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.

If the healthcare system doesn’t compensate competent doctors adequately, there might not be anyone left!

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.

You might also like: What is Financial Independence And How Does That Apply To Doctors?

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.

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