As you may recall from my recent analysis of the 2024 Doximity compensation report, doctor pay, in real terms, is decreasing. That’s a problem given that the same report indicated the large majority of doctors do not feel fairly compensated. Moreover, physicians are being asked to do more and more. We see this in doctors’ responses that indicate higher patient workload and greater administrative burdens as top causes of burnout.
Decreasing doctor pay coupled with greater workload is a recipe for disaster on both an individual and systems-wide level as I will get into below. Burnout, as I have experienced, is at an all time high among physicians. If things don’t change, that will only get worse.
So let’s examine why exactly physician pay is decreasing and what we can do about it.
The current state of decreasing physician pay
In 2023, average doctor compensation increased by nearly 6%. This is a positive difference from 2022 when doctor pay actually contracted by over 2%.
While this is great for 2023, overall trends still do not favor physicians. Inflation is coming more and more under control. However, throughout 2022 especially, it ran rampant. With these inflationary pressures, doctor compensation has seen very minimal real growth.
In simple terms, over the recent past (5 years), doctor pay has not kept up with inflation. Thus, in real terms, it is contracting. Our purchasing power based on our compensation for clinical and non-clinical care is less than it was before.
Why is physician pay decreasing?
This is multifactorial.
Declining reimbursements
The basic fact is that Medicare physician payment has decreased by 26% since 2001. Additionally, another new Harvey L. Neiman Health Policy Institute study found that physician reimbursement per Medicare patient decreased 2.3% between 2005 and 2021 when accounting for inflation. And this was despite a concurrent increase of 45.5% in physician services to each patient. Again, less pay and more work.
Medicare data is the most widely available and thus serves as the benchmark in these cases. However, it is fair to say that insurance reimbursements are down across the board.
Thus, a main factor here is decreasing insurance reimbursement for physician services.
Changes in employment models
For the first time, the majority of physicians work within an employed model under a healthcare system, university, or private equity company.
Why this happened in the first place is up for debate. The most widely accepted view is that physicians liked the idea of trading the stress of running a business and dealing firsthand with insurance companies and government policies of increasing complexity for a stable paycheck and less headache. That’s a large part of why I, in my field, chose an employed position.
The trade off here, however, is that physicians gave up control of their business i.e. the services they offer in the form of patient care. We became employees.
We found ourselves on the outside looking in when it came time to negotiate reimbursement rates, policies, and even practice guidelines.
And unfortunately, we also started to be viewed as expendable by our employers. And as a result, some physicians even came to view themselves as expendable as well. This is not the actual case, but some of us started to believe it.
As a result, we took accepted a lower value and took on greater work.
Lack of education
The last big factor that I will discuss here is a lack of education. No, not medical education. We all get plenty of that.
But we lack an education in the business of medicine, practice management, negotiation, and personal finance.
Without the first two, we feel like we do not have the ability to run our own practice and that an employed position is the only option. Again, I am an employed physician. My chosen practice setting best allowed me to provide the type of care I wanted within my field of reconstructive microsurgery. But even within that framework, I, nor any other doctor, is exempt from this education should their practice need to change but also to optimize their leverage within an employed setting.
Without an education of negotiation, we never learn how to leverage our unique skills and value for better pay. You can see right here how I determined and demonstrated my value and used this leverage during my last contract negotiations to ensure better compensation as a result.
And lastly, without good personal finance habits and financial well-being, we are tied to our paycheck. We feel we cannot leave a bad situation or force change because we need our income to cover our expenses. However, once you enact a plan and reach financial freedom, you are no longer financially tethered.
All of a sudden you can practice medicine on your own terms.
A quick aside on plastic surgeons
In the Doximity compensation report, plastic surgery was one of the few specialties that buck the trend. We saw an increase in pay even after factoring in inflation.
So why is that?
Well, the main factor here, I believe, is that the aesthetic portion of plastic surgery is an out of pocket, cash pay practice model. And, despite aesthetic surgery being a very minor portion of my practice currently, aesthetic surgery predominates in the field of plastic surgery.
Anyway, a cash based practice allows plastic surgeons to negotiate prices and reimbursement directly based on supply and demand as well as inherent skill and services offered. Insurance and red tape are cut out. There are no factors outside of basic economic ones regarding reimbursement and compensation.
However, even within an employed or hospital model, this trend may be due to the fact that plastic surgeons help reduce length of hospital stay and services needed by managing challenging wounds and surgical problems. These are very important parameters for hospitals who may be willing to compensate for those improving the metrics.
Lastly, in general, I do believe that plastic surgeons tend to be more likely to learn about the business of medicine. Maybe because private practice is still such a big component of the field unlike other specialties that have become predominantly employed. This part is really speculation.
The impact of decreasing doctor pay on the medical community
Overall, this lack of growth in physician compensation will likely have varied impacts of the medical community including:
- Increasing the physician gap as less potential doctors are willing to go into extreme debt for diminishing compensation
- Decreasing the present physician pool as more look for alternative non-clinical sources of income with better or similar pay and less liability
- Increased physician burnout as financial well-being decreases in the profession
All of this leads to less doctors and worse patient care. Not good for medicine or society as a whole…
What can we do about decreasing physician compensation?
Many of the factors identified above may seem somewhat out of our control. But there are always things we can do at both individual and systems wide levels.
On a systems wide level, we need to continue to work together to advocate for physician well-being, including financial well-being. The more this becomes accepted and brought into the open, the more doctors will feel empowered to create their own path to financial freedom. And, as I discuss here, a nation of financially free doctors would change healthcare for the better in amazing ways.
We also need to consider as a field how we want to structure our practice of medicine. Perhaps a concerted effort towards more favorable practice settings are needed.
Representation and a voice at the table with regards to policy formation is also necessary.
Realistically however, the compensation issue at a systems level will not be solved rapidly
At an individual level, my recommendations are for physicians to improve their financial education and build the basic habits that will lead them to financial freedom – the concept that they can work and practice medicine because they want to, not because they have to on their own terms.
Therefore, doctors need to practice basic financial hygiene like:
- Saving 20% of their gross income,
- Investing in broadly diversified, low cost index funds for the long term,
- Creating alternative sources of income, and
- Paying off debt
The more doctors who become financially free will help physicians take back control and improve healthcare overall.
Moreover, doctors should know how to negotiate with systems and insurance companies to ensure fair reimbursement for the services they provide. We need to get into the game.
This may mean inserting ourselves into these negotiations even if it is not in our current comfort level or even if we are employed. It means improving our education. Its also means becoming more attune to the value that we create by tracking our RVUs, using more democratized normative compensation data to our advantage, and becoming expert negotiators.
This way we can make a positive change and combat decreasing doctor pay!
What do you think? Do you agree that doctor pay is decreasing? Why is this? And what should we do about it? Let me know in the comments below!
