourinary Gynecological Oncology Gynecology Hospice-Palliative Medicine Infectious Disease Intensivist Internal Medicine/Pediatrics Maternal Fetal Medicine Medical Director Medical Humanities MOHS Surgery Molecular Research Neonatology Nephrology Nuclear Medicine Obstetrics Occupational Medicine Ophthalmology Oral & Maxiofacial Surgery Pain Management Pathology Pediatric Anesthesiology Pediatric Cardiology Pediatric Emergency Medicine Pediatric Endocrinology Pediatric Gastroenterology Pediatric Ophthalmology Pediatric Physiatry Pediatric Pulmonology Pediatric Surgery Pediatric, Development-Behavioral Administrative, Academic and Executive Titles Include: Dean, College of Medicine Dean, College of Public Health and Human Professions Dean, College of Pharmacy Dean, College of Public Health Dean, College of Nursing Dean of Dentistry Chair, Department of Internal Medicine Chair, Department of Cardiology Chair, Department of Anesthesiology Chair, Department of Family Medicine Chair, Department of Surgery Chair, Department of Orthopedic Surgery Chair, Department of Pediatrics Chair, Department of PMFR Chair, Department of Neurology Chair, Department of Gastroenterology Chair, Department of Pediatric Radiology Chair, Department of Pediatric Surgery Chair, Department of Pediatric Oncology Chair, Department of Obstetrics/Gynecology Chair, Department of Pathology Chair, Department of Psychiatry and Behavioral Services Chair, Department of Ophthalmology Chair, Department of Otolaryngology Chair, Department of Radiation Oncology Chair, Department of Transplant Surgery Associate Dean, Diversity & Equity Associate Dean, Admissions and Student Affairs Associate Dean, Education and Health Professionals Associate Dean for Research Associate Dean, Graduate Medical Education Pediatrics Physiatry Physicist Plastic Surgery Podiatry Radiation Oncology Radiology Radiology, Neuro-interventional Reproductive Endocrinology Retina Surgery Retinal Disorders Rheumatology Sleep Medicine Surgical Oncology Thoracic Surgery Transplant Surgery Urgent Care Urological Gynecology Urological Oncology Vascular & Interventional Radiology Vascular Surgery Assistant Professor Chief Medical Officer Full Professor Associate Department Chair Clinical Director Medical Director Associate Professor Executive Residency Director Chief Executive Officer Division Chair Vice President, Medical Affairs Senior Researcher Director of Community Medicine Chief Diversity Officer Director of the Center for Institutional Diversity Chief Information Officer Vice President, Medical Services Director of Quality and Accreditation Chief Nursing Officer Residency Director 2014 Review of Physician and Advanced Practitioner Recruiting Incentives 8

10 Income Offered to Top 20 Recruited Specialties 8 (Base salary or guaranteed income only, does not include production bonus or benefits) Family Medicine Internal Medicine $140,000 $199,000 $293,000 $145,000 $198,000 $360,000 $130,000 $185,000 $325,000 $130,000 $208,000 $325,000 $120,000 $189,000 $300,000 $150,000 $203,000 $345,000 $130,000 $178,000 $290,000 $130,000 $205,000 $285,000 $140,000 $175,000 $255,000 $145,000 $191,000 $250,000 Hospitalist Psychiatry $145,000 $229,000 $350,000 $150,000 $217,000 $350,000 $150,000 $227,000 $350,000 $165,000 $218,000 $300,000 $160,000 $221,000 $400,000 $160,000 $224,000 $300,000 $160,000 $217,000 $305,000 $160,000 $220,000 $275,000 $165,000 $208,000 $295,000 $150,000 $209,000 $310,000 Nurse Practitioner Pediatrics $70,000 $106,000 $150,000 $130,000 $188,000 $240,000 $75,000 $105,000 $150,000 $145,000 $179,000 $300,000 $70,000 $95,000 $121,000 $130,000 $189,000 $220,000 $120,000 $183,000 $250,000 $145,000 $180,000 $265,000 Emergency Medicine OB/GYN $220,000 $311,000 $400,000 $215,000 $288,000 $380,000 $210,000 $288,000 $450,000 $225,000 $286,000 $350,000 $170,000 $264,000 $380,000 $180,000 $268,000 $440,000 $160,000 $255,000 $380,000 $220,000 $282,000 $360,000 $185,000 $247,000 $380,000 $175,000 $272,000 $350, Review of Physician and Advanced Practitioner Recruiting Incentives

