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Want a 50% pay cut?

A recent opinion piece in USA Today responds to a study from Columbia University “blaming” high physician salaries as a significant contributor to rising healthcare costs, including the predicted doubling of family health insurance costs by 2021. Since physicians earn approximately five times the US median income, and earn more than physicians in six other developed countries that were studied, it must be physicians’ fault. Let’s cut physician earnings by 50%; that will fix it, right?

Well, maybe not. What about the educational debt owed by physicians, which is often around $300,000?  What about the 30%50% of gross revenue spent on office overhead?  What about the 60-hour average physician work week? What about the fact that the primary care physician shortage by 2020 is estimated to be 40,000?(I’m sure decreasing earnings will help that!) Lastly, what about the fact that physician take home pay accounts for approximately 10% of healthcare costs?

As a family physician who practiced for 20 years and was forced to juggle many of the above factors, I’m a little offended that folks think physician salaries are to blame for the economic woes of the healthcare system. What do you think?


One of the newest plans being proposed for Medicare payment involves combining the payments for hospital and physician services into a single amount to be divided between the parties as they see fit. The goal for Medicare is to pay less in total than is currently going to doctors and hospitals separately, by encouraging the two parties to work together on economies. 

It reminds me of a practice in Colonial times, also called bundling, in which two persons would be placed in a bed with a board between them in order to conserve heat during the night. Either form of bundling requires the parties to respect each other’s space while drawing together as closely as possible to achieve maximum efficiency. 

Hospital-employed physicians are effectively bundled already, while independent groups are likely to face this issue in the near future. It is closely connected to the subsidy issue, as the parties must determine how much money each needs to live on. Bundling increases the stakes by bringing multiple specialties into the negotiation. Hospitalists in medical specialties will need to advocate their case effectively against that of procedural specialists who have long been the darlings of hospital administrators because they bring money into the institution. Hospitalists need to generate visible cost savings to avoid being smothered by their bedmates.

ACO fuzzy math?

The details surrounding the proposed rules for creating an accountable care organization (ACO) continue to become more complicated—specifically the cost associated with establishing and sustaining an ACO.  The Centers for Medicare & Medicaid Services (CMS) originally estimated a cost of $1.8 million in its proposed rule for start-up and one year of ongoing operations.  Now, according to the American Hospital Association (AHA) study released in mid-May, the start-up investmentmay not be accurately represented by the number that CMS released.  The study found that the cost associated with the elements necessary to manage the care of a population is much higher.  The study revealed start-upcosts of $5.3 million to $12.0 million based on size of the hospital or health system.  That’s a far cry from $1.8 million.

According to the AHA, CMS falls well short on their estimation.  It doesn’t necessarily surprise me that CMS would underestimate the costs of establishing and running a successful ACO.  After all, they don’t operate a business.  However, these numbers are extremely far apart, and it seems to me that this is something that may reflect how little is truly certain or reliable about the costs associated with ACOs.  To me, it seems prudent to re-evaluate the ACO cost models before putting the regulations in place.  So what do you think? Whose estimation should we trust more? Should we believe the true number is somewhere in the middle? Or do we need to sharpen the pencils again to determine the real costs of launching an ACO?

The candidate’s face on Facebook: Should a hiring decision be based on social media conduct?

Would you hire a physician who posted questionable photos or comments relating to his or her personal activities on a social media site?

With escalating frequency, hiring managers are confronted with information about candidates that pushes them into uncharted waters. Do you know what information you can legally, ethically, and practically consider as part of your hiring decision?

Physicians race to become employed

A Wall Street Journal article reports that more physicians are opting for employment. This we already knew, but just how many physicians are choosing not to hang up their own shingles is a bit surprising. The Medical Group Management Association’s survey found that the number of physician practices that are owned by hospitals has increased to 55%–a 5% increase over 2008. The article suggests that some physicians and hospitals may be gearing up for the emergence of accountable care organizations (ACOs), but the shift worries some who believe that large hospital-owned physician practices will drive up prices if they get too big. Read the full article.

Read every line of a physician-hospital service contract

As more physicians contract or enter employment agreements with hospitals and other healthcare organizations, they should be looking out for contract traps. Contracts can become so wordy and complicated that it can be hard for physicians to tell exactly what they are getting themselves into. According to Justin Nabity, director of the Training to Practice Program at Physician Advisors LLC, a big trap involves the ownership rights to any device a physician might invent while under contract.

“The contract might stipulate who has ownership of that invention, which is a problem. [Physicians] have to understand who has ownership of that, and if the practice has ownership, they might want to wait until after the contract is over before they develop it. That is something to watch out for,” Nabity says.

Another trap physicians might fall into involves restrictive covenants. Restrictive covenants prevent physicians who leave an organization from doing business within a defined geographic area for a specified period of time if the physician chooses to terminate the contract early. This area can be a radius around the organization’s primary service site, specified counties, or specified zip codes. If a physician purchases a home in the hospital’s service area and terminates the contract early, he or she will likely have to sell their home and move to another area.

To learn more about the nuances of physician-hospital contracts, check out “Understanding employment contracts: What docs need to know about restrictive clauses” in the Medical Staff Briefing newsletter.