Physician pay is a hot topic in both the lay-press as well as in the medical community. The current political climate which has pushed for wealth equity as well as calling for a new “corporate accountability” (Sen. Bernie Sanders) that will put an end to a system that allows corporate CEO’s to earn millions of dollars in salary and benefits as well as an end to the system which has allowed some entrepreneurs to develop net worths in the billions [“I don’t think that billionaires should exist,” (Sen. Bernie Sanders 2019)] has caused many to take a closer look at higher wage earners, including physicians. It is true that, in general, average physician salaries (all specialties) rank in the top 5-6% in the U.S. (U.S. Census Bureau Figures for 2014) and when compared to the average U.S. salary of $48,672 and even the average U.S. household income of $89,930 (2019) physicians are amongst top-earners in the U.S. However, this post is not intended to address the current political arguments regarding salaries and wealth equity.
Physicians spend a great deal of their life training for their profession including 4 years of undergraduate education, 4 years of medical school, and anywhere from 3-7 years of residency/fellowship training in their specialty. During their training, they work extremely long hours under tremendous pressure and delay a great deal of gratification in their life. When they finish their education, they typically have significant education debt (average $200,000 medical school debt not inclusive of undergraduate degree debt). And once they begin employment, they can be ensured of continued extremely long hours under tremendous pressure with delayed gratification for the privilege of being responsible for the life of someone’s mother, father, son, daughter, husband or wife. Contrast that with David M. Cordani, 2017 CEO of Cigna with an annual salary of $17.55 million or professional basketball player Lebron James’ $94 million annual salary (includes endorsements). However, this is also not a post relating salary to years of education/training, costs in terms of financial expenditures or delayed gratification, nor to the level of perceived societal value of one’s employment.
To begin this discussion, it is important to understand that physician salary is not truly based on market forces. If you invent a device, e.g. the iPhone, that individuals desire, you can determine its price based on its perceived value and what the market will bear based on supply and demand, competitive forces, etc. Likewise, if you perform a particular service, e.g. Plumbing, you can determine your fees based on those same forces. Physicians, on the other hand, can not determine their fees using market forces. Physician fees are largely determined by the federal government according to the Medicare Fee Schedule and Resource-Based Relative Value Scale (RBRVS) which was introduced in the Omnibus Budget Reconciliation Act of 1989 (President George H.W. Bush). This was an attempt to create a uniform and objective system of payment based on work performed by physicians, designated as Relative Value Units (RVU), while performing a particular service, designated as CPT (Current Procedural Terminology) codes. The Specialty Society Relative Value Scale Update Committee (RUC), composed of 29 physicians, mostly specialists, is responsible for determining a particular RVU for a particular CPT and with updating them for new procedures, etc. The RVU system was originally developed based on a large study authorized by congress and performed by Harvard University and the American Medical Association (AMA). An additional piece of the involved history includes the fact that President Bush did not want to keep the federal government in the business of setting and modifying RVU’s and eventually turned that over to the AMA which now holds the copyright to this and earn tens of millions of dollars charging physicians, hospitals, and the like for the right to use this RVU/CPT system. This same Medicare Fee Schedule/RVU system is also used by private insurance companies to set their fee schedule. Therefore, whether public or private insurance, physician fees are artificially controlled by the government.
Now that we have established that physician salaries are not driven nor related to:
- Free-market forces (like almost everything else in the U.S.).
- Amount of education required to earn a medical degree.
- Number of years of significant work, delayed gratification, and personal debt to acquire a medical degree.
- Real and/or perceived importance/value of a physician’s services.
we may proceed with the discussion of specific physician salaries.
What are the figures and how do they compare? In a 2019 (Medscape) physician survey of salary, primary care physician’s average salary was $237,000 versus $341,000 for all specialists. Given that these are averages, there are, of course, those who earn much more as well as less, but with regards to some of the highly procedural-based specialties, the amount is much more including orthopedics and interventional cardiology. Over the course of a lifetime career in medicine (to age 65) this adds up to a difference of approximately $3,500,000 and much more when you consider the pay differences for higher paid specialties.