11 2014 Review of Physician and Advanced Practitioner Recruiting Incentives 10 $71,000 $85,000 $75,000 $105,000 $118,000 $99,000 $150,000 $160,000 $130,000 Physician Assistant $400,000 $250,000 $275,000 $270,000 $315,000 $442,000 $447,000 $396,000 $420,000 $420,000 $500,000 $550,000 $600,000 $525,000 $600,000 Cardiology (non-invasive) $250,000 $300,000 $300,000 $230,000 $230,000 $372,000 $398,000 $412,000 $359,000 $349,000 $500,000 $650,000 $530,000 $500,000 $450,000 Otolaryngology $240,000 $291,000 $300,000 $300,000 $300,000 $454,000 $441,000 $433,000 $424,000 $411,000 $560,000 $600,000 $550,000 $505,000 $600,000 Gastroenterology $350,000 $250,000 $400,000 $300,000 $300,000 $488,000 $483,000 $519,000 $521,000 $519,000 $700,000 $750,000 $750,000 $700,000 $825,000 Orthopedic Surgery $315,000 $275,000 $210,000 $250,000 $300,000 $377,000 $382,000 $360,000 $369,000 $385,000 $450,000 $525,000 $450,000 $550,000 $500,000 Hematology/ Oncology $180,000 $180,000 $160,000 $160,000 $180,000 $262,000 $300,000 $280,000 $256,000 $281,000 $400,000 $400,000 $420,000 $345,000 $460,000 Neurology $430,000 $385,000 $330,000 $320,000 $250,000 $504,000 $424,000 $461,000 $453,000 $400,000 $625,000 $650,000 $650,000 $550,000 $550,000 Urology $270,000 $240,000 $220,000 $205,000 $175,000 $354,000 $336,000 $343,000 $336,000 $314,000 $515,000 $550,000 $450,000 $450,000 $410,000 General Surgery $350,000 $300,000 $400,000 $380,000 $325,000 $454,000 $461,000 $512,000 $532,000 $495,000 $550,000 $675,000 $650,000 $650,000 $680,000 Cardiology (invasive)

12 Neurosurgery Pulmonology $450,000 $591,000 $700,000 $230,000 $358,000 $425,000 $225,000 $351,000 $500,000 $450,000 $701,000 $1,000,000 $180,000 $321,000 $415,000 $550,000 $613,000 $700,000 $200,000 $311,000 $430,000 $590,000 $631,000 $720,000 $200,000 $305,000 $430,000 9 Type of Incentive Offered Endocrinology Salary Salary with Bonus Income Guarantee Other $175,000 $206,000 $235, (20%) 2,335 (74%) 127 (4%) 63 (2%) $170,000 $209,000 $300, (17%) 2,323 (75%) 217 (7%) 32 (1%) $180,000 $248,000 $380, (18%) 1,977 (73%) 191 (7%) 53 (2%) $180,000 $218,000 $270, (16%) 1,975 (74%) 239 (9%) 25 (<1%) $200,000 $219,000 $270, (12%) 2,082 (74%) 367 (13%) 25 (<1%) 10 If Salary Plus Production Bonus, on Which Types of Metrics Was the Bonus Based? (of 2,323 searches offering salary plus bonus, multiple categories possible. Note: 2011 is the first year this question was asked.) 59% 57% 54% 39% 21% 24% 25% 33% 35% 5% 11% 9% 3% 6% 9% 5% 5% 3% RVU Based Net Collections Gross Billings Patient Encounters Quality Other Review of Physician and Advanced Practitioner Recruiting Incentives

13 11 If Quality Factors Were Included in the Production Bonus, About What Percent of the Physician s Total Compensation Determined By Quality?* 12 If Income Guarantee, What Type? (of 127 searches offering income guarantees) 108 (85%) 19 (15%) Determined by Quality 13% *Question asked for the first time in 145 (67%) 146 (76%) 72 (33%) 45 (24%) 231 (97%) 8 (3%) 324 (88%) Net Collections Guarantee 43 (12%) Gross Collections Guarantee 13 If Income Guarantee, What was the Term Offered? (of 127 searches offering income guarantees) 14 Searches Offering Relocation Allowance 1 Year 2 Year 3 Year Other Yes No 64 (50%) 47 (38%) 16 (12%) 0 (0%) 2,845 (90%) 313 (10%) 105 (49%) 79 (36%) 28 (13%) 5 (2%) 2,821 (91%) 276 (9%) 2,577 (95%) 133 (5%) 87 (45%) 83 (44%) 21 (11%) 0 (0%) 2,451 (92%) 216 (8%) 113 (47%) 776 (32%) 49 (21%) 0 (0%) 2,671 (95%) 142 (5%) 202 (55%) %) 35 (9%) 0 (0%) 15 Amount of Relocation Allowance (Physicians only) 16 Amount of Relocation Allowance (NPs and PAs Only) $1,000 $9,849 $25,000 $3,500 $6,904 $10,000 $1,000 $9,555 $25,000 $1,000 $10,035 $40,000 $1,000 $10,454 $85,000 $1,000 $10,035 $30, Review of Physician and Advanced Practitioner Recruiting Incentives 12

