It's not uncommon for physicians to wonder why some colleagues or physician friends seem to have so much more money. Although some doctors may just be more flamboyant spenders, others are probably earning a higher income. Still, as one physician commented, "I look around at what some of my colleagues have, and I'm thinking, 'What did I do wrong?'" There are large differences in wealth and income among physicians, even those within the same specialty. Although the average internist income is $243,000, according to the 2019 Medscape Physician Compensation Report, the range spans about $177,000 to $309,000 or more. For instance, while 39% of family physicians had a net worth of less than $500,000, 16% of them had a net worth of $2 million or more in the 2019 Medscape Physician Wealth and Debt Report. Age and gender differences can explain part of this wealth gap, and spending habits play a role, too, but there are other factors as well. These 10 reasons may help explain why some doctors earn more than others. 1. Your Reputation or Status Attracts Patients, Donors, or Investors Employed doctors can still earn multimillion-dollar salaries, but these riches are only doled out to superstar clinicians—the "rainmakers"—who can bring wealth to the hospitals and health systems where they work. These doctors are expected to burnish the organization's reputation and bring a whole new stream of patients with them, says Travis Singleton, a senior vice president at Merritt Hawkins, a healthcare recruiter. "The rainmakers are going to be treated differently from the average employed physician," he says. "They can get very generous compensation packages, but they are expected to work very hard." Of the top 25 highest-paid physicians at nonprofit organizations, 15 were not the CEOs of their organizations, according to a 2015 analysis of federal income tax data by Modern Healthcare. An orthopedic surgeon in Ohio, for example, earned $2.8 million, whereas the system's CEO made $921,205, the magazine reported. In total, 496 physicians at these organizations earned more than $1 million a year. The rainmakers are concentrated in a few high-earning specialties, such as orthopedics, neurosurgery, invasive cardiology, ophthalmology, radiology, oncology, and dermatology, Singleton says. In 2017, for example, 15 doctors at Rutgers University in New Jersey earned more than $1 million, with the highest paid doctor, a neurosurgeon, earning $2.9 million. Several rungs down the payment ladder, young physicians who show potential for bringing in more patients can win generous signing bonuses. The average 2017 signing bonus was almost $30,000, an all-time high, whereas the highest was $200,000, according to the Medicus Firm, a healthcare recruiter. However, many employed doctors who bring definite value to their organization aren't rewarded with more pay, says urologist Andrew J. Portis, MD, founder of the Kidney Stone Institute at HealthEast Care System in St Paul, Minnesota. "I'm bringing in patients who wouldn't be here otherwise," Portis says. "I enlarge the pie for everybody." But he doesn't get extra payment for the work, he says. This does not bother him, because he gets to do what he likes. "I enjoy my work," he says. In terms of nonfinancial boosts, Portis says he may get better access to operating rooms and funding for new projects. "I'm supported, instead of having to fight for things," he says. 2. You Have Taken a Job in Administration Administrative jobs have become more lucrative for physicians, and now, when they go into the C-suite, they make more money than they did in practice. The wage gap at hospitals between management and physicians has grown in the past decade, according to a 2018 study. On average, orthopedic surgeons now earn one fifth and pediatricians one twelfth of what hospital CEOs earn. Much of the income for administrators comes in the form of bonuses. At Bronx-Lebanon Hospital in New York in 2012, for example, the chief of obstetrics and gynecology was paid a salary of $283,427 and a bonus of $999,500, whereas the chairman of emergency medicine got a salary of $520,795 in salary plus an $800,000 bonus, according to tax filings reported by the New York Post. In Minneapolis, however, doctors still don't see a pay boost until they reach the very highest administrative positions, according to Joel Greenwald, MD, a wealth management advisor for doctors. When doctors enter administration, "the organization may agree to keep them whole, so that they will never earn less than their clinical income, but they will not earn more," he says. Portis is still mostly involved in clinical work. His contract stipulates that 20% of his time is spent on administrative duties at the Kidney Stone Institute, and his continuing clinical duties require him to work a total of 60 hours a week. 3. You Have Taken on More Patients Simply treating more patients remains the primary factor in higher income for most physicians. In a study of family physicians, the number of patients seen was the primary factor in income differences. The mean number of patients per week seen by high earners was 122, whereas low earners saw 84. Seeing a lot of patients, however, does not necessarily mean working longer hours, says Dike Drummond, MD, who coaches physicians on attaining professional satisfaction. Some doctors simply have a faster pace, he says. Doctors who work at a slower rate will still need to put in long hours—60-80 hours a week—to see more patients, but they won't necessarily be burned out, says Drummond, who is an expert on physician burnout. "Doctors who love their work can work their butts off without getting burned out," he says. Portis says that this is true for him. "I am comfortable working harder and being more productive because I love what I do," he says. Most