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Policy Brief |
1 Diagnostic Radiology, Yale University, 333 Cedar St., New Haven, CT 06510-3206.
Received August 3, 2007; revised August 3, 2007;
Address correspondence to H. P. Forman, Associate Editor, Health Policy
(HealthPolicy{at}arrs.org).
Keywords: compensation • managed care • salaries
In a recent article in the Sunday New York Times [1], Alex Berenson returned to an old, but neverquite-dead issue: whether physicians' salaries are (partly) responsible for the troubles in our health care system. In his piece, titled "Sending Back the Doctor's Bill," he interviewed various economists who concluded that "the relatively high salaries paid to American doctors" were, indeed, part of the problem. The piece does go on to mention that the issue is actually "the way [my emphasis] they are compensated."
During the late 1980s, physician salaries were frequently pointed to as part of the problem. Then managed care came along as a new target of populist venom followed quickly by the pharmaceutical companies and their profitability. Now, during a bear market for the drug companies, fingers are once again pointing at physicians and their salaries.
In the Berenson piece, the high salaries of radiologists are mentioned explicitly: "Doctors in the United States earn two to three times as much as they do in other industrialized countries. American doctors make an average of $200,000 to $300,000 a year....But in specialties like radiology, physicians can take home $400,000 or more." Should we be concerned? Should all physicians? Is there truth to the argument that physicians may be part of the problem rather than the solution?
Are Physicians' Salaries Part of the Problem?
Physician salaries represent less than 10% of total national health expenditures. Even if you eliminated physician salaries completely from our health care equation, the total spent per capita would still exceed every other country in the world. The real issue, as alluded to in the Berenson piece, is the incentives that generate the physician's salary. Physicians control the majority of the health care pie in this country. We write prescriptions for drugs, authorize admission to (and discharge from) health facilities, directly interact with patients and their care, and even make recommendations about nonprescription and nonmedical forms of care. More to the point, however, we as physicians generally make more money from doing more. Doing more is not intrinsically bad, but it does become an issue when studies show that doing more does not always equate to improved patient outcomes. Radiologists generally benefit from the "doing more" pattern of care. The additional examinations ordered in an outpatient office, an emergency department visit, or as part of an inpatient stay, all contribute to our overall work and our gross income.
Are Physicians' Salaries Too High?
Each person can look out on the landscape and find jobs that are underpaid or overpaid relative to our own personal values, judgments, and ideals. Looking at the business world, for example, the chief executives of America's 500 biggest companies made a collective $7.5 billion last year, according to Forbes magazine [2]. That is an average $15.2 million apiece [2]. It is important to note that much of the pay was due to exercised stock options, however, this level of income could certainly raise questions about compensation and value.
While it is scientifically difficult to assess whether a particular job is over- or underpaid, there are two data points and considerations we can use to determine whether a particular vocation is (relatively) undercompensated: A position may be considered undercompensated if you cannot attract qualified candidates for the job. This data point alone indicates that physicians are, at a minimum, fairly compensated because, all things being equal, there is no shortage of qualified applicants to medical schools. It is impossible to truly quantify what is meant by qualified but as an active member of a medical school's admissions committee, I am fairly certain that the quality of our applicants has been increasing in the last few years. A position also may be considered undercompensated if there is a demonstrable trend toward lower quality among the current workforce. Here, too, I am challenged to find such evidence among physicians.
Ultimately, this suggests that, presently, physicians are well compensated. This does not imply that a reduction in earning potential or, worse still, greater uncertainty about future earnings, would not adversely impact the workforce and potentially drive away some of our most qualified medical school applicants.
Are Radiologists' Salaries Too High?
Unlike other specialists and primary care providers, we perform a service that is requested. Simple supply and demand economics would dictate a higher salary for radiologists since the number of radiologists in practice has not kept pace with the increased demand for our services. In 2001, 4,176 diagnostic and 274 therapeutic radiology procedures were performed per 1,000 Medicare non–managed care enrollees [3]. The study, which appeared in Radiology in 2005 found that "on average, between 1998 and 2001, utilization per Medicare enrollee increased 16% per year for MRI and 7%–15% per year for CT, ultrasound, interventional radiology, and nuclear medicine, while that for radiography increased 1% per year." [3] At the same time, the number of those certified by the American Board of Radiology remains somewhat steady. In 1999, the American Board of Radiology issued 1,218 new general certificates; in 2002, 1,114 certificates were issued and in 2005, 1,335 new certificates were issued [4].
