Financial Trends in Ob-Gyn Practice,

Financial Trends in Ob-Gyn Practice, 990 00 The influence of managed care and pressure on reimbursement during the 990s created significant financial challenges for ob-gyn practices. This time period also saw dramatic shifts in the characteristics of ob-gyns and the settings in which they practice. Since 99 the American College of Obstetricians and Gynecologists Socioeconomic Survey has tracked ob-gyns earnings from medical practice, as well as practice revenues and expenses for those in private practice. The first Socioeconomic Survey gathered baseline data on ACOG members practice characteristics and workload, as well as annual individual income, practice revenues, and practice expenses for 990. The College repeated the Socioeconomic Survey in 994, 998, and 003, collecting the same financial data for the calendar year prior to the year in which the survey was conducted (i.e., 993, 997, and 00). This paper presents trends in net income (all survey respondents) and private practice revenues and expenses. In addition, we analyze variation in individual income and practice revenues and expenses by respondent and practice characteristics. Net income from medical practice Average net income from medical practice reported by Socioeconomic Survey participants grew 3.5% over the period of time covered by the survey (see Table ). This small percentage difference was not statistically significant. Table Trends in net income Mean Median 990 $ 03, $ 75,000 993 $ 97,458, $ 80,000 997 $ 04,444 $ 90,000 00 $ 0,46 $ 9,000 t-test 993-997 p < 0.05 t-test 993-00 p < 0.05 Data from the Bureau of Labor Statistics Employment Cost Index (ECI) strongly suggest that ob-gyns earnings growth lagged substantially behind earnings growth for similar workers during this period. Between 993 (the earliest year available for the ECI), the cost of wages and salaries for workers in professional and technical specialty occupations, the occupational category that includes physicians, grew by 3%. ACOG s Socioeconomic Survey shows that ob-gyns earnings grew by only 6.5% during the same time period. It is important to note, though, that the average annual income of $0,46 reported by the 003 survey respondents places ob-gyns within the top one percent of the U.S. income distribution See Profile of Ob-Gyn Practice. Available at http://www.acog.org/from_home/departments/practice/profileofobgynpractice99-003.pdf or upon request from ACOG Department of Health Economics, 0-863-498. American College of Obstetricians and Gynecologists, June 004

(U.S. Census Bureau, Current Population Survey, 003 Annual Social and Economic Supplement). Net income reported by respondents to the 003 survey (that is, 00 net income) varied by a number of personal and practice characteristics (see Table ). Income was strongly related to gender, with male respondents reporting incomes that were 33% higher than those reported by women ob-gyns. Income also varied by years of experience, rising sharply through the peak earnings period of to 0 years in practice, then leveling off for respondents with more than 0 years of experience. There was no significant difference between metropolitan area ob-gyns net income and that reported by their non-metropolitan colleagues. Note that this analysis examines variation by only one factor at a time. For example, the finding that women earned significantly less than men does not control for other factors such as type of practice or years of experience. Practice type was also related to income. Private practice ob-gyns earned 35% more in 00 than salaried ob-gyns. Among private practitioners, those in group practice reported average incomes that exceeded those of solo practitioners by 9%. Those reporting at least one delivery in 00 had net incomes that were 5% higher than gyn-only respondents. Subspecialists earned 0% more than generalists. Sources of total net income Table Variation in net income No private practice $ 63,9 Any private practice $ 9,747 Group $ 8,48 Solo $ 83,355 Gyn Only $ 80,954 Ob and Gyn $ 5,385 Male $ 33,76 Female $ 75,34 Non-metro $ 7,4 Beginning in 994, the Socioeconomic Survey asked participants to estimate the percentage of their total net medical income obtained from three broad types of Metro Subspecialist Generalist $ $ $ 08,344 8,48 06,865 activities: clinical practice, teaching/research, and other Years in practice professional activities. On average, our survey Less than 5 years $ 53,8 respondents derived the vast majority of their income 5 to 0 years $ 6,555 from clinical practice. The distribution among the to 0 years $ 54,944 categories has changed very little since the 994 survey, More than 0 years $ 99,79 with the exception of a statistically significant one t-test, p < 0.00 percentage point drop in income derived from other t-test, p < 0.05 professional activities (see Table 3). This change may ANOVA, p < 0.00 reflect differences in the composition of the survey samples in different years rather than a sustained change in how ob-gyns earn their incomes. 3 Table 3 Trends in sources of total net income 990 993 997 00 Clinical practice -- 89.9% 90.6% 90.0% Teaching/research -- 5.6% 5.% 4.9% Other professional activities -- 4.5% 3.9% 3.5 t-test 993 00, p < 0.05 Ob-gyns responding to the 003 survey reported that they earned the majority of their net medical practice income from clinical practice activities, regardless of practice setting or personal characteristics. American College of Obstetricians and Gynecologists, June 004

