Older, independent ophthalmologists are by far the most successful members of their profession. But the results of our first confidential income survey suggest that their foothold at the top may be eroding.

If we look only at the average change in gross income for all independent (non-salaried) ophthalmologists between 1997 and 1998, the results appear to suggest that independent ophthalmologists in general are just barely maintaining altitude. Non-salaried doctors responding to our survey averaged a gross of $546,900 in ’97 and $555,900 in ’98 — a small average increase of $9,000, or 1.6%. If we take 1.98% inflation into account, this indicates a negligible drop in real dollar value of average gross income from ’97 to ’98.

But averages can be deceiving. If we examine the individual gross income gains and losses reported, we find an amazing spread of outcomes. While a few doctors’ gross incomes dropped as much as $100,000 in 1998, others earned $150,000 more in ’98 than they did in ’97. Overall, the number of doctors whose income dropped almost equaled the number who reported gains, and the reported changes ranged wildly from small to large dollar amounts.

What’s going on here?

What could explain such a broad spectrum of bottom line changes from ’97 to ’98? An analysis of the individual survey responses revealed two significant differences between those who did well in 1998 and those whose income dropped:

• the number of years they’ve been in practice
• the number of hours they work each week.

Independent doctors whose gross income increased in 1998 reported that they’ve been practicing an average of 12 years — half of them for less than 10 years. In contrast, the independent doctors whose gross income dropped in 1998 reported being in practice an average of 19 years. Only 5% of these doctors said they’ve practiced less than 10 years, and most have practiced for more than 20 years.

Put in simple terms, younger independent ophthalmologists tended to see their gross income increase from ’97 to ’98. The older doctors, on average, had the opposite experience.

The time factor

A second statistic puts this finding into perspective. The doctors whose gross went up in 1998 worked, on average, much longer hours each week than those doctors whose gross dropped. They reported working an average of 47 hours per week, and 40% of this group, or two out of five, worked more than 50 hours per week. Only 15% of this group said they worked less than 40 hours.

In contrast, the independent doctors whose gross income dropped in 1998 reported working an average of 39 hours per week; and 41%, or two out of five, said they worked 35 hours per week or less. Only one out of four doctors in this group reported working more than 40 hours per week.

The conclusion, in one sense, isn’t surprising. Independent doctors who put in more hours brought in more gross income. The correlation to age difference suggests that doctors who’ve been practicing longer aren’t willing to put in the extra hours that the younger doctors do, and they pay the price — literally — in lost income.

Success breeds success?

Another interesting statistic: Although gains and losses didn’t appear to correlate with level of gross income in general, those doctors who reported a 1997 gross greater than $860,000 all earned gains in 1998. (On average, these doctors were in practice for 12 years and worked 48 hours per week.) Although it’s impossible to say for certain what the reason for this is, it could be that a doctor able to bring in this high a gross is managing his or her practice so well that the current difficulties simply have less effect on gross income.

One other revealing statistic emerged. When this group was asked how their gross income had fared in 1998, 55% of the doctors said their 1998 gross was lower than their 1997 gross. But the actual numbers they reported indicate that only 43% of these doctors had a lower gross in 1998. This suggests that some doctors’ perception of how well their gross income is doing may be negatively influenced by other factors — possibly including having to work harder to maintain income level.

The paycheck perspective

Overall, 1998 net income among all respondents wasn’t as bad as some might have expected. However, doctors on salary took home less net income than independent M.D.s in most cases. Few salaried ophthalmologists earned more than $250,000, while a substantial number of independents — nearly half — did make more.

Doctors on salary reported earning an average of $183,000 in 1998. It’s worth noting that this figure was boosted by a single responding doctor whose salary was nearly $700,000 — more than twice any other salary reported in this category. If this figure is omitted from the sample, the remaining doctors on salary averaged $160,950, a significantly lower figure.

The majority of these doctors (62%) had salaries falling between $100,000 and $200,000. About one out of four (24%) earned more than $200,000; one out of seven (14%) earned less than $100,000.

How did they fare compared to 1997?

• 27% said they earned more in ‘98 than in ‘97.
• 18% said their salaries remained the same.
• 45% reported earning less in ‘98 than in ‘97.

Who’s to blame?

We all know that times are tough for ophthalmologists. Faced with dwindling reimbursements, competition from other ophthalmologists and O.D.s, and the stress of working harder, many doctors who responded to our survey were forlorn.

