According to most economic indicators and public opinion -- the volatile stock market aside -- our economy is still going strong as we embark on our journey into the 21st Century. And despite the difficulties imposed by managed care, the results of our most recent confidential income survey indicate that the majority of ophthalmologists did reasonably well in 1999. About two-thirds of the doctors responding to our survey took home as much or more income in 1999 than they did the previous year

Yet America's rosy economic picture hasn't been equally kind to everyone. Our survey shows a broad range of earnings, including many doctors who aren't faring so well, and some disturbing trends.

With the economy strong, for example, you might think that even if a doctor decides to cut back a little on his working hours as he approaches retirement, he should still be able to maintain his income. Unfortunately, this year's survey -- like last year's -- suggests otherwise. Younger ophthalmologists, on average, are making good money and their incomes are climbing. Older, more experienced doctors are working a few less hours each week, but their level of experience isn't compensating. They're reporting less income than their younger contemporaries, and many of them are watching their income decline from year to year.

In addition to the discrepancy between generations of M.D.s, this year's survey also revealed just how powerful an impact refractive surgery has had on many of our readers' net incomes. Whether this income advantage will continue remains to be seen -- but the results of our survey indicate that the advantage, for now, is very real.

The big picture

As mentioned above, the majority of our respondents (though not all) did reasonably well in 1999. Among independent practitioners:

�       45% reported higher net income in 1999

�       17% reported earning the same as the year before

�       �38% reported taking home less in 1999.

Only a small number of salaried M.D.s responded to the survey this year, but half of these doctors said they earned more in 1999; only 20% reported a drop in salary compared to 1998. (In contrast, last year's survey found that only one quarter of the salaried M.D.s who responded earned more than the year before, with nearly half reporting that their salary had dropped. This year's numbers certainly suggest that 1999 was a better year for doctors on salary than 1998.)

Overall, the doctors responding to our survey reported net incomes ranging from $26,000 to more than $1 million. The average net income reported was $267,849, with the majority of respondents bringing home between $100,000 and $300,000 (see chart, next page).

Some interesting trends were evident:

�       Solo vs. group practice. As you know, many doctors have joined or formed group practices in an attempt to offset the economic crunch created by managed care. Interestingly, those doctors who are part of a group practice reported higher net earnings (on average) than doctors in solo practice, but they also reported working longer hours:

o      Non-salaried solo practitioners averaged a net of $253,260 and reported working 39.4 hours a week.

o      Non-salaried doctors in a group practice averaged a net income of $317,864 -- about 25% more than the solo practitioners -- but worked 46 hours a week.

�       Success breeds success. Another phenomenon that last year's survey uncovered was repeated in this year's figures: Those who are making the most money also tend to be doing better from year to year:

o      Of the respondents who reported a net income greater than $400,000, 77% made more in 1999 than in 1998; only 15% reported earning less.

o      In contrast, of those who reported a net income of less than $400,000, only 44% did better in 1999, and 35% lost net income compared to the previous year.

This may be partly attributable to the increasing popularity of refractive surgery because doctors with higher net earnings were more likely to report that they perform this surgery.

The impact of refractive surgery

Refractive surgery has been touted in recent years as the potential savior of ophthalmologists under siege from dwindling reimbursements and third-party regulations. And despite the changes that are in the wind -- as managed care attempts to pull refractive surgery under its umbrella of control -- it does appear that performing refractive surgery has worked to the advantage of many surgeons. (For more on managed care's attempts to become involved with refractive surgery, see "Who Will Control Refractive Surgery . . . HMOs or You?" in the April 2000 issue of Ophthalmology Management.)

Overall, 37% of the independent M.D.s who responded to our survey reported earning income from refractive surgery. (No one taking home less than $100K reported any income from refractive surgery.)

Of those doctors who did report income from refractive surgery, 80% were part of group practices; in contrast, only half of the surgeons who didn't report income from refractive surgery were part of a group practice.

The fact that refractive surgeons favor group practices presumably reflects the advantages a group practice offers, such as shared equipment investment risk (making it much more feasible to own the equipment), more doctors to provide different services and specialties, and a broader patient base from which to draw refractive candidates.

The reported percentage of income earned from refractive surgery varied from 1% to 60%, with an average of 18.2%. However, a full half of the surgeons in this group reported that refractive surgery brought in 5% of their income or less. Less than one third of the group reported earning 30% or more of their income from refractive surgery.