physicians work longer than the standard 40-hour workweek, according to a 2018 report by the US Bureau of Labor Statistics, based on information from 13,575 physicians. The survey showed that 36% worked 40-50 hours a week, 26% worked 50-60 hours a week, and almost 25% worked more than 60 hours a week. Of the latter group, 5% worked 70-80 hours a week, and another 5% exceeded 80 hours—the mandated limit for resident physicians. Singleton thinks more physicians would be happy to work longer hours if it meant not having to do the paperwork that has deluged modern practices. This is why some hospitals hire scribes to take care of physicians' chart entry, he says. The kinds of patients whom physicians treat also affects their income. For example, those who treat a high volume of Medicaid patients have lower incomes. In 2016, Medicaid paid 72% of what Medicare paid, according to a 2019 report on the Health Affairs blog. Will seeing more patients become unnecessary under value-based payments, which reward physicians for quality and outcomes? It's too early to tell. Value-based incentives are more common for salaried physicians, but these payments still only make up 8% of total compensation, according to a 2018 report by Merritt Hawkins. It's also too early to tell whether accountable care organizations (ACOs)—value-based arrangements available to self-employed physicians—will substantially boost their income. The Medscape Physician Compensation Report 2019 reported that 28% of physicians were in ACOs. Most ACOs have been losing money, but their track records have been improving. About 34% of ACOs in the Medicare Shared Savings Program ACOs earned shared savings payments, up from 31% in 2016, according to a 2017 report. 4. You Make Money From Your Ideas Entrepreneurialism—coming up with innovations that make a lot of money—is an obvious way to earn more than your colleagues. On the Forbes list of billionaires, the richest individual physician, worth $8 billion, is Patrick Soon-Shiong, MD, inventor of a blockbuster cancer drug and founder of two pharmaceutical companies. The net worth of the family of Thomas Frist, Jr, MD, cofounder of Hospital Corporation of America, is $12.5 billion. Gary Michelson, MD, with a net worth of $1.7 billion, holds patents for more than 250 orthopedic devices and procedures. And James Leininger, MD, founder of a medical device company, is worth $1.4 billion, according to Forbes. Going a couple of rungs down the wealth ladder, physicians worth $10 million or more are often plastic surgeons for celebrities, sports physicians for pro athletes, and TV personalities. Among TV personalities, Drew Pinsky, MD, is worth $20 million and Mehmet Oz, MD, is worth $14 million. Among plastic surgeons, Garth Fisher, MD, and Robert Rey are worth $15 million, and Paul Nassif, $14 million. James Andrews, orthopedic surgeon to athletes, is worth $10 million to $100 million, according to a 2018 report. On the next rung down, many physicians are worth several million dollars through such ventures as ambulatory surgery centers (ASCs), small for-profit hospitals, and inventions. Among orthopedic surgeons, who quite often own ASCs or invent medical devices, 18% are worth more than $5 million, according to the 2019 Medscape Physician Wealth and Debt Report. With the trend toward physician employment, the amount of entrepreneurialism may have declined. "Employment tends to wring out entrepreneurialism," Singleton says. "Employed physicians tend to be attracted by the predictable hours and don't expect to make a lot more money." In the Minneapolis area, where most physicians work for large health systems and groups, "individual initiative doesn't get you much money," says Greenwald, the wealth management advisor. Initiative is recognized in bonus payments for employed doctors, but "it's just one of several factors that go into calculating the bonus." Singleton says entrepreneurialism is also blunted by tighter government regulations on physician-owned ventures, such as testing facilities, hospitals, and ASCs. For example, tightened certificate-of-need laws have slowed down the growth of ASCs, he says. 5. You Have Joined a Large Practice Physicians in large practices tend to earn more money than those in small practices, mainly owing to economies of scale. However, hospitals and health systems, where there are opportunities for even greater economies of scale, pay physicians less than they could earn at large practices. Employed physicians have less incentive to work harder. Being in a larger practice was the third strongest predictor of income, according to the aforementioned study of family physicians. Researchers in that study also linked larger practice size to the next strongest predictors: taking negotiations with payers seriously, participating in improvement initiatives, and performing billing and collections in house. Physicians in single-specialty groups have a particular advantage, according to the 2014 Medscape physician compensation survey, the last time Medscape reported this information. These physicians had a higher average income ($273,000) than those in healthcare organizations ($267,000), hospitals ($262,000), and multispecialty groups ($260,000). And all of these venues provide higher income than solo practices ($222,000). Why do single-specialty practices pay better? A 2016 study looking at primary care group practices found that they "are better positioned than hospital-employed and multispecialty groups to reduce costs because they do not have conflicting incentives to fill hospital beds and keep specialist incomes high." Singleton adds that hospitals are less competitive because they often provide more money-losing Medicaid services and free care. But Drummond says not all hospital salaries are the same. They