Sometimes life would be much easier if we had a flowchart to guide us with all of our decisions. Fortunately life can’t be dumbed down to a giant decision tree. No matter what our
Category: medicine
Can the health system afford to give doctors raises?
The business of medicine is unlike any other type of standard “business” in that health insurance and hospitals confound what would appear to be a simple exchange of services for a set price. You know that the confusion is bad when neither doctors nor the patients fully understand how the insurance system works. I have seen patients going into surgery for a lap chole being quoted a price that ended up being off by a few hundred dollars (at least it wasn’t off by thousands!). Sometimes the patient won’t get a bill until months later. Sometimes this spans a new calendar year where certain FSA’s don’t roll over and the expenses have to come out of pocket.
I’ve seen doctors’ offices receive unwarranted clawbacks by insurance companies claiming that the patient had secondary insurances that should have covered what the insurance company mistakenly paid! Sometimes these notices come long after the accepted period of restitution. All of these notices are written with the threat of legal action for those who do not comply. Many of these doctors are too busy to research the claims and simply “pay up” in hopes of making problems go away even though they aren’t even the ones at fault.
The complexity of the health system is sort of like a convoluted financial investment scheme—the party that controls the plan is the only one who benefits!
Why is healthcare complex?
The answer to this question requires at least a dozen doctoral theses in healthcare economics plus several lifetimes of healthcare experience. However, from a layperson perspective, there are several reasons why health insurance is difficult to understand:
- The system is structured with deductibles, copays, coinsurance, and secondary coverage. This means that there are many flowcharts with too many decision points.
- Managed care, fee for service, and capitated care are just some buzzwords that aim to cut costs. Some of these systems convolute an already complex system.
- There are state, federal, private, and federal/private (Medicare replacement plans) insurance coverage systems. Each one has different rules. Again, complexity favors the party who makes the rules.
How are doctors screwed?
Within this system, doctors, nurses, and those directly “generating services” are not the ones who manage resources, make the rules, or decide how to share the pie. There are many mouths to feed but only a limited amount of pie to share. The complexity of the system makes it near impossible to track where all of the pie slices even go.
Many medical groups now are transitioning towards “value-based care”, as a means of cutting costs. The goal appears to combine high quality medicine while saving costs. Unfortunately it is near impossible to envision great ways to cut costs without reducing physician compensation or creating hurdles to healthcare delivery. Both of these seem like a special recipe to cause physician burnout.
Unfortunately, patients don’t understand the system either and often blame doctors for problems that they experience in the healthcare system. Some of the common situations that I’ve seen doctors mistakenly blamed include:
- Billing complaints tied to patient satisfaction scores — Not a week goes by that I don’t hear about my colleagues who work in a large medical group getting low patient satisfaction survey ratings because a patient decided to vent about a bill that they didn’t understand. Guess what? These doctors get hurt the most because there is a good chance that their compensation is tied to these surveys.
- Lack of patient understanding of copays or patient financial responsibilities during visits — Every few months I hear stories from doctors that an unruly patient refuses to pay a $25 copay or complains through predatory online social media channels that the care was not worth the “$50” that they had to pay. The fact that a patient thinks that a physician is compensated $50 for a patient visit grossly reflects how skewed anyone’s understanding of how much a doctor should be compensated.
- Complaints about unacceptable wait times in a doctor’s office — Many multi specialty medical groups have centralized scheduling services that dictate a clinician’s schedule without any input from the doctors themselves! Inevitably some of the complaints erroneously blame doctors for being “too greedy” by over scheduling patients.
The fact that much of the lay public thinks that doctors earn too much money and that doctors don’t manage the flow of revenue in healthcare makes it problematic for doctors to win any argument involving money.
Where does compensation come in?
It seems like a faux paux for anyone in medicine to ask for a raise when health experts are trying to cut costs across the board. After all, the federal healthcare system only has a finite amount of funds and it is clear that this amount doesn’t keep up with inflation—if you want to learn more, start reading about the Medicare Sustainable Growth Rate (SGR) issues.
What is interesting is that hospital administrators don’t seem to have many qualms about asking for more money for themselves. Many hospital administrators also don’t seem to have qualms about offering highly competitive or even highball offers to many allied workers—I’ve seen discussions during medical staff meetings where board members peg nursing salaries at nearly 75% of what the hospitals pay their hospitalists!
Now the point is not to start any turf war within the medicine community, but to realize that the pot has a fixed amount of funding. As much as equality should be heeded in our society, most people would agree that professions with different responsibilities, qualifications, and tasks should have different means of compensation. When the rewards no longer outweigh the challenges of a field, you will not have too many qualified people opting for the more challenging jobs.
