2006 June 25 Sunday
Physician Incomes Declining While People Use Them More

Physician incomes are falling.

WASHINGTON, DC—In sharp contrast to other professionals, physicians' net income from the practice of medicine declined about 7 percent between 1995 and 2003 after adjusting for inflation, according to a national study released today by the Center for Studying Health System Change (HSC).

"The downward trend in real incomes since the mid-1990s likely is an important driver of growing physician unwillingness to provide such pro bono work as charity care and serving on hospital committees," said Paul B. Ginsburg, Ph.D., coauthor of the study and president of HSC, a nonpartisan policy research organization funded principally by The Robert Wood Johnson Foundation.

The decline in physicians' real income stands in sharp contrast to the wage trends for other professionals who saw about a 7 percent increase between 1995 and 2003 after adjusting for inflation, the study found.

Among different types of physicians, primary care physicians fared the worst with a 10.2 percent decline in real income between 1995 and 2003, while surgeons' real income declined by 8.2 percent. But medical specialists' real income essentially remained unchanged.

Actually, the specialists saw a decline of 2.1% according the full report linked below.

Despite the downward trend in real incomes, medicine overall remains one of the most well-paid professions in the United States: At least half of all patient care physicians earned more than $170,000 in 2003, and physician average net income was about $203,000, the study found. Although surgical specialists have lost ground to inflation since the mid-1990s, they remain the highest earning of all physicians, with average incomes of $272,000 in 2003—29 percent higher than medical specialists and 86 percent higher than primary care physicians.

Physicians work long hours. But how many weeks do they take off per year? Or how many hours do they work totally per year? I want to calculate their hourly income. Hard to do without that information.

  • The average number of hours worked by physicians for all medically related activities fell slightly from 55.5 hours a week in 1995 to 53.2 hours in 2003. Medically related activities are defined as time spent on administrative tasks, professional activities and direct patient care but not time spent on call when not actually caring for patients.
  • Physicians spent more time on direct patient care, which is defined as face-to-face contact with patients, patient record keeping and office work, travel time connected with seeing patients, and communication with other physicians, hospitals, pharmacies and others on a patient's behalf. With patient care hours increasing while total medically related work hours fell, physicians are now spending a significantly larger proportion of their work time caring for patients than they did in the mid-1990s-86 percent vs. 81 percent.
  • Flat or declining fees from both public and private payers appear to be a factor underlying declining or stagnating real incomes for physicians. Medicare payment rate increases for physician services amounted to 13 percent from 1995 to 2003, according to the Medicare Payment Advisory Commission (MedPAC), while inflation increased 21 percent. Private payment rates have lagged even more. In 1995, commercial fees were 1.43 times Medicare fees on average; by 2003 this fee ratio had fallen to 1.23, according to MedPAC.
  • The volume of physician services increased substantially between 1999 and 2003, largely because of growth in the number of tests and procedures. Among Medicare beneficiaries, minor procedures grew 6 percent a year on average between 1999 and 2003, according to MedPAC, while office visits grew 4 percent and major procedures 3 percent.

This result is inconvenient for socialists. Doctors aren't the big beneficiaries of increases in medical spending.

From the body of the report (which, btw, has some neat graphs and tables worth looking at):

Flat or declining fees from both public and private payers appear to be a major factor underlying declining or stagnating real incomes for physicians. Medicare payment rate increases for physician services amounted to 13 percent from 1995 to 2003,4 lagging substantially behind inflation, which totaled 21 percent during this eight-year period.

While Medicare fees have declined in real terms since the mid-1990s, the trend for private insurer payments to physicians has lagged even more: In 1995, commercial fees were 1.43 times Medicare fees on average; by 2003 this fee ratio had fallen to 1.23.5 And Medicaid fees have always been much lower than Medicare fees, so despite the fact that Medicaid payment rates rose relative to Medicare and grew faster than inflation from 1998 to 2003, increased Medicaid fees would not have been enough to produce substantial income gains for most physicians.6 One likely exception would be primary care physicians with substantial Medicaid patient panels, especially those practicing in states—such as New York and South Carolina—that started with low Medicaid fee levels and increased them the most aggressively.

