MGMA Data – Is It The Answer?

While MGMA can be helpful to understand general market norms for compensation, it should not be the ONLY thing you look at and might be misleading without the proper analysis. We often see compensation offers lower than MGMA survey norms when the employer is the most attractive one in that particular market, or a market is exceedingly consolidated in your specialty with only one option. When they have multiple candidates to fill a position and they have no local competition, frankly, they create leverage to pay you less than MGMA suggested norms. Also, there may be other aspects of that job that make it deserving of a reduced compensation offer, and we consider those on a case-by-case basis. 

However, if the employer does not have ample options, or you have more than one attractive offer, that signals the potential to consider MGMA survey data as a guide for requesting additional compensation. Our experience is that total compensation data is often not as informative as data on compensation per work RVUs, compensation per patient encounter, or compensation per collections. 

How Are Physicians Compensated?

First things first: A good physician contract should clarify three main questions:

• What are you required to do?

• What are you paid to do that work?

• What are the legal and financial penalties of exit?

The majority of physicians are compensated in whole or in part on volume. Those first two points are often linked. Payors pay your employer primarily based on volume. Improved patient outcomes, experience, or other quality factors are not the primary factors in most payor models. Fee-for-service is the primary method of payment to employers, and thus is how payment is often made to you. You may want a flat salary model that does not account for volume, but out experience is that someone is always counting volume. If you are flat salary and go to renegotiate compensation, your employer will often consider your volume. 

Some “classic” academic settings may be an exception to this general rule in some instances, but often they are also looking at your volume. Some specialties more commonly offer hourly rates, like hospitalists, emergency medicine, urgent care, and others, particularly when volume is not under the employer’s control. In these situations, the main “volume” metric may be hours worked. While quality metrics and patient outcomes are being introduced and this discussion might be very different in the future, let’s recognize that we operate in an imperfect system and your compensation may not reward the right activities. 

Lastly, compensation is rarely “locked in” the initial contract for more than a couple years. Occasionally we can get clauses into contracts that index future compensation to external metrics, like MGMA, but that’s not the norm (maybe it should be!). After a couple of years, it’s highly probable that your employer has the unilateral right to change compensation as they see fit, and your exit strategy. 

What Information Does MGMA Provide?

MGMA will often suggest something like this for physicians within a specialty and practice setting:

Total Compensation 

25%ile = $270,000

50%ile = $375,000

75%ile = $510,000

Yes, having this massive range for total compensation within the same specialty, practice setting, and geographic region is quite common! When you change practice settings and geographic regions, it’s not odd to see these numbers fluctuate by tens of thousands or even hundreds of thousands of dollars.

Importantly, we might also see Annual Work RVUs data within that same percentile ranges that look something like this:

Annual Work RVUs

25%ile = 4,900

50%ile = 7,500

75%ile = 10,000

These also can vary wildly within practice settings and geographic regions. While academic volume is often lower and private practice is often higher in volume norms, this is not always the case. 

Comparing compensation to Work RVUs leads to an obvious conclusion: On average, the amount you earn is highly correlated with your volume. Consider this:

$270,000 / 4,900 = $55.10

$375,000 / 7,500 = $50.00

$510,000 / 10,000 = $51.00

It’s much more rare for us to see volume averages that are wildly out of sync with total compensation offered, particularly in your “standard” W2 employment positions with large institutions. 

MGMA Compensation Per Volume

We often look at the $/wRVU rate (especially for hospital employed positions) and consider the 25%ile and 50%ile. The majority of $/wRVU offered by large employers are within this range. MGMA might also suggest typical Compensation per Work RVU rates like the following:

25%ile = $44.50

50%ile = $52.75

75%ile = $60.25

We rarely see the $/wRVU rate offered to the physician to be at or above the 75%ile, unless the practice is in a very rural location that has a hard time filling a position, or is in a 1099 or locum role, or own their own practice and earn in a cash pay practice or own ancillary revenues or ASC ownership. In fact, a per-unit rate that’s too high could invoke some regulatory risk, but there is not a hard-and-fast “safe” number here. Under a federal law speaking to physician compensation called Stark Law, your compensation must be commercially reasonable, represent fair market value (often utilizing this same data), and cannot take into account the volume or value of your referrals. 