14 17 Searches Offering Signing Bonus 18 Amount of Signing Bonus Offered (Physicians only) Yes No 2,212 (70%) 946 (30%) $1,000 $21,773 $150,000 2,199 (71%) 898 (29%) $1,500 $22,069 $200,000 2,170 (80%) 540 (20%) $4,000 $23,388 $200,000 2,025 (76%) 642 (24%) $5,000 $23,790 $200,000 2,135 (76%) 678 (24%) $2,000 $22,915 $100, Amount of Signing Bonus Offered (NPs and PAs only) 20 Searches Offering to Pay Continuing Medical Education (CME) Yes No $1,000 $8,000 $20,000 2,865 (91%) 293 (9%) 2,789 (90%) 308 (10%) 2,658 (98%) 52 (2%) 2,559 (96%) 108 (4%) 2,618 (93%) 195 (7%) 21 Amount of CME Pay Offered (Physicians only) 22 Amount of CME Pay Offered (NPs and PAs only) $1,000 $3,515 $15,000 $1,000 $2,450 $5,000 $1,000 $3,444 $15,000 $500 $3,391 $12,000 $500 $3,194 $10,000 $500 $3,335 $15, Review of Physician and Advanced Practitioner Recruiting Incentives

15 23 Searches Offering to Pay Additional Benefits Health Insurance 97% 94% 97% 99% 98% Malpractice 99% 96% 99% 97% 99% Retirement 94% 87% 82% 90% 90% Disability 86% 83% 75% 77% 84% Educational Forgiveness 26% 22% 26% 29% 38% Housing Allowance 4% 6% 5% 6% Other <1% 2% 1% 3% 24 If Educational Loan Forgiveness was Offered, What Was the Term? (of 820 searches offering educational loan forgiveness) 25 If Educational Loan Forgiveness Was Offered, What Was the Amount? (Physicians only) 1 Year 2 Years 3 Years 90 (11%) 173 (21%) 557 (68%) $4,000 $77,000 $336, (7%) 183 (27%) 449 (66%) $1,000 $71,733 $210, (6%) 192 (27%) 474 (67%) 39 (5%) 208 (27%) 525 (68%) 26 If Educational Loan Forgiveness was Offered, What Was the Amount? (NPs and PAs only) $20,000 $40,000 $60, Review of Physician and Advanced Practitioner Recruiting Incentives 14

16 Trends and Observations Merritt Hawkins annual Review of Physician and Advanced Practitioner Recruiting Incentives, now in its 21st year, tracks three key physician recruiting trends, as well as various advanced practitioner recruiting trends. 1. Based on the physician recruiting assignments Merritt Hawkins is contracted to conduct, the Review indicates which types of physicians are in the greatest demand and which are the most challenging to recruit. 2. The Review also indicates the types of practice settings into which physicians are being recruited (hospitals, medical groups, solo practice etc.) and the types of communities that are recruiting physicians based on population size. 3. The Review further indicates the types of financial and other incentives that are being used to recruit physicians. Each of these trends is discussed below. WHO IS IN DEMAND? Merritt Hawkins 2014 Review of Physician and Advanced Practitioner Recruiting Incentives examines the permanent physician and advanced practitioner recruiting assignments Merritt Hawkins and AMN Healthcare s physician staffing divisions had ongoing or were engaged to conduct during the 12 month period from April 1, 2013 to March 31, These search assignments reflect the types of physicians hospitals, medical groups, community health centers, academic medical centers, government entities, physician hospital organizations, integrated medical systems, Accountable Care Organizations, urgent care centers and other organizations that are seeking nationwide. They also reflect which types of physicians may be particularly difficult to recruit, necessitating the assistance and additional resources of a physician recruiting firm. A CONTEXT OF CHANGE Physician recruiting trends and practices must be placed in the overall context of the nation s prevailing healthcare delivery system. It is not an exaggeration to state that healthcare delivery in the United States has undergone more changes in the 12 month period examined in this Review than in any previous 12 month period Merritt Hawkins has examined in similar Reviews conducted over the last 21 years. Important recent developments in healthcare delivery include, but are not limited to, the following: The enrollment in health insurance plans of eight million Americans through the Affordable Care Act (ACA). The enrollment of an additional five million Americans in Medicaid (as of May, 2014). The continued financial pressure on hospitals and other healthcare facilities as reimbursement cuts take effect prior to significant patient or revenue increases Review of Physician and Advanced Practitioner Recruiting Incentives