reflect wide variations in organizational efficiency, with overheads ranging from 65% to 80% of total income, he says. "When you're looking for a job opportunity, you should ask about the percentage of income going to overhead, because it could affect your salary," he says. 6. You Steer Clear of Lower-Paying Venues The lowest-earning work venues for physicians are academic institutions and community health centers (CHCs), which include Federally Qualified Health Centers and rural health centers serving low-income populations. Whereas physicians in academic, research, military, and government organizations earned $198,000, those in outpatient clinics, including CHCs, earned $189,000, according to the 2014 Medscape compensation survey, the last year that Medscape reported that information. Both sets of earnings are tens of thousands of dollars less than those already mentioned for single-specialty group practices and even solo practices. The low pay in academic institutions is due to higher numbers of nonpaying and Medicaid patients and a dependence on fluctuating research support. "Academic medical centers in particular don't make as much money in clinical care," Singleton says. Still, Greenberg says academic medicine continues to be attractive to many physicians. "It pays less, but the pace can be less hectic than in private practice, and it's more fulfilling if you love to teach or do research," he says. One of his clients, an anesthesiologist, felt very overworked practicing in a small town for 3 years, so she switched to academia. "She took a pay cut of more than 30%, but she is much happier," he says. CHCs, on the other hand, don't seem to have that kind of draw. Young physicians work there to help pay off their debts and leave when they've completed their obligations, according to an article by Kisha Davis, MD, a family physician who worked in a CHC for 4 years after training. Davis wrote that she loved the work but left her CHC for a stint in President Obama's White House, and she never returned. Doctors in CHCs often have excessive workloads, and this resulted in burnout for some of her colleagues, though not for her, she wrote. "Although I don't miss the headaches, I do miss serving that population," she added. 7. You Find New Practice Niches Singleton says that in recent years, physicians have been breaking out of traditional practices and creating niches that offer more focused services. In some cases, they are making more money than before, though their main aim is finding work they like to do, he says. Singleton calls these physicians the new entrepreneurs. Although they don't make the kind of money that an inventor of a new device gets, they're still thinking outside of the box. For example, a niche practice might treat a certain kind of diabetes, offer diet and nutrition counseling, or provide executive wellness services, he says. One new and promising area is offering convenience, such as starting an urgent care center or a telemedicine company, he says. Singleton knows a family physician who spends all of his time providing telehealth for all of the islands in Hawaii on a cash-only basis. More opportunities are arising. When Massachusetts legalized medical marijuana in 2012, a variety of psychiatrists, anesthesiologists, obstetrician-gynecologists, internists, and pain specialists became medical marijuana specialists, according to a news report by the Boston Globe. Since then, many more states have made medical marijuana legal, and opportunities have expanded. The American Medical Marijuana Physicians Association now lists more than 1000 physician members. However, allowing recreational marijuana, as such states as Colorado and California have done recently, may diminish demand for clinical marijuana. Probably the biggest niche for doctors is concierge or cash-only practices, where physicians are available to patients around the clock for a monthly fee. In 2018, 2% of physicians were in concierge practices, 5% in cash-only practices, and 13% in direct primary care, according to the Medscape compensation report. However, some physicians in this model don't make a lot of money. For example, Eric Kenworthy, MD, saw earnings from his solo internal medicine practice in Brooklyn, New York, plummet in the early 2000s, according to a 2015 interview in New York Magazine. In 2010, Kenworthy switched to a hybrid concierge model, in which only some of his patients paid the concierge fees. By 2014, one quarter of his patients and two thirds of his revenues were in concierge. His net income was at $190,000, still far short of his best year but above what he earned in his worst year, he told the magazine. 8. You Have Moved to a New Locale How much you earn depends a great deal on where you practice. On the basis of average pay by locality, a neurosurgeon could earn 11% more by moving from Maryland to South Carolina, and an anesthesiologist could earn fully 61% more by moving from Massachusetts to Wisconsin, according to a 2015 analysis in the Atlantic. In general, income is higher in less populated areas, where there are relative shortages of physicians. In the 2019 Medscape compensation report, the top-earning states for physicians were Oklahoma, Alabama, Nevada, Arkansas, and Florida. Physicians tend to flock to the big cities where they did their training, avoiding smaller cities that can offer higher incomes, lower expenses, and a pleasant lifestyle. Taking home life as well as work life into account, Medscape selected the following communities as the best places to practice in 2018: Grand Forks, North Dakota; Kailua, Hawaii; Lincoln, Nebraska; Shelburne, Vermont; and Iowa City, Iowa. The dynamics of supply and demand affect the salaries of employed physicians, but self-employed practices deal with reimbursements, and reimbursements