How does Town Size and Population Affect Physician Salary?

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

Answer: In discussing physician compensation, the use of the term "salary" can be misleading, since most physicians are not employed, nor are they paid a base salary. Most physicians 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:

Otolaryngology (Ear, Nose, and Throat – ENT) physicians in towns of 50,000 or less earn $353,746 on average, whereas the same specialty earns an average of $313,766 in metro areas larger than one million people in size, according to the MGMA.

Gastroenterologists in the smallest towns (under 50,000) earn an average of $407,811. 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.

Physiatrists (Physical Medicine and Rehab – PMR) in major metropolitan areas earn $202,865 on average, whereas their counterparts in towns under 50,000 earn almost 28% more, at an average annual income of $258,785, according to the most recent MGMA figures.

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 over $100,000 annually for some cardiologists in smaller communities!

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.