17 expected to result from ACA related increases in insurance enrollment. Decreased hospital census caused by high deductible insurance plans, continued unemployment, and more outpatient choices. To varying degrees, all of these developments impact both physicians and physician recruiting, because physicians continue to play a pivotal role in the healthcare delivery system and are inevitably affected by changes to it. The proliferation of Accountable Care Organizations (ACOs) and the continued movement toward outcomes/valuebased delivery models. The continued consolidation of hospitals, medical groups and other entities. The growth of outpatient medicine and the proliferation of multiple sites of service, including ambulatory surgery centers, retail clinics, urgent care centers, free-standing emergency departments and others. The adoption of team based care and the growing use of advanced practitioners such as nurse practitioners (NPs) and physician assistants (PAs). The adoption of electronic health records (EHR) as Physician Quality Reporting System (PQRS) physician participation deadlines near. The delay of both ICD-10 implementation and a permanent resolution to pending Medicare physician payment cuts mandated by the Sustainable Growth Rate formula (SGR). Release by the Center for Medicare and Medicaid Services (CMS) of data detailing $77 billion in Medicare payments to physicians and other healthcare professionals. The continued shortage of physicians nationwide. PHYSICIANS ARE STILL THE CENTERPIECE Though the healthcare system is evolving, and the role of other clinicians is growing, physicians remain the quarterbacks of the healthcare delivery team and are at the center of the healthcare system. Through patient consultations, hospital admissions, treatment plans, prescriptions, tests, and procedures physicians control the levers to both quality of care and healthcare economics. According to the Boston University School of Public Health, physicians receive or direct 87% of all personal spending on healthcare in the United States. While the quality of care contributions physicians make cannot be measured in dollars, the economic contribution of physicians recently was quantified by an AMA-sponsored study examining national and state-by-state physician economic output Review of Physician and Advanced Practitioner Recruiting Incentives 16

18 The study revealed several physician related economic output metrics, including: Total economic output: The combined economic output of patient care physicians in the United States is $1.6 trillion. Per capita economic output: Each physician supports a per capita economic output of $2.2 million. Jobs: On average, each physician supports approximately 14 jobs. Wages and benefits: On average, each physician supports a total of $1.1 million in wages and benefits Tax revenues: On average, each physician supports $90,449 in local and state tax revenues. Source: The National Economic Impact of Physicians. Prepared for The American Medical Association by IMS Health. March, In addition to the economic output detailed by the AMA study cited above, physicians on average generate $1.4 million in net revenue per year for their affiliated hospitals, and therefore are critical to the economic viability of virtually every hospital in the United States (see Merritt Hawkins 2013 Survey of Physician Inpatient/Outpatient Revenue). Due to their pivotal role, it is the effective recruitment, compensation, and integration of physicians that will determine the direction of the healthcare system, including the implementation of valuebased reimbursement, the adoption of team-based care and EHR, increased patient access to services and the various other goals commonly grouped under the heading of healthcare reform. For this reason physicians continue to be in high demand while supply remains limited, a trend examined in more detail below. Healthcare Reform and Physician Supply Access to physician services in the United States already can be problematic. Merritt Hawkins 2014 Survey of Physician Appointment Wait Times indicates that even in large metro areas with a relatively high per capita concentration of physicians, physician appointment wait times can be protracted (see chart below): New Patient Appointment Wait Times In Days Physician revenue generation today is based largely on fee-for-service metrics, a standard likely to change as the health system pivots from volume-based reimbursement to valuebased reimbursement. However, if and when value-based payment systems eventually prevail, it is physicians, through their practice patterns and choices, who will ensure that quality of care is maintained within a structure of managed, finite resources Review of Physician and Advanced Practitioner Recruiting Incentives Boston Denver Philadelphia Portland Minneapolis Detroit Washington, D.C. New York San Diego Seattle Dallas Source: Merrit Hawkins 2014 Survey of Physician Appointment Wait Times.