What should doctors do?
While we shouldn’t all go out on strike (maybe that isn’t a bad idea!), it is important to realize that we have to play by the rules of the system if we are to remain in the game. Doctors need to understand their worth in order to assess their work situation. As with any occupation, we need to assess whether there are alternatives that would improve our situation and what is negotiable. Realize that if you are able to negotiate a highly salary, it means that the margin of profit that was already there wasn’t going to you to begin with. Since there is a fixed amount of healthcare dollars floating around, the number of dollars set aside to pay doctors is “set” unless you are able to increase productivity. Realize that if you are able to negotiate a highly salary without working more, it means that the margin of profit that was already there wasn’t going to you to begin with.
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If you don’t like how the system rewards productivity or skill, then it behooves all of us to take initiatives to improve how the system functions.
What has been your experience with your hospital or medical group with compensating doctors appropriately?
Photo courtesy of The Simpsons, Copyright 20th Century Fox.
The one thing I wish I knew when I took my first job
If only we could move backwards in time. We could right all of our wrongs, and never make a mistake in life.
It would be nice to relive certain time points in our lives to make a better choice. Perhaps in the end none of this makes a difference, but many doctors do wish that they made different decisions when taking their first jobs. That is typically a point in our lives where our choices can impact everything else in our lives. At this point doctors have the least amount of money they will ever have but are the youngest that they will ever be in their working careers. Many will have young families to support and are making decisions to move their family across the entire country.
To this end, I wanted to recap some of the salient points I give to new graduates when they are choosing their first jobs, and hopefully stop them from making the mistakes that I made.
Assess availability of colleagues
Some people in the world are built to tackle challenges alone. Most of us perform better if there is backup. This is where mentorship and colleagues come into play. Medicine is an interesting career path where it is unusual that physicians have peak knowledge, experience, and stamina altogether straight out of training. Every specialty is unique and will vary on how much experience and age come into play.
Young doctors will have to prioritize what is important to them when taking a new job. For some of us, taking a lower paying job within a multi-doctor department may be a better option than to take a much higher paying job inheriting a practice from a solo physician. Having the ability to grow along with your colleagues or mentors is an intangible perk that we have to weigh against everything else.
Assess peak earning potential
Most physicians advise new graduates to assess the peak earning potential of a job as a key factor rather than starting salary. There are two sides of this coin. Logically, the bulk of a physician’s career will be spent in the peak earning timeframe so being able to earn a high amount for a long period of time will maximize the chance of greater overall earnings. The calculation falls apart in two scenarios:
- Part of the compensation package is tied to a pension — This is commonly seen in the Kaiser Permanente (KP) system, where physicians are paid a highly competitive starting salary but have little room to grow their incomes. The compensation package at KP is tied to a generous pension that takes into affect after a certain length of employment. The purpose of any pension is to relieve the burden of the employee to save for retirement by having a guaranteed lifetime income. For some people, it’s a huge benefit. For others, the pension is a set of golden handcuffs. You can leave the system “early” but will not be able to maximally reap the benefits of being in the system longer.
- Physicians wanting to FIRE — It’s always better to front load your earnings if you want to maximize the amount of time that it will grow. If your working career is only going to be ten years, then it doesn’t make financial sense to take a job where you are compensated pennies for the first five years and start making big bucks for the next five years. FIRE tends to be in the minority but it is important to consider the consequences of your income trajectory. Anecdotally, front loading earnings is exactly how engineers and other early retirees have been able to hang up their hats at age 30. Compound interest and time in the market pays off no matter what.
The coin could even land on its side! Life still happens, and I have certainly known doctors who made what is seemingly the best decision to maximize their salaries only to find out that their spouses hate the city that they moved to.
Location, location, location
Every single one of us has a must-have whether or not we are aware. It could be a Saks 5th Ave, a Costco, or a simply good hair salon. For most people, location matters. If you choose to move your family out to the Yukon for a seven-figure job, you’d better have a game plan to get them out if curling or ice fishing isn’t your family’s favorite sport. Don’t get blindsided by other enticements. You are in it for the long haul, so you need to make sure your choice makes sense. You can still make mistakes even if you make the best choice possible given what you know.
The ultimate dealbreaker
The biggest regret that I had when choosing my first job was that I didn’t negotiate enough. Remember that everything is negotiable, even if you are told otherwise. Sometimes larger institutions have boilerplate contracts, so they may not be inclined make modifications to the contracts simply because it would require work from their contract attorneys. Whether or not you can convince the other party to modify their contract to your liking will ultimately depend on how badly the potential employer needs you.
