Obamacare Isn’t Stopping Doctors’ Incomes From Soaring

Emergency Room Physicians Sue State Over Dire Need For Additional Finances
PANORAMA CITY, CA - JANUARY 28: Dr. Jason Greenspan (L) and emergency room nurse Junizar Manansala care for a patient in the ER of Mission Community Hospital where doctors held a press conference outside on a class action lawsuit against the state of California by a coalition of emergency room physicians claiming that without additional funding, the entire emergency healthcare system is on the verge of collapse on January 28, 2009 in Panorama City, California. According to the coalition, the cost of providing emergency room treatment has nearly doubled over the past decade and patient load increased by more than 28 percent while Medi-Cal reimbursements have remained largely unchanged. During that time, 85 California hospitals in California have closed and an additional 55 facilities have shut down their emergency rooms. California now reportedly ranks worst in the nation for access emergency care and last in emergency rooms per capita. California has seven emergency rooms per million people while the national average is 20 emergency rooms per million people. (Photo by David McNew/Getty Images)
Photograph by David McNew — Getty Images

America’s doctors are healthier than ever.

Far from flattening, as some Obamacare experts predicted, or even waxing in low-single digits like salaries for contractors, lending officers, beauticians, and most other workers, pay for doctors is surging.

That’s the conclusion of a comprehensive study just released by Merritt Hawkins, the nation’s leading physician recruiting firm. According to Merritt Hawkins, a division of AMN Healthcare Services (AHS), America’s physicians have gotten a big, big raise, in the past year—just about their fattest raise in recent history.

This is especially relevant now because Hillary Clinton, who in 1993 waged a war on doctor pay, is getting closer to the White House. If she’s elected president in November, it’s possible that Clinton will once again target rich physician comp that as the new statistics show, is only getting richer.

Dermatologists, cardiologists, urologists, among others, are reaping double-digit increases that lift their salaries to the $500,000 a year range, and that’s not including substantial performance and signing bonuses, relocation allowances, and even full payment of their med school loans.

Keep in mind that doctors enjoy unrivaled job security. No physician in America is voluntarily unemployed, and doctors who want to change employers routinely choose from multiple offers. Hence, the idea that doctors are suffering financially from the revolution in health care delivery, or medical insurance reform, as well as new metrics designed to reward quality of care rather than treating large volumes of patients, is a mainly a myth.

Now that bonuses for traders and investment bankers are shrinking, and the layoff axe is falling more and more frequently, being a doctor looks a lot better than working on Wall Street.

The surge in pay exemplifies the crunch in America’s healthcare market. Demand for care is exploding for all the obvious reasons: notably the fast-growing, highly-active population of seniors; the extension of coverage to 20 million more people through ObamaCare’s exchanges and the expansion of Medicaid; and rising need for psychiatric care and chronic disease management.

At the same time, America lacks the doctors to meet the needs of its swelling, rapidly-aging population of patients. A growing list of new providers, including retail clinics run by the likes of CVS Health (CVS), urgent care centers, concierge practices, and Accountable Care Organizations spawned by Obamacare are joining hospitals and such giant providers as Kaiser Permanente in a ferocious bidding contest for the shallow pool of physicians.

“It’s a competitive nightmare,” says Travis Singleton, Merritt Hawkins’ EVP for marketing. “The market is so tight. All these different delivery systems want to hire doctors because it’s the only way they can grow.” In Singleton’s words, “Winter is coming” because the doctor shortage is about to advance from severe to critical.

A system that fuels demand with huge subsidies, yet systematically restricts the supply, is a textbook formula for fast-rising costs. No illustration is more vivid than the problem with doctors’ pay, a category that accounts for 22% of all U.S. healthcare spending.

The Merritt Hawkins survey provides a highly reliable picture because the firm and its affiliates conduct more physician searches than any other group, and the pay numbers aren’t culled from questionnaires as on other surveys. They’re taken from the contracts that its clients offer to recruit physicians, and reliably pay if the offers are accepted. Merritt Hawkins’ client roster covers the medical universe––from Kaiser and CVS to big hospital and urgent care chains.

About 10%-to-15% of the searches seek to place graduates from residency programs, but the vast majority of the offers go to doctors who’ve been practicing for at least a few years. The study is extremely broad, tallying information from 3,342 searches for physicians and advanced care nurses in dozens of practice categories. The numbers represent not total compensation, but salaries only, though the firm also collects separate information on bonuses and other perks. The numbers are extremely current: The data is based on searches conducted for the 12 months ending March 31, 2016.

The jump in salaries is a surprise, since doctor pay has been relatively flat over the past few years, with about half the categories rising modestly, and the other half falling a bit. “This is the first time in at least ten years where we’ve seen doctors universally, across the board, not only getting salary increases, and in most categories, increases in double digits,” says Singleton.