19 Of particular note is the fact that Boston has by far the highest average wait times of the cities examined in the survey, despite having 450 physicians per 100,000 population (the average ratio for the entire U.S. is 226 physicians per 100,000). In 2006, Massachusetts implemented a healthcare reform system very similar to the ACA, and today 97% of the state s residents have health insurance. Partly as a result, wait times to see a doctor have become extended, while emergency room visits increased rather than decreased. Whether the ACA will drive similar trends nationwide remains to be seen. In the 12 month period examined in this Review (April 1, 2013 March 31, 2014) Merritt Hawkins observed some healthcare facilities ramping up their physician recruiting activity in preparation for an anticipated increased demand for services related to insurance enrollment through the ACA. However, physician recruiting activity to date has not largely been driven by ACA related spikes in demand. Facilities are waiting to see how insurance enrollment impacts physician utilization particularly whether high deductible plans will limit physician visits and whether utilization will further be limited by the enrollment of relatively healthy younger people. The expansion of Medicaid enrollment through the ACA also to date has been a minimal spur to physician recruiting, having its greatest effect on Federally Qualified Health Centers (FQHCs) whose mandate is to provide accessible care for traditionally underserved and under-insured populations. A similar physician appointment wait time study conducted by the Massachusetts Medical Society (MMS) in 2013 shows an average wait time in Massachusetts of 39 days for a family physician appointment. The MMS study also shows that only 51% of family physicians and only 45% of general internists in Massachusetts are accepting new patients (Massachusetts Medical Society Patient Access to Care Study. July, 2013). Because so many physicians today are not accepting new Medicaid patients (only 45.7% in the markets examined in Merritt Hawkins Physician Appointment Wait Time Survey cited above) expanded Medicaid enrollment may have the greatest impact on hospital emergency rooms. Unable to access office-based physicians in a timely manner, Medicaid patients often rely on the emergency room for care. An analysis of California emergency department visits confirms that adult 2014 Review of Physician and Advanced Practitioner Recruiting Incentives 18

20 Medicaid beneficiaries have the highest rate of ED visits, higher than both uninsured and privately insured patients. Similarly, a study of Medicaid expansion in Oregon showed that adults chosen in a lottery to receive Medicaid coverage used the ED about 40% more often than those who were not selected (Newsatjama.jama. com/2014/01/02). Trends other than ACA-related insurance enrollment, including the ongoing physician shortage, have had a more immediate effect on physician recruiting. A DEARTH OF DOCTORS Medical schools in the United States have expanded in recent years and will be producing 27,000 graduates annually by the end of this decade, 50% more than in 2000 (Help Wanted! Journal of Oncology Practice. Richard Cooper, M.D. January, 2014). However, Medicare funding for residency training was capped by Congress in 1997 and there has been little corresponding growth in the number of resident positions since then, though the U.S. population has grown by 50 million people. More than 60 state medical societies, specialty societies, and hospital organizations have called for the cap to be lifted, but without practical effect. at three times the rate of those 30 or younger, according to the CDC, and account for over 33 percent of all community hospital stays, though they comprise only 12 percent of the population (HealthLeaders December 29, 2010). An additional factor driving the physician shortage is the evolution of physician practice styles. As more physicians choose employment and opt for controllable schedules, physician productivity is decreasing. According to a survey conducted by Merritt Hawkins for The Physicians Foundation, physicians worked 6% fewer hours in 2012 than in 2008, a drop in productivity equivalent to the loss of 46,000 full time equivalent (FTE) physicians from the workforce. Projected Physician Shortages 131,000 91,500 58,000 Compounding the problem, some 10,000 Americans turn 65 every day (at a rate of one every eight seconds) and will continue to do so for the next 20 years (AAMC Physician Policy Workforce Recommendations, September, 2012). People in this age group see physicians 7, Source: AAMC Physician Workforce Policy Recommendations, September, Review of Physician and Advanced Practitioner Recruiting Incentives

21 Physician demographics also are contributing to the shortage. Because over 40% of active physicians are 55 years old or older, the shortage will soon be compounded by a major wave of physician retirements during the next five to ten years. As a result of these and related factors, ongoing physician shortages are projected to worsen. The chart on page 19 illustrates the coming gap between the number of physicians in the United States and the number needed, as projected by the Association of American Medical Colleges (AAMC). Hospital Vacancy Rates for Clinical Professionals healthcare industry and by the emergence of aligned delivery models such as Accountable Care Organizations (ACOs)/ primary care medical homes/integrated delivery systems. As of April, 2014, over 428 provider groups were operating as ACOs. About four million Medicare beneficiaries are now in an ACO and an estimated 14% of the U.S. population is now being served by an ACO (Kaiser Health News. FAQ on ACOs. April 16, 2014). The graph below illustrates the accelerating rate of hospital consolidations nationwide: Number of Announced Hospital Consolidations, Physicians 17.6% Nurses 17.0% 72 NPs/PAs 14.9% Allied Professionals 13.3% Source: 2013 Clinical Workforce Survey. AMN Healthcare. 38 The shortage is compelling many healthcare facilities nationwide to recruit physicians to fill current openings on their staffs. The chart above shows the average hospital vacancy rate for various clinical professionals as tracked by AMN Healthcare s 2013 Clinical Workforce Survey. In addition to the physician shortage, physician recruiting is being driven in part by increased consolidation within the Source: Irving Levin Associates Healthcare Acquisition Report. In an effort to meet ACO staffing requirements, to manage the health of large population groups, and to secure market share, these large integrated organizations are recruiting or acquiring physicians en 2014 Review of Physician and Advanced Practitioner Recruiting Incentives 20

