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Old July 30th, 2001, 12:32
sysadmin sysadmin is offline
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Physician Income in the 1990's: Problems and Disappointments

Conrad C. Physician income in the 1990's: problems and disappointments. Internet Med J 1998.02.16 From the Barney School of Business and Public Administration, University of Hartford, 200 Bloomfield Avenue, West Hartford, CT 06117. 860/768-4202

Abstract : The combined effects of cost containment measures in public programs with the emergence of managed care have placed physicians in a difficult position. Their anticipated incomes have not come forth, limiting their practice options. Simultaneously, younger physicians who have had to avail themselves of student loans are facing the twin problems of high debt leverage and repayment schedules in tandem with income less than they had expected. The following discussion explores some theoretical explanations for the income problems currently affecting physicians. In concluding, the discussion addresses likely outcomes and effects of the income problems in terms of the options for physicians and the quality of care overall.

INTRODUCTION

In the 1990’s, subtle but sweeping changes are taking place in the income status of physicians in the United States. The professional classification of physician has always been synonymous with a stable, secure, and well compensating career. As the American landscape of health care has changed, so have the perceptions of physicians of their income potential. Managed care programs have redefined physicians as both gate keepers and bearers of the burdens of cost containment. The impacts of such responsibilities have had powerful effects on physicians’ income.

Some industry analysts believe that the forces responsible for the changes in physician incomes derive from two labor markets in which the physicians must compete. There are two labor markets affecting the physician workforce and therefore their income: the physicians’ training market and the physicians’ services market. The training market refers to medical education and the numbers of physicians graduating and going into various types of practice. The services market refers to the demand for physician services, which is where we see the most pronounced effects of managed care.

THE SERVICES MARKET: MANAGED CARE AND EFFECTS ON PHYSICIAN SERVICES

Managed care has had a direct impact on physician earnings and on the way they practice of medicine. Many mid-career, highly specialized physicians, have experienced reduced incomes in order to accommodate managed care organizations. "A survey by Ernst & Young, New York City, found that doctors in practices that receive more than 50% of their gross revenues from managed care contracts earned an average of $116,600 in 1995, down from $137,900 in 1994." The same study indicated, conversely, that physicians in practice with less than 50% income from managed care organizations had an income increase from $108,000 to $115,000 on average across specialties.

Mergers and acquisitions among health care organizations have compounded the problems physicians have had in maintaining competitive incomes in managed care organizations. "Merged hospitals frequently find they have too many physicians, with the result that some – especially specialists and subspecialists—lose income or even their jobs."

Clearly the specialist physicians bear the largest brunt of the evolution to managed care. Their plight may not improve, considering estimates that if 40% to 60% of Americans are enrolled in heath maintenance organizations by the year 2000, the supply of specialists will outpace by 60% the number required. The demand for the services of specialist physicians will decline as primary care physicians begin to provide the same services, at less cost.

Managed care organizations have placed much more emphasis on care by primary care physicians, based on the assumption that such care is more cost effective. Such presumptions ignore the possible effects on the quality of care provided by primary care physicians, who are often at a financial disadvantage if they refer patients to specialists. Consider the following conversation published by Dr. Michael Greenberg in a commentary appearing in the American Medical News:

" ‘You want to send this patient to a podiatrist? Outside the system? Whose capitation is this going to come out of , yours or mine?’ I was unprepared for the questions from the primary care physician. In my 18 years of practicing dermatology, I commonly sent patients with difficult plantar warts to podiatrist… ‘I don’t give a ****,' I responded. ‘This is not about money. It’s about doing what is right for the patient.’ But as the words left my mouth, something inside me went gray and numb. I strongly cared about doing what was right for this patient, but suddenly realized that I did care about the money too. I was uneasy about how easily the lie had slipped out."

Managed care has placed physicians in the difficult position of being patient advocates while trying to contain costs. In the balance is the physician’s personal income.

In the 1990’s, subtle but sweeping changes are taking place in the income status of physicians in the United States. The professional classification of physician has always been synonymous with a stable, secure, and well compensating career. As the American landscape of health care has changed, so have the perceptions of physicians of their income potential. Managed care programs have redefined physicians as both gate keepers and bearers of the burdens of cost containment. The impacts of such responsibilities have had powerful effects on physicians’ income.

Some industry analysts believe that the forces responsible for the changes in physician incomes derive from two labor markets in which the physicians must compete. There are two labor markets affecting the physician workforce and therefore their income: the physicians’ training market and the physicians’ services market. The training market refers to medical education and the numbers of physicians graduating and going into various types of practice. The services market refers to the demand for physician services, which is where we see the most pronounced effects of managed care.