Of the 20 practice areas with highest number of recruiting searches, no fewer than 19 saw increases. (The only exception is emergency medicine, where salaries were flat.) As usual, the most active area was family medicine. On average, family doctors got a $27,000 raise in the past year, from $198,000 to $225,000, for a 13% increase. Doctors in the two other primary care categories, internal medicine and pediatrics, also had great years. Each garnered 15% bumps to $237,000 and $224,000 respectively. It’s well known that primary practitioners are in heavy demand because they’re the gatekeepers to HMOs, ACOs, and all the new quality-based systems for managing large populations.

But specialists are also thriving.

In many cases, they’re getting even bigger increases than their primary care colleagues, on top of already far-higher pay. Notable examples are general surgeons at $378,000 up 12%; dermatologists at $444,000. also up 12%; urologists at $471,000, up 14%; OB/GYNs at $321,000, up 16%; otolaryngologists at $403,000, up 21%; and non-invasive cardiologists at $493,000, which have seen their pay rise more than 30% above what they have been paid on average over the past three years. Orthopedists and invasive cardiologists also got inflation-beating increases of 4% and 5% respectively. On average, both specialties pay well over $500,000 year in salary alone.

They make even more than that. Merritt Hawkins’ numbers exclude bonuses tied to quality of care, as well as tens of thousands of dollars more in relocation and signing bonuses. The performance bonuses are frequently around 25% of salary, or $50,000, for primary care practitioners, and an even higher percentage of base pay for specialists.

The typical defense of doctors’ high pay is that a lot of their gross income goes to covering premiums for malpractice insurance. Not so, says Merritt Hawkins. The survey finds that in 99% of searches, those premiums are paid by the hospital, group practice, or other employer.

A major finding is that today’s medical market is doing just what you’d expect, demanding and rewarding specialists, a phenomenon that mostly goes unheeded by reform advocates. “The focus has been on primary care doctors because they’re the gatekeepers,” says Singleton. “But today’s patient population demand more specialist care than ever.” That’s because the elderly need not just family doctors who monitor whether they take their medication for diabetes, but specialists who care for folks with complex, chronic illnesses, which are the biggest source of expenditures.

They include cancer specialists, pulmonologists treating sufferers from long-term respiratory problems, radiologists who evaluate results from the growing suite of diagnostic tests (“Very little is done without imaging,” says Singleton), and psychiatrists needed to tackle the epidemic in mental illness. In fact, after family doctors, the second highest number of job searches was for psychiatrists, a rise of several place in the rankings over the past few years. All of these specialists saw big pay increases in the survey, reflecting where the market is heading.

The employment setting for doctors has gone through an historic transformation. Ten years ago, the employers who typically hired doctors on salaries were mainly the huge providers such as Kaiser and the Mayo Clinic, or rural hospitals that couldn’t attract candidates any other way. Most doctors effectively “hung out a shingle.” The local hospital would loan them the money to get started, and after they paid it back, the these self-employed practitioners were on their own. Today, over 90% of Merritt Hawkins’ searchers offer salaried positions.

The reason: Once again, the market is so competitive that employers need to lure potential hires with income that’s stable, and effectively guaranteed. The new regime reflects a shift in doctors’ approach to work, with profound effects on productivity. “Doctors are interested in having a balanced lifestyle with time off, vacations, and reliable pay,” says Singleton. “It’s no longer, ‘I own the ice cream store and have to work all the time.'” Doctors who work on salary, he says, are less productive than self-employed doctors are, or used to be, meaning they see fewer patients on average.

As a result, the volume of care doctors provide is actually shrinking as demand surges. Around 26,000 physicians a year are graduating from residency programs, just a few more than in the mid-1990s. Medicare, the main source of support for medical education, has frozen funding since 1997, so that the ranks of graduating doctors remains fairly constant.

As a result, the physician population is aging even faster than their patients, a lot faster, in fact. Fifty-two percent of orthopedists, 54% of cardiologists, 60% of psychiatrists, and two-thirds of oncologists are 55 or older. This will be the first year that more doctors retire than start practicing, just when the trend toward managing chronic illnesses for broad populations––supposedly the solution to rising medical costs––it dominating medical delivery.

The Association of American Medical Colleges projects that by 2025, the U.S. will face a shortage of up to 90,000 doctors, and a dearth of specialists will account for most of the shortage. Merritt Hawkins says the number is far higher. “If we weren’t in this massive transition to value-based medical delivery with all the disruptions detracting attention from the underlying problem, we’d be screaming about the specialist drought,” says Singleton. “This is the worst specialist crunch we’ve ever seen.” And though the focus has been on minting more primary care providers, they’re in short supply as well.

So under the current system, America is in a bind. If a new president wants to save money by slashing what doctors earn, he or she will need to greatly increase the use of price controls in Medicare and Medicaid, and beyond. That’s because the basic economics are pushing medical fees and doctors’ incomes, not down but ever-higher. Price caps mean you’ll wait weeks or months to see a specialist. That’s the forbidding, patient-unfriendly, “healthcare winter” in shadowing America’s future.











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