However, distribution among the three categories did vary by practice type (see Table 4). Private practice respondents Table 4 derived 93% of net income from Variation in sources of total net income clinical practice, in contrast to salaried respondents who reported Other an average of only 73% of income Clinical Teaching/ Professional from clinical practice. On average, Practice research Activities teaching/research was a more No private practice 7.8% 6.0% 9.% significant source of income for Any private practice 93.%.9%.5% salaried respondents than for Group 89.% 5.9% 3.9% private practitioners. In addition, Solo 93.3%.5%.% those in salaried practice reported that they earned an average of Gyn Only 87.7% 6.5% 4.3% more than 9% of total net income Ob and Gyn 93.4% 4.0%.3% from other professional activities, Male 90.3% 4.5% 4.3% compared to only % reported by Female 89.6% 5.5%.3% private practice respondents. Non-metro 94.6%.%.% Findings on income sources are Metro 89.4% 5.4% 3.7% consistent with findings on work Subspecialist 8.%.4% 5.0% hours, which show salaried obgyns devoting significantly more Generalist 9.8% 3.6% 3.% Years in practice time to administrative activities Less than 5 years 9.9% 6.7%.4% such as practice management than 5 to 0 years 90.7% 5.6% 3.3% their private practice counterparts to 0 years 9.7% 3.8%.7% (see Profile of Ob-Gyn Practice). More than 0 years 87.4% 4.% 5.7% t-test, p < 0.05 The distribution of income sources ANOVA, p < 0.05 also differed significantly among private practice respondents. Solo practitioners earned 93% of income from clinical practice compared to 89% for group practice ob-gyns. Those in group practice derived significantly greater percentages of income from teaching/research and other professional activities. Respondents scope of practice also was related to how income was generated. Survey participants who reported at least one delivery in 00 earned 93% of their 00 income from clinical practice, while respondents who reported no deliveries derived 88% from that source. Gyn-only respondents reported correspondingly higher income percentages from teaching/research and other professional activities. Subspecialists relied less on clinical practice to generate income, reporting only 8% from this source in comparison to the 9% reported by generalists. Subspecialists also earned higher percentages of their incomes from teaching/research and other professional activities. Survey respondents practicing in non-metropolitan locations earned almost 95% of net income from clinical practice. Their metropolitan-area colleagues reported deriving only 89% of income from clinical practice. Metropolitan-area respondents earned higher percentages from teaching/research and other professional activities. Opportunities for ob-gyns to be involved in American College of Obstetricians and Gynecologists, June 004 3

