In April 2011, Jackson Healthcare conducted a national online physician survey to identify and explore the shifting dynamic between their fixed and variable compensation sources. In addition, Jackson calculated how much physician compensation factors into overall national healthcare costs.

Critics argue that physicians have a financial incentive to drive up healthcare costs.  They believe that physicians order more tests and treatments, because they profit from their orders.  They also believe that were physicians to be protected from malpractice lawsuits, they would not stop practicing defensive medicine, because of this perceived financial incentive.

Our physician research debunks this myth.  Not only does the majority of a physician’s total compensation come from avenues unrelated to their medical orders, we’ve found that physician compensation accounts for a small share of total U.S. healthcare costs.

Physicians, in general, receive very little compensation from the labs, imaging, prescriptions, admissions and procedures they order.  The majority of physician compensation comes from a combination of fixed sources, productivity and ownership.

Key Findings From Physician Compensation Survey

  • 82% of physician respondents receive no compensation from the prescriptions, lab tests, diagnostic imaging, hospital admissions and facility/surgery fees they order
  • 36% of physician’s total compensation comes from fixed sources (i.e. salary, hourly rate or stipend)
  • 12% of physicians’ compensation is tied to productivity
  • 8% of physician respondents receive compensation from practice ownership
  • 6.2% of physicians’ total compensation comes from the following sources:
    • 0.5% from charges associated with prescriptions
    • 1.0% from charges associated with lab tests
    • 1.1% from charges associated with hospital admissions
    • 1.3% from charges associated with facility fees for surgeries
    • 2.3% from charges from diagnostic imaging

Breakdown Of Variable Compensation Sources

Physician Compensation 8% Of Total U.S. Healthcare Costs

Jackson Healthcare has calculated U.S. physician compensation to account for roughly 8% of the total national annual healthcare costs.

According to the most recent estimate from The Centers for Medicare and Medicaid Services (CMS), overall U.S. healthcare spending in 2009 was $2.5 trillion.  CMS reports that $505 billion accounts for physician and clinical services.  According to data from Medical Group Management Association (MGMA), physician compensation accounts for 37 percent of total collections, or $186 billion (7.5 percent of total U.S. healthcare spending).

Calculating the percentage using the most recent statistics on the number of practicing physicians in the U.S. from the American Medical Association and salary figures from MGMA, annual aggregate physician salaries total $216 billion, or 8.6 percent of total U.S. healthcare costs.  The MGMA statistics were obtained from a 2010 report using 2009 data.

Survey Methodology

In April 2011, Jackson Healthcare conducted a web-based survey of 1,512 physicians.  The survey has an error range of +/- 1.6 percent, at the 95 percent confidence level.

If physicians indicated that a portion of their compensation was variable, they were asked a series of questions to report the percentage of their income that came from various variable compensation sources: productivity bonuses, profit from practice ownership, charges from diagnostic imaging, charges associated with facility fees from surgeries, charges associated with hospital admissions, charges from lab tests, and charges from prescriptions. Percentages of variable compensation were presented in multiple-choice questions with ranges. The survey results were calculated by utilizing the top percentage in each range, for a worst-case scenario computation.

Definition of terms used are as follows:

  • Fixed compensation was defined as salary, hourly rate or stipend that does not vary with productivity.
  • Variable compensation was defined as bonuses, productivity incentives, profit from ownership or any other compensation over and above fixed salary or hourly rates.

Published: May 2011

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