There is a fine line with asking for what you feel you deserve and also asking for something that is unreasonable for the other party too. I’ve seen new graduates both shortchanging themselves and also overestimating their own abilities. If there are other doctors vying for the same job, then your potential employer has the upper hand. However if you are the only candidate on the docket, you might have more leverage than you realize.
The moral of the story? Don’t be afraid to ask, and make sure you have a good justification on why you deserve what you are asking for.
What other questions should you have asked during your first job?
Should doctor salaries be publicized?
One of my coworkers who grew up in India told me that their teachers in grade school would post everyone’s scores in the hallway after every exam. This comparison of grades and objective testing further extended to cities and even regions in the country. There are people going through the hierarchical ranks with “gold medals” in science or engineering. Throughout this process, it was relatively transparent who the smartest or highest achieving people (at least on paper) were. The “winners” in the system also got the best opportunities for jobs and potential to move to the United States. He once asked me why the hospital systems aren’t transparent about doctor salaries or executive salaries.
While there isn’t a single best answer to his question, I began to wonder how our healthcare system would fare if incomes were publicized.
Can grades even be compared to income? No way. There is a finite cap on grades, and everyone in the class can theoretically earn a 100% if no one ever misses a question. There is only so much money floating around in the world. Not everyone can get a “100%” on their salaries.
Corporate America can do it
The corporate world often discloses the compensation of some of its management members under their shareholder agreement. Non-profit entities have to disclose their executive compensation schedules through a 990 form—this is a powerful resource for you financial voyeurs who want to see what other people are earning. Remember, all non-profit institutions (read: hospitals) file this publicly so you might actually find some interesting financial information on your coworkers or friends. Some of the names on these compensation schedules belong to doctors, but these numbers are unrelated to what doctors earn in their clinical practice.
Posting salaries of your doctors
Clearly publicly posting one’s income is not really a socially acceptable analogue to posting grades in school. The inherent problem with the public being aware of your physician’s salary is that laypeople truly have little idea what goes into the training or daily routine of a doctor; they just see the salary and judge based on a number.
What might actually be an interesting scenario is if everyone’s compensation within a hospital or medical group be listed. This includes everyone—the janitor, all of the mid-level managers who make your lives hellish, all of the HR people who litter their email signatures with online and fabricated degrees (BA, AClh, MBA, CFO, BLS), and the one guy who doesn’t do much of anything but still gets paid more than the pediatricians and family medicine doctors in the group.
Here is a hypothetical layout of the salaries of Medical Group A:
While physicians still remain at the top of the income chain, you might be surprised how many hands are in the pot. At the basic level, doctors (and to a certain extent midlevels and physician extenders) are fundamentally responsible in bringing in the revenue. However, this revenue has to be distributed among all of the other workers in the organization. And we all know that the number of administrators in healthcare has grown by several thousand percent since the mid 1970’s. What has been most revealing in speaking to various hospital personnel is that most non-physicians have little idea what doctors actually do, even though they are working alongside the doctor!
Go back and reread that statement. Those of you in the hospital or clinic settings will know what I am talking about. Remember the time the hospital facilities person told you that his call schedule was worst than yours because he was on call all of the time? The worst case scenario was that a water pipe in the hospital had burst so he had to unlock the door for the plumbing staff to do the repairs. Oh, if he “forgot” to pick up the phone there would not be any consequences. <end rant>
In the end, I realized that nothing good would come out of posting anyone’s salary. We would actually lose out as doctor because what people want to see are numbers, not how much work or how long it takes to get to where you’re at.
What hospital statistics don’t reveal about doctor salaries
I came across a heated newsgroup thread related to a recent survey comparison of medical specialty salaries and the revenue that each specialty generates for hospitals. Overall there is a general correlation between higher hospital revenue and higher salaries, but there are some outliers. According to the data, ophthalmologists generated one of the least amount of revenue for hospital yet reported income that was in the middle of the pack. You can read the official survey data on Merritt-Hawkins.
Naturally, there was some animosity from those specialties who felt short-changed by the system. Why would a certain field be compensated more for contributing less to the system? The devil in the detail, of course.
This topic presents a good learning opportunity for all doctors.
A study is only as good as the data given
We’ve all taken part in clinical or laboratory research at some point in our lives. Some of us conduct research in our jobs. We all know that variables need to be controlled, and shoddy survey research is only as good as the respondents’ responses.
