Physician pay and productivity have diverged for the first time in years, creating challenges for practices heading into 2026. Compensation rose by 1.5% to 3% while encounter volumes declined, according to the latest data from the Medical Group Management Association (MGMA). The shift raises concerns about sustainability as costs climb while reimbursement remains flat or declines. The disconnect between rising compensation and falling productivity suggests structural changes in healthcare delivery, where physicians may be handling more complex cases that require greater time and resources per patient. This trend could signal a broader transition toward value-based care models, where quality and outcomes take precedence over sheer volume of visits.
Andy Swanson, chief customer success officer at MGMA, discussed the findings with Physicians Practice Managing Editor Keith Reynolds. The report highlights a decline in encounter volume, but he cautioned against interpreting this as reduced physician effort. Instead, he noted that encounters now carry higher acuity, offsetting the drop in volume. This shift reflects the growing prevalence of chronic conditions and the aging patient population, which often require longer, more intensive consultations. The data shows the need for practices to adapt their staffing and scheduling models to accommodate these changes, ensuring that physicians have adequate time to address complex patient needs without compromising care quality.
The Medicare efficiency adjustment, set to take effect in 2026, will further strain practices. A 2.5% cut to the work relative value unit (RVU) value of roughly 7,700 codes will disproportionately impact procedural specialties. Swanson emphasized the need for practices to benchmark and defend against these cuts, which will primarily affect paper-only reimbursement. The adjustment is part of a broader effort to streamline Medicare payments, but its implementation risks exacerbating financial pressures on practices already grappling with declining reimbursement rates. Procedural specialties, in particular, may face significant revenue losses, as their services are heavily weighted toward work RVUs. Practices in these fields will need to explore alternative revenue streams or negotiate higher rates with commercial payers to offset the cuts.
Recruiting and retention are also under pressure. He advised against cutting starting salaries in hard-to-recruit specialties, suggesting instead that practices focus on schedule management and smarter advanced practice provider (APP) staffing ratios. He noted that one in three doctors cite burnout as a reason to leave, signaling an unsustainable baseline in the industry. The burnout crisis is compounded by the ongoing physician shortage, which has made it increasingly difficult to fill vacant positions. Practices must prioritize physician well-being, offering flexible schedules, mental health resources, and opportunities for professional development to retain their staff. Additionally, optimizing APP utilization can help redistribute workloads, allowing physicians to focus on high-acuity cases while APPs handle routine care.
The discussion also touched on AI’s uneven impact, with ambient scribes at the bedside offering clear benefits. Swanson urged patience for further advancements and criticized the industry’s short attention span regarding technological adoption. He also briefly addressed the OpenAI IPO, clarifying that he was not offering personal investment advice. While AI has shown promise in reducing administrative burdens, its integration into clinical workflows remains inconsistent. Ambient scribes, which use natural language processing to transcribe physician-patient interactions in real time, have demonstrated measurable improvements in documentation efficiency. However, broader AI applications, such as diagnostic tools or predictive analytics, are still in the early stages of adoption. The healthcare industry’s tendency to chase the latest technological trends without fully realizing the potential of existing solutions may hinder long-term progress.
Looking ahead, Swanson expects 2026 baselines to be volatile and is already focusing on 2027. He stressed the importance of revisiting base-plus-production pay models as APPs absorb more volume, advocating for a return to fundamentals like panel size and total visit volume. The shift toward APP-led care models could reshape compensation structures, with practices needing to balance physician salaries against the growing role of APPs in patient care. By focusing on panel size and total visit volume, practices can ensure sustainable growth while maintaining financial stability. This approach may also help mitigate the impact of reimbursement cuts and rising operational costs, allowing practices to handle the uncertainties of the coming years.
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