Our salaries are assumedly set by the market with fees negotiated with and set by commercial and government payers. However, the assumption that our fees are market-based rests on the premise of open competition. Open competition requires relatively low barriers to entry, among other things. In fact, our market is not quite so "open," and one could argue that the supply of radiologists is held back by nonmarket forces, including the Medicare and Accreditation Council on Graduate Medical Education (ACGME) limits on training positions offered.
The disproportionate number of medical students eager to enter our profession compared with the number of training positions available would, indeed, suggest that salaries are higher than a competitive market would offer. Do we benefit from this? Assuredly! We are attracting the brightest and most ambitious of our graduating medical students in this country. Ultimately, this comes at the expense of other equally important medical fields. Put a different way, the relative attractiveness of radiology as a profession must be due, in part, to the salaries that we are paid. If radiology, in and of itself, is a very fulfilling specialty, then the salaries would be expected to be lower than average. If, on the other hand, the field had serious lifestyle obstacles, the salary might reasonably be expected to be higher than average. If the latter is the case, then one would not expect such a huge excess of medical student interest relative to training positions.
Views on Physician Compensation and Incentives
How might one reconfigure physician compensation to combat this problem? There are currently two not entirely exclusive modes of physician compensation: fee-for-service arrangements, as the majority of physician compensation operates, and salary arrangements, as is typical for government-run facilities and staffmodel HMOs. In actuality, the distinction becomes blurry. Academic facilities generally operate on a fee-for-service basis, but may have the majority of physician compensation set as salary. Even salaried physicians in government institutions may be financially encouraged to maximize output/throughput (i.e., do more).
In the original construction of "managed care," the notion was that capitation and incentives for an effective gatekeeper would effectively reduce excess utilization of lower-value services, including imaging. There are areas of our practice where excess utilization occurs. The American College of Radiology, in particular, has been aggressive in its efforts to develop and put forward appropriateness criteria and other guidance to encourage more efficient utilization of our services. One must ask, then, whether there are different compensation models that could yield greater compliance with evidence-based guidelines. Will gain-sharing arrangements lead to reductions in radiology service provision? Will incorporation of physician fees into a Diagnosis Related Group (DRG) payment for an inpatient stay result in altered incentives? Can intelligent computerized order entry result in such changes? Ultimately, it would benefit each and every radiologist to think about these issues.
The current scheme (no matter how passive we may be in its performance) does not yield optimal health outcomes: it gets exactly the behavior you would expect—more work, more money; but NOT necessarily more value to the patient. So to answer the opening query: Yes, we should worry. We should worry because we are coming under increasing scrutiny; we are relatively passive in our participation in the health care system, and we have done little to demonstrate our value to the overall health care system. Our level of compensation is contributing to an already brewing storm that currently manifests itself in turf battles. The relatively high compensation for many areas of our practice makes these areas attractive targets for clinicians looking to enhance their practice revenue. The relative shortage of radiologists compared with the plethora of other specialties makes turf battles VERY challenging.
The good news is that we have time to act instead of react. A bitterly partisan Congress is unlikely to make dramatic changes anytime soon. This affords us, as a specialty, the opportunity for self-reflection to consider the strategic opportunity that lies ahead. The present favorable economic environment, relative to our peers, will not last forever. The Deficit Reduction Act of 2005, which adversely impacted our practices without warning should be seen as the first salvo in a potentially long war.
This analysis may not make the reader happy. In no way, however, should it mean that I think we (as physicians or radiologists) do not deserve to be paid as much as the market will bear. We work hard. We provide vital services, and just as importantly, we could make more money in other disciplines. However, in the high visibility that physician practice brings, we also need to consider our overall position in a broken health care "system." If we are to remain an important contributor to society, we need to be part of the solution.
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