In this survey, both hospital and office-based specialties are lumped together. Certain medical fields like dermatology, ophthalmology, and psychiatry are office-based fields. For the most part they function independently of hospitals, and generate revenue from professional charges as well as ancillary services. They do not typically bring in much revenue to hospitals.
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Why? These specialties are unique:
- These specialties typically do not consult other specialties, so the referral chain ends with them.
- These specialties typically do not order high volumes of ancillary testing such as lab work or imaging.
- Procedures that these specialties perform can typically be conducted outside of the hospital. Anything done outside of the hospital translates to zero revenue to the hospital.
- They’re also not likely to be employed by the hospital either.
If you look back at the survey, a field like ophthalmology isn’t going to bring much revenue into the hospital. An ophthalmologist isn’t likely to be employed by a hospital either. So the reported salary of an ophthalmologist isn’t likely to have any correlation with hospital revenue at all.
In contrast, neurosurgeons employed by a hospital are going to be more common. Most of their surgeries are performed in the hospital, and their work brings in significant technical revenue to the hospital. A hospital could contract with independent neurosurgeons for their services, but from a business standpoint employing the neurosurgeon would give the hospital much more control.
Key points in the business of medicine
It’s never a good idea to make career decisions based on money especially in medicine. What might be a hot field with great compensation may no longer be the case your entire career. The key points I impress upon my students to assess are the following:
- You need to choose a field that you enjoy.
- Once you’ve narrowed down your potential options, get a sense of what you can do with your expertise. Inpatient, outpatient care? Lifestyle?
- Understand how one’s skills within a profession translates into income. You don’t have to understand everything, but getting a head start will allow you enough time [read: years] to synthesize the right questions to ask in the future.
If your career specialty is already set, it’s not too late to reassess what you understand or not about your field. If you are an internist, you probably already have a good sense of job options available like outpatient care or hospital medicine. Study how revenue stream occurs. Figure out where the middlemen are, and ask yourself if you are okay with how the system you are in works. Realize that not every one of your peers will share the same values that you do. Make sure that whatever you decide to do helps to preserve your profession. I’ve seen plenty of doctors “sell out” their profession to make a quick buck. Don’t be that gal. We’ve worked too hard to throw away everything.
The bottom line? Don’t get mad if someone else seems to work less and earn more! If that is important to you, figure out what you can do to make it right! You’ve got an entire career to do it.
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Private schools and costs, revisited
College admission letters officially came out a few weeks ago, and there were many happy parents as well as some disappointed ones. One of my colleagues’ daughters received her acceptance letter to Harvard. He had kept me in the loop during the application process and her daughter had already been accepted into Stanford and Berkeley, both with full tuition scholarships. I congratulated him and we had no further discussion about it.
Implicitly we both knew that she was going to Harvard even though there were two full scholarship offers at great schools. I guess you know where I stand in terms of private vs public education…
There is no end to the debates about private and public schools. The contention has always been that private schools confer no guaranteed return on investment despite having a higher price tag than publicly funded schools. We’ve all seen private grade schools that are great, and probably an equal number that are lousy. I recall that in childhood many of the doctors’ kids all enrolled in a private school only to find that the public city schools offered better advanced classes. I attended public schools that were considered some of the worst in the entire country up until college, and managed to develop a relatively good career. It all depends on where you live and options are around.
The money bloggers are relatively vocal in their opposition of private education, from secondary school all the way into college. The doctor money bloggers in general seem to favor the public school route, but their rationale also involves saving oneself from unnecessary expenses. There is nothing wrong with that viewpoint, especially when these very same money bloggers have hard evidence from their own experiences that they carved out a financially successful lifestyle without the huge price tags. I would venture to assume that the physician bloggers who developed successful professional careers without shelling out the big bucks would also argue that private education confers zero advantages. There is a saying in medical school “P = MD”—if you can make it through, an “M.D” is an “M.D” whether you got it in the Caribbean or Dublin.
The evolution of medical school tuition costs
We’ve seen quite a few changes in the medical school world over the past year and a half. We’ve seen that New York University’s medical school is waiving tuition for all of its students. Likewise, Columbia University has also has a program that covers all need-based aid. Most recently, Washington University in St. Louis also announced that it will cover the cost of tuition for its entering medical school class.
That’s three private universities using their endowment to eliminate tuition cost out of the picture.
For those of you who aren’t familiar, these three medical schools are highly competitive. I remember that there was a time that WashU gave its first year students a t-shirt with the student’s MCAT score on it. Many aspiring doctors would strongly consider finding a means to fund their tuition at these schools if they were accepted.
Free private education for all?