22 masse, rather than on an ad hoc basis, as has been common in the past. Today, a large healthcare system/aco may initiate a search effort for dozens of primary care physicians at a time, in order to establish the primary care networks that are the key to population health management and team based care. In part because of their key role as care coordinators, primary care physicians (defined as family physicians, general internists, and pediatricians) remain in particularly high demand as delivery models shift. They also are the main targets for recruitment of expanding Federally Qualified Health Centers (FQHCs), urgent care centers and Veterans Administration facilities. For the eighth consecutive year, family medicine was Merritt Hawkins most requested search assignment, with general internal medicine second (also for the eighth consecutive year). Third on the list are hospitalists, who typically are general internists, while pediatricians are sixth, up from 9th two years ago (pediatricians were not in the top 20 as recently as 2005/06). The supply of primary care physicians has been inhibited in recent years by a decline of interest in these areas. In 1950, 50% of physicians were engaged in primary care and the remaining 50% were engaged in a handful of medical specialties Today, only 32% of physicians are engaged in primary care while the remaining 68% are engaged in one or more of 200 specialties for which board certification can be obtained (New York Times, June 23, 2010) a percent lower than most developed nations. Due to comparatively low pay and longer work hours, fewer U.S. medical graduates have displayed an interest in primary care over much of the last 15 years, ceding over 50% of filled residency positions in some years to international medical graduates (IMGs), according to the National Residency Matching Program (NRMP). While interest in primary care residencies among medical school graduates recently has increased, nearly one in five Americans live in a region designated as underserved for primary care by the federal government. Training of primary care physicians, with a focus on interprofessional cooperation, will have to be accelerated to meet the demand created by delivery systems built around prevention, population health management, team-based care and quality/volume-based reimbursement. Three-year rather than fouryear medical school programs may be one answer. New York University, Texas Tech, and Columbia University have launched three-year programs, and about ten other medical schools are considering doing so (The Washington Post. January 14, 2014). Urgent Care and the Retail Boom An additional spur to the recruitment of primary care physicians is the growth of urgent care centers and other proliferating sites of service (see chart on page 22). Hospitals, large medical groups and other entities are repositioning how they appeal to healthcare consumers, with a greater emphasis placed on access to Review of Physician and Advanced Practitioner Recruiting Incentives

23 services. Urgent care centers, free standing emergency departments, emergency departments specifically for the elderly (of which there are now 50 in operation with another 150 on the way FierceHealthcare, February 20, 2014) and retail clinics are among the proliferating sites of service that allow healthcare providers to offer access to medical services everywhere, all the time. Urgent care centers alone now see 160 million patient visits a year, and studies show that 14% 27% of visits to hospital emergency rooms could be handled by an urgent care center (Becker s Hospital Review. August, 2013). Medical Practices That Can Arrange For Patients to See a Doctor or Nurse After Hours Nations Netherlands New Zealand United Kingdom Australia Germany Canada United States % 90% 87% 81% 78% 47% 40% Source: Commonwealth Fund International Policy Survey of Primary Care Physicians Growth of Urgent Care 9,300 urgent care centers in the Unites States 40% expect to expand or add a new site 85% expect to see new patient growth 50% are free standing 50% are in retail shopping centers Source: Becker s Hospital Review. August 2013 Retail centers are expected to double from 1,400 in 2012 to 2,800 by 2015 with projected 25% to 35% growth in coming years (Advisory Board Daily Briefing, June 13, 2013). Many of these sites are staffed by primary care physicians or by NPs and PAs who provide primary care services. These outpatient settings are increasing in part because physician practices in the United States are less accessible after hours than practices in other nations, as the chart following indicates. Increased access is part of a wider trend in which healthcare facilities are trying to evolve healthcare delivery away from a transactional model toward an experiential one characterized by customer service, price transparency, provider ratings, and ease of use. With the understanding that consumers punish complexity and reward simplicity, healthcare is shifting to a retail model with a wider menu of niche providers to suit varying customer preferences. FQHCS AND SPECIALTY SERVICES As referenced above, FQHCs have an expanded mandate to provide access to traditionally underserved populations through funding provided by the federal stimulus bill and the ACA, and many have ramped up their recruiting efforts. In addition, numerous hospitals and larger medical groups have invested in high-end 2014 Review of Physician and Advanced Practitioner Recruiting Incentives 22

