Are you turning away millions of dollars as an academic doctor?

After doctors finish their medical training, there is a spectrum of career options that range from full-time clinical medicine (which most people choose) to full-time academic medicine to full-time researcher. Whichever path one takes will surely benefit society, but can have a major impact in compensation. Over the course of one’s career, there is unfortunately a huge discrepancy in earnings.

Think millions of dollars.

Or for you gamblers, it’s like getting to the final table (guaranteed $1 million earnings) of the World Series of Poker every few years, but donating your earnings back to your hospital administrators. These administrators then make you work harder for less pay.

Sounds fair, right?

Let’s take a look, step-by-step, at how there can be such a discrepancy in earnings despite being the same type of doctor.

 

 

How doctors generate revenue in private practice.

As a doctor involved in direct patient care, you generate revenue directly from your services. The more services you provide, the greater revenue you bring into your practice (or your employer). For many doctors who participate in insurance plans, this is measured in revenue value units (RVUs) or something similar—anesthesiologist work is measured in ASAs, which are calculated on the difficulty of a type of surgery and modified by the duration of a surgery.

 

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Even doctors who don’t participate in direct patient care—that means you, pathologists and radiologists—have productivity that can be quantified.  Additionally, there may be other factors in physician productivity that aren’t directly quantifiable, such as the number of consults that are generated and procedures that other specialists perform on patients that you cared for who otherwise wouldn’t have received treatment. If you look into capitated care models, managed care models, and closed-system models, the revenue streams becomes even more obfuscated.

 

No matter how confusing this may seem, medicine in a private practice model is still service-driven. The more you work, the more money you bring into your practice or your employer. Hopefully this work translates into a higher income for us all.

 

How doctors generate revenue in academic medicine.

If you are a physician in an academic center or university setting, the revenue generating component is more opaque. I look at it like a black box:

No one knows what happens inside the black box, not even the administrators!

The service portion of being a doctor in academic medicine is diluted into many different roles. Some of these roles aren’t directly related to patient care, so any revenue that is generated doesn’t go through the typical insurance panels.

Take, for instance, research. This is a very valuable component to the healthcare industry, but there is no visible compensation in research unless there is a breakthrough discovery. Research funding in the U.S. comes mostly from the National Institutes of Health (NIH). Most researchers have to apply for funding through an arduous process every few years!  The funding that one receives through a research grant is unlikely to even cover your salary!

Teaching medicine is another example where the income stream is not clear cut. Insurance companies pay you for taking care of their insured clientele, not for educating future doctors.  It doesn’t matter if you’re taking full liability for a full inpatient service, presenting grand rounds, or writing a case report.

Let’s compare a specialist working in academic medicine with one in private practice.

Suppose that you are a vascular surgeon who decides to work at a teaching hospital. You have a faculty appointment at the medical school but you are primarily a clinician working 85 hours a week. The call schedule is only once every five weeks, but you get called in every time you are on call (hey, ruptured aneurysms wait for no one!). You also spend time teaching medical students, residents, fellows, and prepare grand rounds cases. Your hospital pays you about $500,000 a year, but your salary is essentially capped. That means that you’ll likely be earning the same take after five to ten years on staff. You’re making big money, but you’re also spending a lot of time at the hospital.

If you decided to leave the university setting, there are a number of options that could materialize. You could join a hospital group, get paid a much lower starting salary than what the university might actually offer you, but build up to that $500,000 a year. You’d still be working those 80 hours a week. The difference is that by not being involved with teaching or research, you might actually free up a few extra hours a week. No bad, eh?

 

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A third option might be to join an office-based vascular surgery group. You might be brought on board with a salary lower than what you might get at the university, but there is room for growth. After several years of servitude, you purchase into the group and build equity in the equipment. There is an angio-suite that you own along with the practice. You are still working those 80 hours a week (yeah, what a brutal subspecialty), but you bring in a cool $1.5 million each year.

Think about it. A vascular surgeon can have a $1 million income difference depending on where she decides to work. I’ve actually seen situations where the income differences are even greater. Now we’re talking serious money.

What’s the moral of this story? Vascular surgeons have tough jobs!

 

It’s not about the money! 

Look, life isn’t all about the money. Some of us don’t enjoy yachting on the weekends or having caviar every night.  Some of us who do may even be fortunate enough to have alternative sources of income.  Our happiness levels start to plateau after a certain amount of income and net worth. I like to think of it like this:

Your happiness actually increases if your income potential is hopeless, but happiness will also plateau with increasing income.

For some doctors, academic medicine is a means to pay the bills AND be happy. What is not to like about conducting research that could potentially revolutionize healthcare or simply educating future generations of physicians?  Some of us actually enjoy writing and editing scientific manuscripts.  Academic institutions are structured to allow doctors to do just that.  These roles may not necessarily maximize a doctor’s income potential, but they contribute to society and personal satisfaction. If you would like to put a price on that, state your argument in the comments section below. 😉

 

What should I do if I’m undecided?

There’s not going to be a magic ball that tells you what to do. I know plenty of doctors who left academic medicine after several years when they needed a change. I also know several doctors who decided to enter academia after many years of pure clinical practice. The doors remain open no matter what decision you make early in your career.

Remember why you entered medicine; I hope that it was to care for patients. At the end of the day, you still need to be happy. However, it doesn’t hurt to consider the financial implications of your decisions.

How did you decide between academic and purely clinical medicine?

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  • Set for Life

    Great article! The differences between private practice and academic medicine can be staggering.

    • Smart Money MD

      Thanks Jamie!

      Have a great weekend!