actually favor urban areas. Medicare reimbursements are adjusted upward in urban areas to account for higher practice expenses. In 2003, Iowa physician Michael Kitchell, MD, told the US Senate Finance Committee that the Medicare geographic adjustment for his state set reimbursements unfairly low compared with some large cities. For example, he noted that reimbursement for the procedure code 99213 varied by as much as 30%—with San Francisco and New York City at the high end and Iowa and rural Missouri at the low end, according to his presentation to the committee. The spread can be even wider for other codes, he added. Today, this system remains basically the same, with more than 100 geographic payment areas across the country. Within each area, physician pay tends to be quite uniform, except for lower pay in such venues as CHCs, Greenwald says. He says salary levels in the Minneapolis area, where most doctors are employed by systems, tend to be uniform, keeping most physicians from constantly moving among employers. But Singleton says that this is not the case in other areas, such as Boston, where reimbursements can vary even between neighborhoods. He also notes that doctors charge markedly higher fees in a wealthy suburb, such as Westchester County, New York, than they do just a few miles away in the Bronx. 9. Your Practice Offers More Ancillary Services Offering ancillary services used to be a key driver of physician income, but opportunities have declined. In the survey of family physicians, the second strongest predictor of income was offering a full scope of services, including making rounds on the hospital and providing obstetric services. Similarly, physicians in family medicine and some other specialties offer such ancillaries as simple surgery, EKGs, and stress tests, Singleton says. "These procedures are almost 10 times more lucrative than office visits," he says, "but you don't see much of that anymore." In 2015, only a minority of physicians was still expanding their ancillary services, according to the Medscape survey on physician compensation for that year, the last year Medscape measured this category. Specialists were somewhat more likely to offer new services, according to that survey. Whereas about 23% of family physicians, 20% of internists, and 18% of pediatricians offered new services in the past 3 years, 27%-31% of orthopedic surgeons, anesthesiologists, gastroenterologists, ophthalmologists, and urologists did so. What has changed? For one thing, states have been tightening existing regulations on the use of ancillary services. In 2013, for example, Pennsylvania imposed prohibitions on physician financial arrangements with labs, according to a 2014 report by a Pennsylvania law firm. Also, with more doctors employed at hospitals, hospitals typically don't provide these physicians with payments for ancillary services. "Hospitals are maintaining control of ancillary services performed by employed physicians," stated a 2011 issue brief by the Center for Studying Health System Change. In any case, making money doesn't seem to be the chief reason why physicians are adding ancillary services. The main reason stems from a belief that they are effective, according to a 2015 working paper published by National Bureau of Economic Research. 10. You Negotiated a Better Salary Deal Male physicians earn more than their female counterparts—even after adjustment for such factors as productivity, part-time status, and years of experience, according to a 2016 study in JAMA Internal Medicine. The study, which was limited to academic physicians because payment information for them is easier to obtain, found a payment gap of $20,000 between the sexes even after the adjustments were made. What causes this pay gap? In an interview with Time magazine, the lead author of the study surmised that women tend to negotiate payment less aggressively than men and are less likely to pressure employers into giving them a raise by soliciting outside job offers. A key problem is that women don't ask for what they want, according to Linda Babcock, an economics professor at Carnegie Mellon University in Pittsburgh who has coauthored several books on negotiation and the gender divide. Men initiate negotiations about four times more often than women and tend to describe the negotiating process as "winning a ball game" or "a wrestling match," whereas women tend to equate it with "going to the dentist," she wrote. Another, more obvious factor may account for the pay gap: Some employers have a bias against women that may not even be conscious, the lead author of the JAMA Internal Medicine study said. For example, one study found that when the authors of a scientific paper were identified as women, people rated the overall quality lower, he wrote. Conclusions Successful entrepreneurs, superstar clinicians, and physician-CEOs have always been fairly unattainable positions for most doctors, and these levels may be even harder to attain as more physicians move toward employment and accept standard salaries. However, there are still ways physicians can make a somewhat better living, such as seeing more patients, joining a single-specialty group practice, or moving to a small city. Physicians can also avoid making even less money by dropping lower-paying venues, limiting the number of Medicaid patients they see, or opening a concierge practice. Each of these choices involves trade-offs, though. Some physicians may decide that research and teaching are worth the lower pay of academia, or that they might prefer clinical work rather than become a higher-earning administrator in their organization. Finding the best job might mean following your own compass rather than the money trail. "The main payback is that I enjoy my work," Portis says of his job. Source