24 specialty services in recent years, and the last decade has seen a building boom of sleep centers, heart centers, neuroscience centers, orthopedic centers and other specialty care facilities that require primary care doctors to ensure they have a requisite number of patients. ONLINE RESOURCES AND TELEHEALTH insurance companies willing to pay for these services. The share of large employers with more than 5,000 employees that offer telehealth services increased to 17% in 2013, from 12% the year before, and the percent of companies considering doing so grew to 43% from 33% in the same time frame (Wall Street Journal/MarketWatch, March 3, 2014). Even though physicians can be made more efficient and accessible through the use of technology, the existing physician workforce is insufficient to meet demand and is being supplemented by other clinicians, such as NPs and PAs, a trend underlined by the 2014 Review. Despite this proliferation of service sites, consumer access to physicians remains a challenge, which innovators and entrepreneurs are rushing to meet. New services promoting access are arising in markets nationwide, such as ZocDoc, an online service that allows consumers to access physician schedules in their cities to determine which physicians have openings. Zipnosis, pioneered by Park Nicollet in Minnesota, is an online program that for $25 a visit provides diagnosis of minor problems such as colds, flu, bladder infections, allergies and acne. Since 2010 it has expanded to Alaska, Colorado, Connecticut, Kentucky, Maryland, Massachusetts, New York, Rhode Island, Washington and Wisconsin. Phone and web-based telehealth services are exploding with more employers and IS THERE AN ADVANCED PRACTITIONER IN THE HOUSE? Prior to 2011, Merritt Hawkins received few requests to recruit advanced practitioners, including NPs and PAs. In 2013, NPs and PAs made the list of our top 20 most requested search assignments for the first time. In the 2014 Review, NPs and PAs combined rank as our fifth most requested search. The number of search assignments Merritt Hawkins conducted for NPs and PAs grew 320% collectively from to. There are over 115,000 NPs practicing in the U.S., with 88% focusing on primary care, and 18% practicing in rural areas, according to the American Academy of Nurse Practitioners (AANP). They hold prescriptive authority in all 50 states and 96% of them are female Review of Physician and Advanced Practitioner Recruiting Incentives

25 Over 83,000 PAs practice in the U.S., about one-third in primary care and two-thirds in specialty areas, according to the American Academy of Physician Assistants (AAPA), and 62% are female. They have prescriptive authority in all 50 states and their numbers have increased by 100% over the last ten years. While NP and PA professional groups are seeking a wider scope of practice in many states, they and most other observers agree that NPs and PAs are intended to supplement physicians, not to replace them. In the emerging era of health professional shortages, physicians, NPs, PAs and other clinicians will need to practice to the limits of their training, so that work is redistributed as appropriate across the spectrum of healthcare providers. Facilities using NPs and PAs will need to understand their role and ensure they are truly supplementing physician services rather than duplicating them. This team-based model of care ultimately may only be achieved through programs stressing interprofessional education, when succeeding generations of clinicians trained in the team-based approach are integrated into the workforce. Nevertheless, many facilities aspire to this model today and are moving toward it. THE ROLE OF LARGE RETAILERS While there are still disputes about scope of practice issues between physician and advanced practitioner professional groups, the ways in which PAs/NPs are being used now are often being dictated by state governments, by large health systems, major employers and retailers. For example, Wallgreen s announced in April of 2013 that it will become the first retail chain to expand its health care services to include diagnosing and treating patients for chronic conditions such as asthma, diabetes, and high cholesterol, using PAs and NPs. (Walgreen s Becomes 1st Retail Chain to Diagnose, Treat Chronic Conditions, Kaiser Health News, April 4, 2013). The use of PAs/NPs in a diagnostic role is a significant step that may be imitated by other retail chains and sites of service. Whereas in the past, hundreds of independent physicians in a region may have decided if and how PAs and NPs were employed, today those decisions are being made at a more corporate level. In 18 states, NPs have full authority to evaluate and diagnose patients, order diagnostic tests and prescribe drugs, enabling them to open a practice or work in a retail clinic with no doctor on site. Law makers in numerous other states are considering legislation that would allow nurse practitioners to practice independently. Enhanced scope of practice laws for NPs and PAs and recognition of their expanded duties by third party payers are likely to further drive demand for these clinicians Review of Physician and Advanced Practitioner Recruiting Incentives 24