The current physician reimbursement model is primarily one which rewards procedures more than cognitive based services. As an example, an ophthalmologist performing a non-complicated cataract surgery that takes about 10-15 minutes to complete is paid $650 as compared to a primary care physician seeing a complex elderly patient in the office addressing diabetes, coronary artery disease, hypertension, hyperlipidemia, osteoarthritis complaints and depression would be reimbursed $121 for this 30 minute visit. Additionally, these surgical reimbursements are not based on outcome, therefore volume of procedures performed are the primary determinant for revenue, another disadvantage for primary care. You can certainly become more efficient at performing surgical procedures to increase volume, but you can not increase your volume of patient visits by asking Mrs. Smith to more rapidly relay her medical history and complaints. Furthermore, it is unlikely that the vast difference between procedural and cognitive based care will change any time soon as the committee (RUC) responsible for determining RVU’s and reimbursement is made up of primarily specialists who perform these procedures.
On the question of salary as a percentage of revenue generated, primary care also fares poorly. As a group, 2019 data (Merritt Hawkins) revealed that primary care generated an average revenue of $2,133,273 versus all specialists (combined) generating $2,446,429 in revenue. Specialists at the top received salaries representing 15-20% of revenue whereas Internal Medicine ranked the lowest at 9.76% of revenue. This revenue generated by primary care physicians represent, in part, laboratory and radiographic studies aimed at diagnosing and preventing disease and are associated with significant uncompensated quantities of the physician’s time in terms of reviewing, interpreting, taking additional action, and explaining test results for patients.
The above figures are certainly considerations used when deciding on a future specialty. In one survey (Medscape), more than half of all residents reported owing more than $200,000 and 24% reported owing more than $300,000. These salary differences can make the difference between the ability to move from the past 11-17 years of “student” life of renting an apartment, driving an unreliable automobile and a beans and rice diet to being able to start a family, possibly purchase a home, and a reliable automobile and saving for retirement while still making the large payments on your student loans [on a standard 10-year plan, monthly payments for the average medical school debt of $200,000 at 7.00% interest could be nearly $2,300 per month]. Other factors cited include the burden of documentation in the EHR and the significant amount of administrative/paperwork tasks relegated to primary care physicians.
With regards to the pressing issues related to U.S. healthcare spending and the health of our population, there is much to be gained from further investment in primary care. The U.S. spends about 4-7% of our healthcare dollars on primary care. Research has shown that for every $1 invested in primary care, $13 is saved in downstream costs. There have been countless studies showing improved outcomes including a 19% lower odds of premature death and a 33% reduction in healthcare costs in adults with a primary care provider versus those who see only specialists. Despite this, of the roughly 18,000 yearly medical graduates, only 25% go into primary care.
There is no (valid) argument that healthcare in the U.S. is not considered a priority. Current spending on healthcare in the U.S represents 18% of GDP ($3.6 trillion). Although the quality of care we deliver in this country is unrivaled in the world, studies are also showing that we do not get the same value out of the money we are spending when compared to other developed nations. That is, in part, felt to represent the lower amount of preventative and primary care services we are providing our patients in the U.S. compared to other countries. The physician workforce in the U.S. is approximately 80% specialty and 20% primary care. The U.S. population has greater access to specialty care but less access to primary care than other developed nations. Increasing access to primary care has the benefits of decreasing mortality and reducing healthcare costs. Certainly, potential salary is not the only factor in choice of specialty for medical school graduates, however, higher reimbursement for primary care services may be an investment in the future growth of the field. Maybe it is time for a raise for primary care.
Very interesting….and one of the things that most jumps out to me from your blog is that figure of how every dollar spent on primary care yields $13.00 in savings downstream. This would suggest that the 80/20 split between specialists/primary care doctors should be reversed, or at least tweaked.
Agree with all of this. Keep in mind that as the pay disparity remains a concern in primary care for all of the reasons above, the ever increasing hassle factor PCP’s face make it a less and less preferred choice for graduating doctors as they choose their career path.