THE TRAINING MARKET: THE EFFECTS OF MEDICAL EDUCATION ON PHYSICIAN INCOME

A medical education is hugely expensive. Young physicians in the past, considered the expense a sound investment and guarantee of high income. That assumption may no longer be valid in the 1990’s.

Since 1960, medical student tuition has increased by 400% in private schools and 250% in public schools, adjusted for inflation . Tuition has risen because federal and state government funding for research has declined. Additionally, managed care programs have reduced clinical income. Medical school tuition averages $20,000 per year in addition to other educational costs. Recent reports show that almost 90% of medical students receive some type of financial aid. Much of that financial aid is in the form of federally guaranteed student loans. Many medical students graduate owing massive debts, with devastating economic and psychological consequences. The pressure to meet large debt service requirements makes young physicians sensitive to changes in their income. [editor's note: my debt was over $200,000 upon graduation from medical school in 1992]

Since 1993 there has been a surge in federal student loans in all areas of education, from $102 billion in 1990 to $205 billion in 1995. The increase derives from the reauthorization of the Higher Education Act of 1992, in which Congress created a new component of the guaranteed loan program. It allows all students, regardless of need to obtain loans with federal guarantees, but whose interest is not subsidized. Medical students represent a large part of that borrowing. As we approach the new century, there is increasing concern about how educational indebtedness may substantially increase the rate of defaults.

The increased costs associated with the prolonged medical education required for specialization, (combined with the diminished earning potential in the managed care environment) have turned many students away from pursing medical specialties. In 1994, the percentage of senior medical students expecting to be certified in generalist fields increased substantially after a ten-year decline. Nearly 23% signaled their intentions to take generalist training, compared with less than 15% in 1991. The exact reasons for this trend are unclear, especially when we consider that interest in generalist careers dropped dramatically during the 1980’s with just over 30% of students choosing a generalist career. It may be that managed care has become significant enough now to affect medical students’ perceptions about their future job opportunities and earnings potential. The shift toward more generalist physicians indicates a tightening labor market for physicians. A 1994 survey of California specialists found that 27%, including half the obstetrician-gynecologists and one-fourth of the internal medicine subspecialists, planned to take training in primary care, in the following five years.

RESULTS OF CURRENT TRENDS IN PHYSICIAN SERVICE AND TRAINING MARKETS

Changes in the training market will ultimately have effects in the physician workforce and physicians’ incomes. As more generalists work for increasing numbers of managed care organizations, we will observe a decrease in physician incomes overall. Even today, physicians who only recently began their practices, are being squeezed by economic forces. These individuals carry huge student loan debts, often exceeding $100,000 in some cases, and yet they are not able to earn the income they had anticipated and now need. As a result, they experience limits on their freedom to go into private practice and diminished expectations in their lifestyles. The disappointment of these physicians will not go unnoticed by incoming medical students. Their hopes for a secure and lucrative future will be less optimistic than their predecessors’.


The costs of a medical education may change the ability of students to pursue a medical career, unless they have the resources to pay all the expenses without incurring debt category. If that happens, fewer students will go to medical school, and it would then become an option for students from only the wealthiest families. Another impact of the changes in the training and service markets for physicians is the de-emphasis of specializations. In the long term, the availability of fewer specialists will denigrate the quality of medical care. Seeing a specialist will become a rarity. Fewer specialists will produce less research and applied advances in treatments and cures for human ailments.

In the meantime, physicians are reassessing their earning potential and being disappointed. Their positions are not enviable. They have made huge, personal, monetary, and intellectual investments in themselves, and now see their earning potential declining as their value diminishes in the markets in which they must compete.



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Old June 16th, 2004, 18:41
bmccreary bmccreary is offline
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Re: Physician Income in the 1990's: Problems and Disappointments

I am an undergraduate student taking a medical sociology class. I found this paper extremely interesting and would like to comment on further implications of the points highlighted. These trends of physician disappointment and dissatisfaction will negatively affect the patients of these doctors. Physician stress, understaffing , and dissatisfaction has been positively correlated with more patient medical mishaps. It is unfortunate that not only the doctor suffers in the ways mentioned in the article, but the patient suffers possibly life-threatening consequences because of these factors as well. Furthermore, it seems that physicians must also carry a higher feeling of stress and responsibility because of these implications continuing to add to the cycle of physician fatigue and patient morbidity and mortality.
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