teaching/research, as well as administrative activities are most likely greater in metropolitan areas. Sources of income also varied significantly by years of experience. Ob-gyns in practice more than 0 years reported lower percentages of income from clinical practice and teaching/research and higher percentages from other professional activities. Those in practice less than five years and between 5 and 0 years earned a higher percentage of income from teaching/research than respondents with to 0 or more than 0 years of experience. Sources of clinical practice income The Socioeconomic Survey asks participating ob-gyns to estimate the percentage of their net income derived from each of three sources: obstetrics, gynecologic surgery, and other health care services. The distribution of income from these sources remained relatively stable over the time period covered by the Socioeconomic Survey (see Table 5). However, the mean percentage of income derived from obstetrics declined by a small but statistically significant amount between the 99 and 003 surveys, while the percentage derived from other health care services increased slightly. Table 5 Trends in sources of clinical practice income 990 993 997 00 Obstetrics 43.%, 4.3% 4.7% 4.3% Gynecologic surgery 3.%, 34.9% 4,5 9.7% 6 3.5% Other health services 4.8%,3 3.8% 4,5 7.4% 6.6% t-test 990-993 p < 0.05 t-test 990-00 p < 0.05 3 t-test 990-997 p < 0.05 4 t-test 993-997 p < 0.05 5 t-test 993-00 p < 0.05 6 t-test 997-00 p < 0.05 This trend is consistent with our findings on workload: between 99 and 003, we found a small drop in the percentage of respondents reported performing at least one delivery in the previous year, a decline in the average annual number of deliveries, and an increase in average weekly office visits and office hours (see Profile of Ob-Gyn Practice). The distribution of clinical income sources varied by respondents practice characteristics (see Table 6). American College of Obstetricians and Gynecologists, June 004 4

Table 6 Variation in sources of clinical practice income Other Obstetrics Gynecologic surgery Health Care Services No private practice 44.% 30.3% 5.3% Any private practice 40.9% 3.7% 6.8% Group 43.5% 30.7% 6.5% Solo 34.4% 34.3% 9.8% Gyn Only 3.4% 4.0% 5.0% Ob and Gyn 50.0% 9.% 0.8% Male 40.8% 3.4% 6.% Female 4.3% 30.0% 7.% Non-metro 36.% 35.7% 7.7% Metro 4.% 30.9% 6.4% Subspecialist 36.4% 35.0% 7.8% Generalist 4.3% 30.8% 6.4% Years in practice Less than 5 years 49.4% 30.8% 9.9% 5 to 0 years 43.3% 3.7% 4.8% to 0 years 45.6% 30.3% 3.7% More than 0 years 30.8% 33.% 34.7% t-test, p < 0.05 ANOVA, p < 0.05 Not surprisingly, respondents who reported no deliveries in 00 derived very little income from obstetrics, while obstetric services accounted for over half of clinical practice income for those reporting at least one delivery. Similarly, gynecologic surgery and other health care services were much more important income sources for respondents reporting no deliveries in 00. Other health care services accounted for more than half of income for gyn-only respondents compared to only about one-fifth for those who had performed deliveries. Gyn-only respondents reported that more than 40% of their income came from gynecologic surgery, while this source supplied only 30% of ob-gyn respondents incomes. Private and salaried practitioners did not vary in sources of clinical practice income. Among those in private practice, however, group practice respondents reported that obstetrics was a significantly larger source of income than did solo practitioners. Conversely, gynecologic surgery and other health care services were larger sources of income for solo practice respondents. Generalists obtained a larger proportion of income from obstetric services than did those who identified themselves as subspecialists. Respondents with a subspecialty practice reported a significantly higher percentage of income from gynecologic surgery than respondents with a generalist practice. Respondents practicing in metropolitan areas generated more income from obstetrics and less from gynecologic surgery than non-metropolitan survey participants. Income sources also differed by years of experience. Those ob-gyns who had been in practice less than five years reported deriving almost half of their income from obstetrics, while those who had been in practice for more than 0 years received less than a third of income from obstetrics. The percentage of income earned from gynecologic surgery did not vary significantly by years of experience. However, other health care services were a more significant source of income for respondents in practice more than 0 years, accounting for more than one-third of clinical practice income. American College of Obstetricians and Gynecologists, June 004 5

