In this article, we will explore the latest trends and changes in physician compensation, including how the COVID-19 pandemic impacted compensation, the challenges and opportunities of value-based compensation models, and the integration of telehealth and digital health into physician compensation. So, let’s dive into this complex and dynamic topic and see how it affects the healthcare system.
The Highest-Earning and Lowest-Earning Specialties
The recently published Medscape report highlights an alarming disparity in physician compensation. According to the survey, there is a significant wage disparity among the highest and lowest-earning physician specialties. This discovery highlights the reality that not all physicians are paid equally, and that certain specialties are far more profitable than others. According to the survey, some physicians earn more than 3x as much as peers in other areas.
This disparity not only impacts individual physicians’ quality of life but also affects the medical sector especially recruitment and specialist retention in particular locations.
The highest-earning specialties in 2023:
- Plastic surgery: $619,000
- Orthopedics: $573,000
- Cardiology: $507,000
- Urology: $506,000
- Gastroenterology: $501,000
- Otolaryngology: $485,000
- Radiology: $483,000
- Oncology: $463,000
- Anesthesiology: $448,000
- Dermatology: $443,000
The lowest-earning specialties in 2023:
- Public health and preventive medicine: $249,000
- Pediatrics: $251,000
- Family medicine: $255,000
- Infectious diseases: $262,000
- Diabetes and endocrinology: $267,000
- Internal medicine: $273,000
- Rheumatology: $281,000
- Allergy and immunology: $282,000
- Physical Medicine and Rehabilitation: $306,000
- Psychiatry: $309,000
- Nephrology: $270,000
The income disparity between different medical specialties is a complex issue influenced by multiple factors.
Supply and demand
The number of physicians accessible in specific expertise compared to the demographics’ need for that specialty is one of the most important factors influencing physician salary. If fewer healthcare providers are available or the demand for a specialty is higher, practitioners can usually charge more or negotiate higher rates. On the contrary, in oversupplied specialties, or low-demand areas, physicians may have fewer options when negotiating salary, earning less than their peers in high-demand specialties.
Aside from the demand and supply, reimbursement rates are an important factor in influencing their income. They vary greatly depending on specialty, service type, insurer type, and geographical location.
Specialties that provide more complex, invasive, or procedural services tend to have higher reimbursement rates than those that provide simple, noninvasive, or cognitive services. For example, cardiologists and urologists perform procedures such as angioplasty, stent placement, or prostate surgery, which reimburse at higher rates. In contrast, specialties such as diabetes and endocrinology or infectious diseases, which provide consultation and management services such as diabetes education, medication adjustment, or antibiotic therapy, tend to be lower-reimbursed specialties.
Reimbursement rates vary by payer type, with Medicare and Medicaid typically reimbursing at lower rates than private insurers. Geographic location can also impact reimbursement rates, with physicians in specific regions or states receiving higher or lower rates than their counterparts in other areas.
Where physicians work can have a significant impact on their income. Factors such as overhead costs, productivity expectations, salary negotiations, bonus opportunities, and benefits packages all come into play. Physicians can practice in a variety of contexts, such as hospitals versus offices, academic vs non-academic, employed versus self-employed, and urban versus rural. Academic physicians, for example, may earn less but have more benefits, such as research possibilities or tuition. Conversely, independent physicians may have higher income potential but also face higher overhead costs and less job security.
It’s no secret that the cost of living and market competition can significantly affect how much a physician earns. Providers practicing in higher-cost-of-living regions or states, frequently make more than those who practice in lower-cost-of-living regions. Similarly, states with lower market competition tend to have higher physician income than those with higher competition.
The income gap between specialties is a complex issue that can impact physician satisfaction, recruitment, retention, and diversity in various ways. For example, if physicians perceive their income as unfair or inadequate compared to their peers or to the value they provide, it can lead to dissatisfaction and demotivation. Conversely, if physicians feel that their income is competitive, secure, and reflective of their skills and efforts, it can enhance their sense of achievement and well-being.
It’s worth noting that satisfaction with income can also vary by specialty, depending on the expectations and preferences of individual physicians. For instance, some specialties may value intrinsic rewards such as helping patients, research opportunities, or work-life balance more than extrinsic rewards such as high income or prestige. Therefore, a psychiatrist who prioritizes patient care and relationships may be more satisfied with their income than a plastic surgeon who values status and financial rewards.
The Impact of COVID-19 on Physician Compensation
The COVID-19 pandemic impacted physician compensation as many physicians experienced reduced patient volume, canceled or postponed elective procedures, increased expenses for personal protective equipment (PPE) and infection control measures, decreased reimbursement rates for telehealth visits, and increased risk of exposure and burnout.
Physician compensation was impacted significantly last year by the coronavirus pandemic. Many of those, who had their compensation linked to productivity took a financial hit from the pandemic, with declines in patient office visits and other disruptions.