26 A LOOMING SHORTAGE OF NPS AND PAS The shortage of healthcare professionals is so acute that some experts believe that even the enhanced use of NPs and PAs will not be enough to fill the gaps. Like physicians, many NPs and PAs today are gravitating to specialty areas and to larger communities. Data generated by noted physician workforce analyst Richard Buz Cooper, M.D. show that while the number of NPs and PAs per capita is growing, the number in primary care per capita peaked several years ago and is declining. These numbers suggest there may not be enough PAs and NPs to ride to the rescue and alleviate primary care shortages, and that some of the same trends that have led to physician shortages may be duplicated in the PA and NP workforce. Though the number of NP and PA education programs is projected to grow by 3% to 5% annually, Dr. Cooper projects a 20% deficit of these clinicians by 2025 (Physician Shortage Isn t the Only Looming One, Advance for NPs and PAs, July 28, 2011). Though many hospitals and medical groups have become better at assimilating NPs and PAs onto their clinical teams, more interprofessional cooperation will be needed as primary care physicians focus on directing team-based care and managing chronically ill patients. THE CRISIS IN PSYCHIATRY Federal rules that go into effect in 2014 give Americans more access to behavioral health coverage, but as in primary care and other areas, coverage may not always lead to access. The shortage of psychiatrists and behavioral health resources has become acute nationwide, a fact highlighted by the difficulty many psychiatric patients in emergency departments have accessing an inpatient bed. In California, the average time is 10 hours. In central Ohio, it is 19 (Access to Mental Health Services Strained as Benefits Expand. HealthLeaders, February 27, 2014). In 2014, psychiatry was Merritt Hawkins fourth most requested specialty. As Merritt Hawkins has reported in this Review and elsewhere, the shortage of psychiatrists continues unabated while failing to receive the attention focused on the shortage of primary care physicians. The silent shortage will continue as psychiatrists are essentially aging out of the workforce, a trend illustrated by the chart below: 40 or Younger 10 % Psychiatrists by Age % 70 % 55 % % 61 or Older 39 % All active psychiatrists are 50 or older All active physicians are 50 or older Source: AMA Physician Master File Review of Physician and Advanced Practitioner Recruiting Incentives

27 Many psychiatrists today are seeking outpatient practice settings, so that it is increasingly difficult for inpatient facilities to recruit the physicians they need. This is particularly true of federally funded psychiatric facilities and correctional facilities, where the need is greatest. In the future, demand for psychiatric services will have to be addressed by primary care physicians, who today are prescribing a growing volume of psychopharmacologic drugs, and by non-physician behavioral health professionals such as psychologists. Psychologists now are able to prescribe medications in the military and in the Indian Health Service, and in two states, New Mexico and Louisiana. At least six states (Arizona, Hawaii, Montana, New Jersey, Oregon, and Tennessee) have or are considering giving psychologists prescriptive authority. WHAT ROLE WILL THE ED PLAY? While requests for emergency physicians were down relative to last year, emergency medicine nevertheless ranked as Merritt Hawkins seventh most requested search. The number of hospital emergency room visits continues to grow and hit an all-time high of about 130 million in 2010, the last year for which numbers are available, up from 124 million in 2008, according to the CDC s National Hospital Ambulatory Medical Care Survey. Emergency departments now account for about half of all hospital admissions in the U.S. according to a RAND Corporation study ( preess/2013/05/20.html). While the number of hospital-based emergency departments has decreased in recent years, the number of freestanding emergency departments has increased, doubling in the last decade and now up to 284 in 45 states (Freestanding Emergency Department Growth Creates Backlash, American Medical News, April 29, 2013). Opened by hospitals and physicians, sometimes in alliance and sometimes separately, they are able to take more complex cases than urgent care centers. Freestanding EDs are subject to the Emergency Medical Treatment and Active Labor Act (EMTALA) if they accept Medicare or Medicaid, and must see all patients who present to the department. The proliferation of free-standing EDs is part of the shift in philosophy referenced above in which healthcare organizations are placing a premium on making services more accessible to patients by expanding hours and creating multiple service sites. Despite popular perceptions, emergency department visits are not largely driven 2014 Review of Physician and Advanced Practitioner Recruiting Incentives 26

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