Physician Salaries - Towns and Cities; Size does matter!

How does Town Size and Population Affect Physician Salary?

By Andrea Santiago, About.com Guide

Question: How does Town Size and Population Affect Physician Salary?

A reader, who is a future physician, posed some questions about physician salary as it relates to the size of the community in terms of population. Do physicians earn more in small towns or large cities, and why?

Answer: In discussing physician compensation, the use of the term "salary" can be misleading, since many physicians are not employed, nor are they paid a base salary. Most physicians (more than 50%) are in business for themselves, owning a private practice in full or in part, as opposed to being employed by a hospital or group. Even for physicians who are employed, their compensation is controlled by many geographic, economic, and demographic factors, such as managed care and insurance reimbursements, which are set by third party organizations and government regulations.

According to the Medical Group Management Association (MGMA) which conducts extensive annual surveys and analysis of physician compensation, most physicians earn more money in communities which are well under one million in population. In many specialties, the highest earners are found in towns of 50,000 to 250,000 in size, according the the MGMA statistics.

This disparity in compensation is due to several factors:

Competition: In smaller to mid-sized communities, competition from other physicians is not as prevalent as in larger metropolitan areas, which tend to become “over-doctored” due to the tendency of doctors to flock to large cities due to family ties or perceived benefits of working in a larger city.

Reimbursements: Reimbursements from insurance companies tend to be higher in small- to mid-sized communities. Therefore, a physician in a big city and a physician in a small town could see the exact same amount and type of patients, and do the same amount of work, and each physician could be reimbursed completely different amounts based on the rates in their area, and often it’s the small-town doc that comes out ahead.

Overhead costs: Typically, costs of practicing as a physician, such as malpractice insurance, and office space, are higher in larger cities. This is because larger cities tend to be more litigious environments than smaller communities, and frequent lawsuits drive up the cost of malpractice insurance further.

Examples of high-earning physician specialties in smaller towns:

Orthopedic Surgeons These surgeons earn the most in towns of 50,000 or less, typically. For example, according to the MGMA Physician Compensation and Production Report of 2009, orthopedic surgeons in the smallest towns earn a median annual income of $502,195, and only $474,359 annually in in metro areas larger than one million people in size. Their median income decreases further in towns with a population of 250,000-1,000,000, to about $393,402.

Gastroenterologists in smaller towns (under 50,000) earn an average of $467,927. Those physicians in towns of 50,000 to 250,000 earn $452,195 on average, which is a whopping 22% more than their counterparts in major metro areas (over one million population), who earn $370,673 annually on average.

Dermatologists earn the most in towns of 50,000-250,000 with a median income of about $395,159. In major metropolitan areas, dermatologists earn about $50,000 less than that, with a median annual income of $340,317 in cities with a population over one million. In towns under 50,000 in size, derms earn $356,624, according to the MGMA 2009 Physician Compensation and Production Survey.

Cardiologists in small to mid-sized towns earn anywhere from 17% to over 25% more than those in major metro areas. Those increased earnings can equate to a difference of nearly $150,000 annually for some cardiologists in smaller communities! Interventional cardiologists see the most dramatic effects of town size on income, for example, with median earnings of $609,041 in small towns (under 50,000 people), and $462,820 in major metro areas (over one million people).

Above are just a few examples. The list goes on, but these are a few of the most dramatic examples. Not every specialty sees such a significant difference, but nearly every specialty sees a gain in compensation in smaller towns, particularly those in the lucrative range of 50,000 to 250,000 in population, which are the highest paying locations for most specialties. As an added bonus, in addition to earning more money each year, physicians in smaller communities get more for their money, obtaining additional savings and improved financial situations for doctors who practice in small or mid-sized communities.