"Primary care physicians spent more than half of their 2002 practice revenue on operating expenses, according to the latest Medical Economics Continuing Survey, which samples MDs and DOs in office-based practice. Doctors in the specialty fields we analyzed–invasive and noninvasive cardiology, gastroenterology, general surgery, and orthopedic surgery–fared a bit better. But even those doctors spent from 43% to 50% of their earnings on overhead. The biggest outlay was for office payroll, which easily outpaces the other two high-priced items: rent (or mortgage payments) and malpractice insurance premiums. "Without question, the greatest rise in expenses in California and Arizona over the past 24 months has been related to staffing and insurance," says Judy Capko, a consultant in Thousand Oaks, CA. "Workers' compensation has nearly doubled, and unemployment costs are increasing even more rapidly," she adds. "Some practices are reducing fringe benefits and limiting pay hikes to the increase in the Consumer Price Index." (
Last Updated: April 16, 2004
Physician Income (New)
Internists' incomes will continue to be vulnerable due to increasing practice operating expenses, liability premiums, and Medicare reimbursement policies. (Although provider payment increases through 2005 are included in the Medicare Modernization Act, the underlying update formula has not been changed and will result in cuts after 2005.) Individual income will be affected by a variety of factors, including: region of the country, subspecialty, patient population, percent of income from Medicare, size and type of practice (single vs. multi specialty), and degree of capitation. Subspecialties emphasizing procedures will continue to report the highest incomes. Internists with large numbers of Medicare or Medicaid patients and those practicing in low income or rural areas will be particularly vulnerable to stagnant or decreasing income. Some physicians will begin charging retainer fees for boutique care (concierge practices) or surcharges beyond traditional copays and deductibles to offset increasing administrative costs.
Reviewer Comments
Evidence:
American Society of Concierge Physicians. About the American Society of Concierge Physicians. [Electronic Version]. March 2004. Available from: conciergephysicians.org. Accessed March 1, 2004.
The American Society of Concierge Physicians ("ASCP") is a national non-profit organization created to serve physicians in the retainer-based, boutique, or concierge medicine field (collectively "concierge physicians"). ASCP is designed to unify these physicians across the country and foster collaboration among the physicians and other stakeholders in the medical, governmental, legal, and regulatory communities. (Fact)
Garfinkel Weiss G. Practice expenses: The Continuing Survey takes a closer look at the costs of doing business, from automobiles to utilities. Medical Economics. 2003:31-7. Available from: memag.com.
Primary care physicians spent more than half of their 2002 practice revenue on operating expenses, according to the latest Medical Economics Continuing Survey, which samples MDs and DOs in office-based practice. Doctors in the specialty fields we analyzed–invasive and noninvasive cardiology, gastroenterology, general surgery, and orthopedic surgery–fared a bit better. But even those doctors spent from 43% to 50% of their earnings on overhead. The biggest outlay was for office payroll, which easily outpaces the other two high-priced items: rent (or mortgage payments) and malpractice insurance premiums. "Without question, the greatest rise in expenses in California and Arizona over the past 24 months has been related to staffing and insurance," says Judy Capko, a consultant in Thousand Oaks, CA. "Workers' compensation has nearly doubled, and unemployment costs are increasing even more rapidly," she adds. "Some practices are reducing fringe benefits and limiting pay hikes to the increase in the Consumer Price Index." (Survey)
Guglielmo WJ. Physicians' earnings. As demand for primary care doctors plateaus, so does income. Medical Economics. September 19, 2003:71-9. Available from: memag.com.
According to Merritt, Hawkins & Associates, a physician search and consulting firm in Irving, TX, "income offers made to primary care physicians remained relatively flat," although generalists were still in demand in certain places, especially rural areas. Among the primary care specialists surveyed, ob/gyns led their colleagues with the highest practice revenue and also the highest total compensation ($500,000 and $220,000, respectively). Internists are on par with FPs with total compensation of $150,000. Pediatricians and GPs trailed behind with total compensation of $130,000 and $116,000, respectively. It is good to go group; and if you do, look for a big, single-specialty group: Surveyed physicians in groups of 10 to 24 had the highest practice revenue ($700,000) and total compensation ($300,000). We also found that physicians in single-specialty groups received 16% (or $30,000) more in total compensation than their colleagues in multispecialty groups. As might be expected, physicians–whether in primary care or specialty practice–hit their earnings peak between the ages of 50 and 54. Earnings start to dwindle as retirement closes in, probably because they tend to taper their practices. Physicians in the South had the highest total compensation, typically earning $30,000 more than their colleagues in the East, where total compensation was lowest last year. And the gender gap persists. The typical female physician received $55,000 less in total compensation than her male counterpart. One of the reasons typically posited for that fact is that women are more likely to choose the lower paying specialties; they also tend to work fewer hours than their male colleagues. Among FPs, internists, and pediatricians, the gap is narrowest in family medicine, where male physicians earned only $10,000 more than female doctors. (Survey)
Medical Group Management Association. Physician compensation and production survey. [Report]. 2003.