It’s more likely that we see a $/wRVU rate somewhere between the 25%ile and 50%ile, with lower-end offerings more likely to be bolstered by non-volume based add-ons, like NP/PA supervision stipend, call pay, quality metric stipends, etc. For example, if you have a $20k to $50k quality metric bonus opportunity, it’s quite common for your production-based model to pay you proportionally less. Our experience is that these “add-ons” don’t always result in higher total compensation.

For physicians compensated on percentage of collections models, we see very limited utility in using the MGMA data on total collections. We don’t see it correlating well to our anecdotal experiences, and instead trend toward relying on actual collections numbers from the employer or $/% rates from competing offers.

Lastly, “hours worked” or “patient contact hours” is not a metric that MGMA analyzes that I know of. This leaves us a bit in the dark for some specialties, like hospitalists and emergency medicine. For these specialties, we often de-prioritize data like MGMA in favor of local offers in the market you want to be in.

MGMA Data Interpretation Is Not Easy!

Simply “having the data” without any other context does not really help you.

We obviously cannot give away MGMA data because it’s not mine to give. It can be quite expensive to obtain, and you should not rely on something posted to Reddit 4 years ago. Also, because of all of the different ways to subdivide this data, it’s vital that you consider the correct subsection. For example, the data often shows meaningful differences based on:

• Region (Eastern, Southern, Midwestern, and Western);

• Practice Setting (Private Practice, Hospital Employed, and Academics).

Sometimes, additional datapoints are very instructive, like:

• Independent Contractor status (tax form 1099) vs. or Employee status (tax form W2);

• Only a few years out vs. several years out;

• For academics, whether you are an Assistant Professor, Associate Professor, full Professor, or Medical Director; 

• Whether you work in a small demographic region (i.e. less than 50,000 people)

If you are looking at the “All Practices National” dataset, this could create many problems for you! The wrong dataset could suggest your compensation should be much higher or lower than it actually is. Local markets can differ a lot from even regional data. For example, we sometimes see lower numbers in very attractive markets like San Diego, LA, Seattle, Chicago, Austin Houston and Dallas, Ft. Lauderdale and Miami, Raleigh Durham Chapel Hill, and others. 

Further complicating this, your employer may consider other datasets, like Sullivan Cotter, AMGA, and others.

MGMA Data: What’s The Takeaway Here?

When you dig into this stuff as much as we do, you realize that the data is simply one tool, not the holy grail. You need to know what your local market calls for and pay close attention to your exit strategy for future renegotiation leverage. This is ideally obtained by prioritizing exit strategy issues in your first contract. The employer rarely agrees to an improved exit strategy, like a reduced noncompete or improved malpractice tail coverage. Considering more than one offer in the same geographic region with plenty of time (ideally 18-9 months) to negotiate is a great start for first contract physicians. This is also where noncompetes and nonsolicits come in handy for employers… your renegotiation leverage is often severely curtailed because they aim to remove that local competition.

We also NEED HEALTHY SUCCESSFUL INDEPENDENT PHYSICIAN OWNED PRIVATE PRACTICE! The hospital and private equity buyouts of private practice; payor activities that curtail private practice compensation; and overall reduced competition through consolidation, is creating significant headwinds for physician compensation.

However, using MGMA data to potentially negotiate or renegotiate your compensation per volume rate, whether that’s work RVUs, collections, or even patient encounters, may be helpful. In the firm, we look closely at whether the employer’s volume expectations match their compensation plan. We want to avoid or negotiate offers that require high volume for low compensation. Offers that purport to offer high compensation for low volume are rare, and we often believe they will not last long term. Future renegotiation of lopsided initial offers that favor physicians are sometimes reconfigured to favor employers in the future, often using the terrible exit strategy you initially signed up for as leverage. 

Even if the data suggests your compensation is low, there is no guarantee that your employer will improve your compensation upon being presented with the data. If you don’t have another offer and the ability to leave, it may not move the needle. Negotiating compensation is much more correlated with the value you create, plus your exit strategy! You will hear us chirp about exit strategy during compensation discussions because without an attractive one, it’s not nearly as useful and physicians believe.