Private ob-gyn practice revenues and expenses The Socioeconomic Survey asks respondents in private practice to report total practice revenues and expenses for the complete calendar year preceding the year in which the survey was conducted (that is, 990, 993, 997, and 00). Group practice respondents report revenue and expense amounts for the group as a whole and also report their individual shares of revenues and expenses. In addition, the survey asks respondents to assess the accuracy of their responses as highly accurate, a good estimate, or a rough estimate. We report here data on practice revenues and expenses for a subset of survey respondents from each year of the survey. This group of respondents includes respondents in ob-gyn solo or group practices (i.e., no multi-specialty practices) who provided responses to all major financial data elements (income, total revenue, total expenses, personal share of revenue and expense, accuracy of data), assessed their responses as either highly accurate or a good estimate, and who reported at least 35 hours per week of patient care. This subset was selected to include only the most reliable data that can be considered representative of typical ob-gyn practices. We multiplied group practice data by respondents personal shares of revenue and expenses to yield a perphysician amount comparable to data from solo practitioners. Per physician revenue generated by ob-gyn solo and group practices grew by 6% between 990 and 00 an absolute increase of slightly more than $00,000 per ob-gyn (see Table 7). Average per-physician expenses grew by almost $65,000 or 60% over the same time period. Calculating expenses as a percentage of revenue, expenses consumed an average of 57% of practice revenues in 990. In 00, though, expenses represented an average of 7% of revenue. (Note that Table 7 Trends in ob-gyn private practice revenues and expenses 990 993 997 00 Per-physician total revenue $54,349 $54,8 $555,655 3 $646,95 Per-physician total expenses $7,6,4,5 $3,706 $34,888 3 $435,773 Practice expense ratio 57%,4,5 63% 63% 3 7% Sample size 396 38 00 4 t-test 990-00, p < 0.05 t-test 993-00, p < 0.05 3 t-test 997-00, p < 0.05 4 t-test 990-993, p < 0.05 5 t-test 990-998, p < 0.05 the table shows the mean of the practice expense percentage calculated for each respondent. This is not equivalent to the mean expenses divided by mean revenue.) The 00 mean ratio of practice expenses to practice revenues seems perhaps implausibly high. The mean for 00 is indeed somewhat influenced by extreme values, with about 0 percent of respondents reporting expenses equal to or greater than revenue. In comparison, data from 99, 993, and 997 show approximately 0% of respondents reporting expenses that equaled or exceeded revenue. The high expense to revenue ratios could be due in part to some respondents including wages, salaries, and bonuses paid to physician partners in total expenses. Reporting and data entry errors may also contribute. American College of Obstetricians and Gynecologists, June 004 6

The median provides a measure of central tendency that is less sensitive to extreme values than the mean. While somewhat lower than the mean statistics shown in Table 7, median practice expense percentages show a similar pattern, growing from 5% of median revenue in 990 to 65% of median revenue in 00. One possible reason for this steep growth is rising labor costs for the types of personnel employed in ob-gyn practices. Between 990 and 00, total compensation costs for workers in health services occupations, for example, grew by 48% (Bureau of Labor Statistics, Employment Cost Index, Series ECU84I). Practice type and scope were related to 00 private practice revenues (see Table 8). Group practice respondents reported 5% more revenue per physician than solo practices. Subspecialty practices generated 8% more in Table 8 Variation in ob-gyn practice revenues and expenses Practice Revenue per Physician Practice Expenses per Physician Group $ 703,958 $ 483,0 7% Solo $ 565,408 $ 368,5 69% Gyn Only $ 570,909 $ 48,630 73% Ob and Gyn $ 657,93 $ 43,649 70% Male $ 655,43 $ 44,080 70% Female $ 65,68 $ 4,440 7% Practice Expense Percentage Non-metro $ 643,9 $ 396,7 64% Metro $ 647,60 $ 443,34 7% Subspecialist $ 808,77 $ 58, 7% Generalist $ 63,37 $ 4,698 7% Years in practice Less than 5 years $ 690,63 $ 48,845 66% 5 to 0 years $ 67,568 $ 40,47 73% to 0 years $ 66,788 $ 458,48 73% More than 0 years $ 643,40 $ 437,937 68% t-test, p < 0.05 revenue than generalist practices. Although mean revenue reported by ob-gyn respondents exceeded the mean of revenue reported by gyn-only respondents by almost $80,000, this difference was not statistically significant due to wide variation in the data from gyn-only respondents. Revenue also did not vary significantly by respondent gender, metropolitan/nonmetropolitan location, or years of experience. Practice expenses per physician were significantly higher in group practices and subspecialty practices. However, metro/nonmetro location, gender, provision of obstetric services, and years of experience did not appear to affect practice expenses. In 00, the ratio of practice expenses to revenue varied significantly only by metropolitan/non-metropolitan location. Respondents in non-metropolitan locations reported expenses that accounted for a significantly lower percentage of revenue than did respondents in metropolitan-area locations. Group practice did not confer an advantage over solo practice in terms of practice expense. In fact, practice expense percentages for survey participants from group practices were somewhat higher than those for solo practice respondents, but the difference was not statistically significant. American College of Obstetricians and Gynecologists, June 004 7