Internists’ incomes will continue to be vulnerable due to increasing practice operating expenses, liability premiums, and Medicare reimbursement policies (Although provider payment increases through 2005 are included in the Medicare Prescription Drug, Improvement and Modernization Act of 2003, the underlying update formula has not been changed and will result in cuts after 2005.) Individual income will be affected by a variety of factors including: region of the country, subspecialty, patient population, percent of income from Medicare, size and type of practice (single vs. multi specialty), and degree of capitation. Subspecialties emphasizing procedures will continue to report the highest incomes. Internists with large numbers of Medicare or Medicaid patients, and those practicing in low income or rural areas will be particularly vulnerable to stagnant or decreasing income. Some physicians will begin the controversial practice of charging fees and surcharges beyond traditional copays and deductibles to offset increasing administrative costs. (Survey)
Office of Inspector General. OIG alerts physicians about added charges for covered services. Extra contractual charges beyond Medicare's deductible, coinsurance: A potential assignment violation. [Press Release]. March 31, 2004. Available from: oig.hhs.gov. Accessed April 7, 2004.
Acting Principal Deputy IG Dara Corrigan today reminds Medicare participating physicians of the potential liabilities posed by billing Medicare patients for services that are already covered by Medicare. "We are hearing reports about physicians asking patients to pay additional fees, and we believe this is an ideal time to remind physicians and Medicare patients about this potential liability. Charging extra fees for already covered services abuses the trust of Medicare patients by making them pat again for services already paid for by Medicare," Corrigan said. "If participating physicians decide they want to charge patients additional fees they should be mindful that they are subject to civil money penalties if they request any payment for already covered services from Medicare patients other than the applicable deductible and coinsurance." (Fact)
Reed MC, Ginsburg PB. Center for Studying Health System Change. Behind the times: Physician income, 1995-99. Results from the Community Tracking Study. Report. No. 24. March 2003. Available from: hschange.org. Accessed April 25, 2003.
Between 1995 and 1999, at a time when most wages and salaries in the United States were rising sharply, average physician net income from the practice of medicine, adjusted for inflation, dropped 5.0%. The reduction of 6.4% in primary care physicians' average real income was particularly notable and greater than the 4.0% drop for specialists. The growth of managed care is a likely factor behind the decline in real income for physicians. During this period, managed care plans successfully held down spending for medical care by pressing providers for lower prices and restraining utilization of services. Medicare also held down its fees during this period. The real-dollar decline in physicians' income may help to explain the intensity of organized medicine's objections to recent cuts in payment rates in Medicare as well as decreased physician participation in charity care. Congress recently canceled the 2003 cut and provided a small increase in physicians' fees, but the mechanism for setting payment updates is still in place, so the issue may be back in 2004. Physician incomes have never been an explicit consideration in setting Medicare payment policy. Since 1989, the policy has varied fee updates according to how trends in the spending for physicians' services have compared to a target. But the experience with the sharp decline in payment rates in 2002 and the prospect of additional declines thereafter has introduced a new element in policy – trends in beneficiary access to care. To the extent that trends in income influence physicians' willingness to serve Medicare patients, then income may play a more prominent role in policy. (Survey)
U.S. General Accounting Office. Medical malpractice insurance: Multiple factors have contributed to increased premium rates. Report. No. GAO-03-702. June 2003. Available from: gao.gov. Accessed July 29, 2003.
Since 1999, medical malpractice premium rates for physicians in some states have increased dramatically. Among the seven states that were analyzed, it was found that both the extent of the increases and the premium levels varied greatly not only from state to state but across medical specialties and even among areas within states. Multiple factors have contributed to the recent increases in medical malpractice premium rates in the seven states that were analyzed. First, since 1998 insurers' losses on medical malpractice claims have increased rapidly in some states. Second, from 1998 through 2001 medical malpractice insurers experienced decreases in their investment income as interest rates fell on the bonds that generally make up around 80% of these insurers' investment portfolios. Third, during the 1990s insurers competed vigorously for medical malpractice business, and several factors, including high investment returns, permitted them to offer prices that in hindsight, for some insurers, did not completely cover their ultimate losses on that business. Fourth, beginning in 2001 reinsurance rates for medical malpractice insurers also increased more rapidly than they had in the past, raising insurers' overall costs. While the medical malpractice insurance market as a whole had experienced periods of rapidly increasing premium rates during previous hard markets in the mid-1970s and mid-1980s, the market has changed considerably since then. These changes are largely the result of actions insurers, health care providers, and states have taken to address increasing premium rates. (Survey)
Additional Citations:
Association of American Medical Colleges. Congress passes historic Medicare prescription drug legislation. Washington Highlights. November 25, 2003. Available from: aamc.org. Accessed January 20, 2004.
Garfinkel Weiss G. Practice expenses: The Continuing Survey takes a closer look at the costs of doing business, from automobiles to utilities. Medical Economics. 2003:31-7. Available from: memag.com.
Guglielmo WJ. Bridging the reimbursement gap. Medical Economics. November 8, 2002:96-8, 103-4, 107. Available from: memag.com.
Harris SM. Lay the groundwork for retainer practice. American Medical News. December 1, 2003. Available from: amednews.com. Accessed December 11, 2003.
MacStravic S. Do boutiques deliver better care? HealthLeaders News. February 9, 2004. Available from: healthleaders.com. Accessed February 9, 2004.
Medical Group Management Association. Academic practices aim to achieve competitive compensation for physicians. [Press Release]. May 20, 2003. Available from: mgma.com. Accessed May 22, 2003.
Pennachio DL. Fees & reimbursements: Doctors continue to raise fees in hopes of recouping increased practice expenses, but reimbursements are thwarting the plan. Medical Economics. October 10, 2003. Available from: memag.com. Accessed October 16, 2003.
Staff and Wire Reports. New Rx for docs? Some M.D. s adding fees to supplement insurance. The Hartford Courant. November 1, 2003. Available from: ctnow.com. Accessed November 3, 2003.
Statement History
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