Despite the relatively small percentage of income many of these doctors reported earning from refractive surgery, the doctors in this group tended to have a significantly higher net income than those who didn't perform refractive surgery:

�       Surgeons who reported no income from refractive surgery netted an average of $234,824 in 1999.

�       Surgeons who did report income from refractive surgery netted an average of $376,300, more than one and a half times the average of the first group.

�       Within the latter group, those surgeons who reported earning 30% or more of their income from refractive surgery netted an average of $536,167 in 1999 -- more than twice the average net income of those doctors who didn't perform refractive surgery.

The growth of this surgery's popularity was also reflected in income growth between 1998 and 1999 (see chart, above). As you can see, the more refractive surgery a doctor reported performing, the more likely he was to have had his income increase in 1999.

Management consultant Jeffrey Denning, of Long Beach, Calif., comments: "Despite the 'sturm und drang' about managed care and price rollbacks in ophthalmology, these results confirm what I've been telling clients for 25 years: Doctors are in charge of their incomes.

"High levels of inflation haven't existed in America for several years, but a lot of doctors still think they should get a raise just because another year has gone by. That's "old economy" thinking. Newthink: Raises come to those doctors who decide to earn them.

"So how do you earn a raise? The traditional way of thinking about earning a raise is to find ways to do more: work longer, work harder, work faster, work more often. But there's another way of slicing it: You can get more valuable. Adding a skill like refractive surgery proves it."

Those who perform the surgery do pay a price: They reported working an average of 47.5 hours per week. The other independent respondents reported working an average of only 40.5 hours a week. Put another way, those doctors who are performing refractive surgery are netting significantly higher income (on average) but they're also putting in the equivalent of an extra day's work every week.

Also, the apparent income advantage provided by refractive surgery may not last. Consultant Mark E. Kropiewnicki, J.D., LL.M., of Plymouth Meeting, Pa., comments: "It's good to see that net income increased for 100% of the respondents who earned 30% or more of their income from refractive surgery. However, with increased market competition and managed care inroads into refractive surgery reimbursement, I doubt that this will continue for more than a few more years."

The age factor

This year's survey confirmed the age discrepancy first uncovered in last year's survey: Younger ophthalmologists are doing better in many respects than older, more experienced M.D.s. Consider these statistics:

�       Independent M.D.s who earned more than $400,000 were in practice an average of 10.8 years.

�       Independent M.D.s who earned less than $400,000 were in practice an average of 17.1 years.

The same trend is evident if we look at the numbers in terms of whose incomes increased or decreased. Doctors who earned more in 1999 were in practice an average of 12.4 years. Doctors whose earnings dropped in 1999 were in practice an average of 21.4 years.

To clarify this, let's look at the numbers organized by years in practice. As the charts on these pages illustrate, net income, on average, peaked between 6 and 10 years in practice and then declined. The number of hours worked and the likelihood of making more money in 1999 all declined as experience increased.

The tendency to want to work less hours may be something of a trap. Consultant Mark Kropiewnicki comments: "As ophthalmologists age, they tend to want to slow down -- and they're financially able to do so.

"Unfortunately, patient volume doesn't always drop off in proportion to the amount of time an ophthalmologist chooses to slow down. A 20% slow down in work time can easily result in a significantly greater percentage drop off in patient volume, resulting in much lower income."

While some younger ophthalmologists may see these numbers as painting a discouraging picture of what could lie ahead, it's important to remember that these statistics are only a snapshot of the current spread of our respondents' earnings and hours. In other words, younger M.D.s shouldn't assume that they'll be earning less 10 or 20 years from now (or working less hours, for that matter!)

Likewise, the tendency for more experienced ophthalmologists to see their incomes dropping could easily change with a shift in the status of managed care or the development of new technologies.

Contributing factors

We asked our respondents to list, in their own words, what they felt were the primary factors affecting their income, for better or worse, in 1999.

Of the independent M.D.s who reported an increase in their net income in 1999:

1.    44% attributed the increase to performing more refractive surgery

2.    20% mentioned an increase in patients (which could mean many different things)

3.    12% credited faster, more efficient cataract surgery.

Interestingly, only a single doctor attributed his higher net income to better financial management of his practice! This stands in contrast to last year's responses, which often mentioned business management considerations such as increased productivity, delayed purchases and better control of overhead.

The most common reason offered for lower income in 1999, by far, was decreasing reimbursements from third-party payers. (One doctor noted increasing difficulty in collecting the reimbursements he's owed.)