How would your opinion of private education change if it were all free? This is an interesting thought exercise, as many private schools survive solely on the premise that they offer a higher quality of education. Most non-parochial primary and secondary schools have certain testing requirements for entrance, whereas non-magnet public schools simply require you to live within a certain vicinity.
Residency and fellowship
Doctors have to train beyond medical school in order to enter the profession. It’s pretty clear cut that a top tier residency will likely offer a stronger peer group and potentially a higher quality of training. Many of these training programs are tied public universities (at least one in most states), but a large number are also tied to private universities with affiliated hospitals. Most medical students aren’t really going to care whether they train at a private or public hospital.
One reason for this? Residents are paid during their training, so you might as well go to the best program you can get accepted into as long as it works with the rest of the family.
Interestingly, many dentists I know who enter residency (dentists are not required to train after dental school) still opt for the private route, with the hope that they will get “better” training. Their rationale? Dentists have to pay for their residency.
Professional school, colleges, and primary school
If money weren’t a factor then choice of all other schooling will likely distill down to two factors: (1) quality of education and (2) convenience. Gee, that sounds like the same criteria that most people look at to try to justify the cost of private education. Many of my colleagues consider that paying for a child’s four-year education will only sent them back four years of retirement. We all know that this translates to more than that due to investment growth, but I still see perfectly rational people make choices that perhaps are a little bit irrational. That is the beauty of human nature!
By the way, tuition alone at Harvard for the upcoming school year runs upward of $46,000. Early retirement anyone?
Doctors need to understand their worth
There was a recent news brief stating that the average internist generates about $2.4 million annually for the hospitals that they work for. While it’s no surprise that doctors help others make money, seeing a figure to your worth hammers home how much we sustain the healthcare system, often at our own expense.
This basically means that a Hospitalist making $240,000 a year doing average work for the hospital is working with a 90% overhead! This is not just a matter of robbing Peter to pay Paul—this is robbing Peter, Paul, and their children to pay the king! I certainly wouldn’t want to be running a business with a 90% overhead. Those of you who are hospitalists probably know of the various incentive programs that your hospital offers to its doctors for good work:
- A $10,000 annual bonus for twelve consecutive months of good patient satisfaction scores.
- A $5,000 quarterly bonus for handling more admissions from the ER.
- An invitation-only steak dinner catered by the hospital for a year of prompt charting.
Now this article is not intended to get all doctors to strike, but we do have to sit back and realize that we’re getting moldy carrots for a whole lot of work. In case you were wondering, those fat cats occupying the C-suite are getting steak dinners more than once a year.
How does a Hospitalist bring in $2.4 million to the hospital?
This is more of a thought exercise, but I’ve had colleagues tell me that their RVUs amount to a fraction of this $2.4 million figure. Sometimes, hospitals show doctors their RVUs simply to shame them into working harder—maybe comparing them to each other or showing that a particular doctor isn’t meeting the baseline number of admissions. Not all RVUs are created equal, but that will be a discussion in another article.
In order to follow the dollar signs, you have to look at what can happen with every hospital admission:
Even though the primary doctor only brings in direct revenue from daily exams, labs, and diagnostics, all of the consultants downstream generate even more money for the hospital. Remember that revenue comes both in the form of professional and technical charges. The technical and facilities charges bring in serious amounts of money into the system. Just look at some of the bigger hospitals in metropolitan areas—they are all renovating their facades and public spaces in order to attract more patients. The money is coming in somewhere, and doctors play an integral role in capturing that revenue for the hospital.
The conundrum of the doctor
Unfortunately understanding the money trail isn’t going to get your hospital to pay you more. The issue has to do with numbers. Just as hospitals are trying to supplant M.D.’s with physician extenders who can follow protocols at a lower salary, the more doctors of your “type” there are, the easier it is for the hospital to hire. In the medicine world, internists are a dime a dozen—you can always be replaceable if there is someone out there willing to do your job for less pay. More specialized doctors may have more leverage in the health system, they are still replaceable. I’ve seen highly trained specialists in metropolitan areas become replaced by hospitals when they gripe about work hours or inadequate salaries.
The more work for less pay issue doesn’t sit well with me—we all obviously have different thresholds on our worth, but the lack of uniformity among our profession contributes to our downfall. I’d imagine that starting debt after our training contributes to our willingness to negotiate higher salaries, as does our starting net worth.
Until we find a more unified front to combat the system, I simply continue to tell my trainees to learn as much about the healthcare system as they can if they intend to practice medicine.
What would you suggest doctors should do to qualify our worth?