Methods and Data Sources The data reported here are from four mail surveys of ACOG member physicians in the 50 states and the District of Columbia conducted in 99, 994, 998, and 003. All four surveys used a similar questionnaire, designed by staff of ACOG s Department of Health Economics, in collaboration with Princeton Survey Research Associates (PSR) of Princeton, New Jersey. PSR managed and supervised questionnaire design, pretesting, sampling, data collection, and data entry for each of the surveys. Results from each survey are weighted to be representative of the ACOG membership in terms of geographic location, sex, Fellowship status, and age in that year. ACOG staff analyzed the data using SPSS for Windows, Release.5. Differences between sample means were tested with t tests and adjusted for each survey s design effect and finite population correction factor. Differences between sample proportions were tested with Z tests and adjusted for each survey s design effect and finite population correction factor. All comparisons and trends discussed in the text are statistically significant at p < 0.05 unless otherwise noted. A detailed explanation of the survey sample for each year follows: 99 The 99 survey is based on self-administered mail questionnaires completed by a representative sample of,86 ACOG member physicians living in the U.S. and involved with patient care. The questionnaires were initially mailed out on July 3, 99 to,000 randomly selected ACOG Fellows and Junior Fellows in practice. Residents were excluded from the sample. Questionnaires returned by October 4 were tabulated. The final response rate was 67%. For results based on the total sample, one can say with 95% confidence that the error attributable to sampling and other random effects is plus or minus 3 percentage points. 994 The 994 survey is based on self-administered mail questionnaires completed by a representative sample of,46 ACOG member physicians living in the U.S. The questionnaires were initially mailed out on September, 994 to a proportionate stratified random sample of,00 ACOG Fellows and Junior Fellows in practice. Residents were excluded from the sample. Questionnaires returned by December 9 were tabulated. The final response rate was 55%. For results based on the total sample, one can say with 95% confidence that the error attributable to sampling and other random effects is plus or minus 3 percentage points. 998 The 998 survey is based on self-administered mail questionnaires completed by a representative sample of,30 ACOG member physicians living in the U.S. The questionnaires were initially mailed out on October, 998 to a proportionate stratified random sample of 3,00 ACOG American College of Obstetricians and Gynecologists, June 004 8

Fellows and Junior Fellows in practice. Residents were excluded from the sample. Questionnaires returned by February 5, 999 were tabulated. The final response rate was 4%. For results based on the total sample, one can say with 95% confidence that the error attributable to sampling and other random effects is plus or minus 3 percentage points. 003 This survey is based on self-administered mail questionnaires completed by a representative sample of,49 ACOG member physicians who live in the United States. The questionnaires were initially mailed out on January, 003 to a proportionate stratified random sample of 3,00 ACOG Fellows and Junior Fellows in practice. Residents were excluded from the sample. Questionnaires returned by May 6, 003 were tabulated. The final response rate was 49%, accounting for ineligible respondents and undeliverable questionnaires. For results based on the total sample, one can say with 95% confidence that the error attributable to sampling is plus or minus percentage points. For more information contact: James Scroggs Associate Director, Health Economics (0) 863-447 jscroggs@acog.org American College of Obstetricians and Gynecologists, June 004 9