In the report's figure 1 they show "Professional/Technical Workers" gaining 6.9% in income from 1995 to 2003. So the decline in income for physicians is even more dramatic when compared to incomes of other knowledge workers.

Total medical spending in inflation-adjusted dollars is growing quite rapidly. But that money is not going toward higher physician incomes. At the same time, US federal, state, and local governments are shifting the costs of the uninsured onto the backs of the insured. Physicians are less inclined to treat people for free because they have to do more paying treatments to make up for lower payments per treatment.

The medically uninsured portion of the population is rising. The biggest cause of this trend is the importation of large numbers of low skilled Hispanics. Hispanics are medically uninsured at two and a half times the rate of whites. You pay for this in two ways: more in taxes to fund government health care programs and more for medical insuranance to pay for the cost-shifiting that governments force on hospitals.

The New York Times reports that many doctors are trying to make their services more customer friendly - it is a about time!

Professional societies for family doctors and internists are urging their members to break with tradition by making it easier to schedule appointments — or even making appointments unnecessary in the case of walk-in patients who need immediate attention.

"It's a big trend," said Amanda Denning, a spokeswoman for the American Academy of Family Physicians, which has about 94,000 members.

The academy is spending $8 million on consultants who visit doctors nationwide to suggest improvements in patient care. The advice is meant to "keep them from going to an in-store clinic," Ms. Denning said, while also benefiting doctors by making office procedures more efficient.

The rise in co-pay requirements in medical plans has people looking harder for cheap physicians.

According to various polls, cost is a high priority for most patients. "People will change physicians for differentials of $10 or $15 in a co-pay," said Dr. Anne B. Francis, a pediatrician in Rochester and spokeswoman for the American Academy of Pediatrics.

But convenience also ranks high. That is one reason about 20,000 of the 59,000 actively practicing members of the American Academy of Family Physicians now use electronic health records. Being highly computerized can let doctors offer Web-based scheduling that enables patients to book their own appointments.

The decline in physician income does not appear to be due to a drop in demand. A new report by the CDC National Center for Health Statistics finds that in a 10 year period ending in 2004 the frequency of visits to physicians increased by 19% per person.

Americans made more than 1.1 billion visits a year to doctors' offices and hospital emergency and outpatient departments in 2004, up by 31% in the last 10 years. A portion of this increase is due to an 11% rise in population during that period. This was accompanied by a 19% increase in utilization per person. The increase in the visit rate per person among persons 65 years and over (26%) was higher than among persons under age 65 years (16%).

That averages out to 3.8 visits per person.

This article has some neat charts at the bottom. Suggest you click thru and give them a look. Note that visits for diabetes are the biggest increase with 117% more visits. This could be due to more treatment options and an aging population increasing the incidence of type II age-associated insulin resistant diabetes. Also, visits for spinal cord problems are up 94%. How come?

People wait over three quarters of an hour on average in emergency rooms. This is the result of the uninsured going to emergency rooms for care. The wait times amount to rationing by queue line length.

There was no change in the average time a patient spent face-to-face with a physician in office settings (Figure 4). The amount of time a patient waited before seeing a physician in the emergency department increased from 38.0 minutes in 1997 (first year collected) to 47.4 minutes in 2004.

How much of the increase in visits to doctor's offices is due to an aging population? How much is due to rising affluence? How much due to increased numbers of treatments available? Oh, and how much due to more plastic surgery and other treatments that enhance appearances?

Share |      By Randall Parker at 2006 June 25 11:44 AM  Economics Health

D Flinchum said at June 26, 2006 3:33 AM:

Very interesting. I suspect that the H-1B visas of IT fame are likely at issue here as well.

My "doctor" is actually an FNP who works with a group of doctors - best doctor I ever had BTW. She is married to a doctor and their only child has just one more year in college. I asked her what her daughter was planning after getting her BS in engineering, and she told me medical school. The daughter had the grades and certainly her parents could "facilitate" her getting into medical school so I said, "That's great!" I was informed that BOTH of her parents are trying to talk her out of it.

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