Other factors that affected income:

�       Dispensary. Overall, 42% of our respondents indicated they had income from a dispensary in their practice. The proportion of respondents with income from a dispensary was similar at every earnings level, with only one exception: doctors with a net income below $100,000. (No one making less than this reported having income from a dispensary.)
The percentage of practice income attributed to a dispensary ranged from 1% to 50%, with about half of the respondents saying that dispensary income was 5% to 10% of their total practice income.

�       Cataract surgery. The majority of respondents (85% to 90%) in every earnings range reported performing cataract surgery. The average percentage of practice income attributed to cataract surgery was 31%.
Interestingly, the percentage of practice income attributed to cataract surgery grew with income range:

o      respondents who reported earning $300,000 or less earned an average of 28% of practice income from cataract surgery

o      those earning between $300,000 and $400,000 per year earned an average of 34% of their practice income from cataract surgery

o      those making more than $400,000 per year earned an average of 44% of their income from cataract surgery.

�       Competition. Most respondents said that competition had little or no effect on their income. Among those who reported that competition did have an impact, the following sources of competition drew these comments:

o      Competition from other M.D.s: 21% of respondents felt that this had a positive effect; 32% reported a
negative impact.

o      Competition from chains: 18% said this was a positive factor; only 13% listed it as a negative.

o      Competition from O.D.s: 18% said this was positive; 18% said that competition from O.D.s hurt their practices.

�       Managed care. Feelings were more negative about Medicare and third-party insurance plans:

o      Half of the respondents listed Medicare as having a negative impact on their income. (The feelings of many M.D.s were probably summed up by one respondent who wrote, "I am seriously thinking about firing all Medicare and Medicaid patients forever.") This wasn't a universal reaction, however. One-third of the respondents listed Medicare as having a positive impact.

o      55% listed other third-party plans as having a negative impact on their income. But once again, the majority opinion wasn't unanimous; 24% said that other third-party plans had a
positive effect on their practices.

Keeping it in perspective

�������� While the numbers from this year's survey clearly suggest marked differences in income among certain groups of M.D.s, it's important to remember that statistical averages only tell us general information about an entire group. Within every group there are exceptions. And it's important to remember that while current issues such as declining reimbursements have unquestionably lowered incomes, there are also bright spots, including new options like LASIK.

�������� Several respondents commented on the state of the profession. Some were not happy with the direction things appear to be moving. "I'm saddened by the rampant commercialism of ophthalmology today. The entrepreneurs and buccaneers have clouded our once noble profession . . . with all the advertising and trivializing of our surgery."

But despite unhappiness with some aspects of the current situation, no one seems ready to throw in the towel. One doctor who's been in practice for almost 40 years summed it up nicely: "I still like to work. I don't want to retire."

Respondent Profile

Many doctors are understandably reluctant to give out information about their incomes and practices -- even when a survey is confidential. (Our survey's return envelopes were blinded to ensure that all respondents remained anonymous). To get a workable sample, we mailed out 1,326 surveys; 84 doctors responded.

Here are some background statistics about the doctors who responded:

�       One-third of the responding doctors are in solo practices; almost half (46%) are in group practices; the remainder are employed.

�       Almost two-thirds (63%) of respondents practice in cities with populations of 100,000 or more. Eleven percent practice in towns with populations of 25,000 or less.

�       On average, our respondents have been practicing for 16 years, with half in practice 13 years or less. Six percent have been in practice more than 30 years.

Putting In the Hours

Survey responses showed a high correlation between the number of hours worked each week and the likelihood of earning more in 1999 than during the previous year. Consider the following:

�       �Those whose net income rose worked an average of 45.7 hours each week.

�       Those whose earnings stayed the same worked an average of 42.3 hours a week.

�       Those whose net income dropped worked an average of 38 hours a week.

One third of the doctors in the first group (whose net income rose in 1999) reported working more than 50 hours a week. In contrast, only a single doctor in the other two groups (whose income stayed the same or declined) reported putting in more than 50 hours a week.

However, it's worth noting that there were plenty of exceptions to the correlation between longer hours and an upswing in earnings: A quarter of the group whose income increased did work less than 40 hours.

What about the number of hours doctors worked compared to the previous year?

�       Of those whose net income rose, 40% reported working more hours than they did in 1998. 54% worked about the same hours. Only 6% said they worked less.

�       Of those whose earnings stayed the same, 17% worked longer hours in 1999, but the vast majority -- 83% -- worked the same hours as the previous year.

�       Of those whose net income dropped, only 13% worked more hours than the previous year. 58% worked the same hours, and 29% worked less.