According to the AMGA survey, which is based on data collected from 398 medical groups representing about 190,000 clinicians:
- Overall physician compensation increased by 0.12% in 2020, down significantly from the 3.79% increase AMGA reported for 2019.
- Overall physician productivity decreased by 10.17% in 2020, down dramatically from the 0.56% increase reported for 2019.
- In primary care, in 2020 median compensation for all specialties increased by 0.40% and median productivity fell by 10.63%. In 2019, median compensation increased by 4.46% and median productivity increased by 0.44%.
- In medical specialties, 2020 median compensation for all specialties increased by 0.39% and median productivity decreased by 10.81%. In 2019, median compensation increased by 3.52% and median productivity increased by 0.9%.
- In surgical specialties, 2020 median compensation decreased by 0.84%.
- Primary care nurse practitioner compensation increased by 1.29%.
- Primary care physician assistant compensation decreased by 1.85%.
- General pediatrics and adolescent medicine posted the lowest 2020 median specialty compensation at $257,432.
- Of the 170 medical groups that indicated how the base salary for physicians is determined, 90% reported that market salary data is the primary determinant.
Though the survey, found very modest increases in compensation, there were significant decreases in productivity, which can be directly tied to the pandemic. The data reveals the devastating economic impact of COVID-19 on healthcare provider organizations and indicates that they may need to rethink their compensation models in order to remain resilient in the face of future disruptions.
The COVID-19 pandemic also had some positive effects on physician compensation in 2023 and beyond, as many physicians experienced increased demand for certain specialties, new models of care delivery, innovation and technology adoption, and resilience and collaboration.
Navigating the Challenges of Physician Compensation
The COVID-19 pandemic has brought significant challenges for the healthcare industry, including the need to reassess how physicians are compensated. Traditional compensation models that prioritize volume-based incentives can have negative consequences, including the overutilization of services and low-quality care. The pandemic has underscored the importance of value-based compensation models that prioritize high-quality care and outcomes.
Value-based pay schemes have the potential to improve care quality and lower healthcare costs by motivating clinicians to focus on satisfied patients and positive health outcomes.
According to a study by RAND Corporation, most physicians employed in group practices owned by health systems are paid primarily based on the volume of care they provide. However, some health systems have started to adopt more value-based compensation models that include financial incentives for quality and cost performance.
The COVID-19 pandemic has significantly accelerated the adoption and use of telehealth and digital health services by physicians and patients. While telehealth and digital health have offered a convenient and safe alternative to in-person care, they have also presented some challenges and opportunities for physician compensation. According to a survey by Merritt Hawkins, most physicians did not receive extra compensation for telehealth services in 2020.
However, payers and health systems are beginning to recognize the value and potential of telehealth and digital health services and are adjusting compensation policies accordingly. Medicare, for example, expanded its coverage and payment for telehealth services during the pandemic and has made some of these changes permanent. As such, incorporating telehealth and digital health into physician compensation is likely to become an increasingly important consideration for health systems and payers in the future.
The Best and the Worst States to Work as a Physician
Physician income tends to be higher in states located in the South and Midwest regions, while lower in states located in the Northeast and West regions. This can be due to various factors such as cost of living, tax rates, malpractice climate, regulatory environment, health system performance, and physician workforce supply and demand. The states with higher physician income have lower population density and lower physician-to-population ratio, indicating less competition and higher demand for physicians, which allows them to charge higher fees or negotiate better contracts with payers. However, these states tend to have a lower-quality public hospital system, which may impact the quality and access to care for patients and populations.
States with the highest physician income:
- Wisconsin: $397,000
- Indiana: $372,000
- Georgia: $363,000
- Connecticut: $362,000
- Missouri: $361,000
- New Jersey: $360,000
- South Carolina: $360,000
- Florida: $359,000
- California: $358,000
- Michigan: $356,000
States with the lowest physician income:
- Maryland: $306,000
- Colorado: $327,000
- Virginia: $330,000
- Massachusetts: $331,000
- Arizona: $334,000
- Washington: $338,000
- Tennesse: $340,000
- Pennsylvania: $344,000
- Alabama: $348,000
- New York: $348,000
The landscape of physician compensation is constantly evolving, and it is influenced by various factors. One of the most significant impacts on physician compensation was caused by the COVID-19 pandemic, which led to reduced patient volumes, canceled or postponed elective procedures, increased expenses for personal protective equipment and infection control measures, decreased reimbursement rates for telehealth visits, and increased risk of exposure and burnout for many physicians.
However, the recovery of compensation in 2023 has been promising, driven by increased demand for certain specialties, new models of care delivery, innovation and technology adoption, and resilience and collaboration among physicians and health systems.
Physician compensation is an important part of the healthcare industry that can affect patient care quality and accessibility. It is critical for physicians to stay current on the newest trends and factors influencing their income. So, that they could make informed decisions that are consistent with their aims and values.