"The combination of reimbursements, HMOs referring patients to optometrists for vision care and an excessive supply of ophthalmologists spells financial disaster in the future," warned one doctor. Another echoed these sentiments: "It’s time to retire — I’m getting sick of the paperwork and low reimbursements."

But — as noted above — many ophthalmologists are thriving in spite of these difficulties. In fact, about half of the doctors who responded to our survey earned at least as much personal income last year as the previous year — and most of those doctors increased their income significantly.

We asked doctors to rate the impact that different factors had on the change in their income in 1998. The clear winner in the "villain" category was third-party plans — followed closely by Medicare. More than two-thirds of the respondents said third-party plans had affected them negatively; a slightly smaller number said the same of Medicare. However, many doctors graded Medicare less severely.

Reaction to competition from M.D.s, O.D.s and chains was more mixed. A majority rated competition from chains and O.D.s as having little or no effect, and a majority rated competition from other ophthalmologists as neutral or even somewhat positive in its impact.

We also invited doctors to describe, in words, the factors affecting their income in 1998. The results were similar. Some 40% listed decreasing reimbursements from third-party payers; 22% mentioned Medicare fee cuts, and 17% attributed their loss to competition. The only other factors mentioned, by a handful of doctors, were increased overhead and poor management of their practices.

On the upside . . .

What of those who fared better in 1998 than in 1997? Besides working harder, factors credited included:

• growth of population and increased patient visits
• increased productivity
• delayed purchases
• more referrals
• increased refractive surgery and forensic evaluations
• adding a new doctor to the practice who increased access to insurance.

An outsider’s viewpoint

We asked ophthalmic consultant John Pinto, based in San Diego, Calif., to comment on the results of our survey.

"This study corroborates trends that I’ve seen emerge in this field during the past 20 years. Interestingly, ophthalmic wages are in step with American macroeconomic trends. In the overall U.S. economic landscape, the upper and lower income populations are growing, while the middle class is shrinking. In the same way — and for some of the same reasons — the "ophthalmic middle class" is getting smaller. About two-thirds of the doctors I consult with are slipping backward in real earnings and about one-third are advancing.

"A generation ago, ophthalmic practices enjoyed 65% profit margins and 6-month patient backlogs. Today, ophthalmologists of equal intelligence and clinical dedication have to adopt an unaccustomed level of business savvy and competitive intensity in order to thrive.

"I expect this trend to continue. The result? Over the next decade those ophthalmologists least fit to survive in competitive urban markets will be forced to relocate to kinder rural markets. They’ll be forced to accept significant income concessions, or be forced into early retirement.

"Those most fit to survive today’s medical business climate can expect to continue growing their practices and enjoy incomes and personal wealth that will vastly exceed that of their predecessors."

The secret ingredient?

It’s clear that many ophthalmologists are working harder than ever just to stay afloat. But the changes listed as significant factors by those whose income increased last year suggests another, less obvious, piece to this puzzle: management skill.

Most factors listed — increasing productivity, making strategic practice changes, managing overhead and generating more referrals — are signs of effective management. Therein lies hope, even in the toughest economic times. The evolution of managed care, like changes wrought by Congress, may be outside your immediate control. But business skills are not.

Only a handful of doctors mentioned poor management as a source of trouble in their practices. Whether this is an accurate judgment — or a very serious blind spot resulting from the traditional unwillingness of doctors to think of themselves as businesspeople — remains to be seen. One thing seems certain: When times are tough, business and management skills are among the most important allies you can have.

About our Survey

Professionals are always reluctant to respond to income surveys — even confidential ones. To get a workable sample of respondents for our first confidential income survey, we sent out 1,500 questionnaires. A total of 83 doctors responded. Although we don’t know their specific names — the return envelopes were blinded to assure confidentiality — we gathered the following background statistics to help you put this research in perspective:

• One-third of the responding doctors are salaried ophthalmologists; the remaining two-thirds are private practitioners or franchisees.
• On average, the respondents have been in practice for 19 years. The vast majority — 78% — have been in practice 25 years or less.
• 64% practice in cities with a population greater than 100,000; 34% practice in towns with populations ranging from 10,000 to 100,000 people. Only 2% said they practice rural areas.
• Nearly half of the respondents (46%) are solo practitioners. Another 44% are part of a group practice; 3% are employed by an M.D.; 3% work for a corporation; and 4% work in other settings — academic or military.