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Physicians Don’t Make the Most Money in Healthcare

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As physicians, you are the most highly trained professionals in healthcare today. In a fair world, this would mean that you would/should/could earn more than anyone else. You should be at the top of the heap.

Perhaps you’ve heard of the rise of the physician executive, however. It is becoming increasingly common for physicians to seek administrative posts in lieu of day-to-day care delivery. The benefits in having physicians in the C-suite are numerous, of course, but there might be another layer to this trend, as detailed by Elisabeth Rosenthal in The New York Times this past weekend.

Rosenthal reports: “Though the recent release of Medicare’s physician payments cast a spotlight on the millions of dollars paid to some specialists, there is a startling secret behind America’s healthcare hierarchy: Physicians, the most highly trained members in the industry’s work force, are on average right in the middle of the compensation pack. That is because the biggest bucks are currently earned not through the delivery of care, but from overseeing the business of medicine.”

She continues: “The base pay of insurance executives, hospital executives, and even hospital administrators often far outstrips doctors’ salaries, according to an analysis performed for The New York Times by Compdata Surveys: $584,000 on average for an insurance chief executive officer, $386,000 for a hospital CEO, and $237,000 for a hospital administrator, compared with $306,000 for a surgeon and $185,000 for a general doctor. And those numbers almost certainly understate the payment gap, since top executives frequently earn the bulk of their income in nonsalary compensation.”

Rosenthal then discusses the deal struck by Aetna chief executive Mark T. Bertolini, who “earned a salary of about $977,000 in 2012 but a total compensation package of over $36 million, the bulk of it from stocks vested and options he exercised that year,” and former Barnabas Health president Ronald J. Del Mauro, who “earned a salary of just $28,000 in 2012, the year he retired, but total compensation of $21.7 million.”

Furthermore, “studies suggest that administrative costs make up 20 to 30 percent of the United States healthcare bill, far higher than in any other country. American insurers, meanwhile, spent $606 per person on administrative costs, more than twice as much as in any other developed country and more than three times as much as many, according to a study by the Commonwealth Fund.”

Is it little wonder why our country’s healthcare bill is in the trillions? the article asks. Especially when the U.S. is compared to other countries, where “top-ranked hospitals have only skeleton administrative staff and where healthcare workers are generally paid less.”

Rosenthal notes that many physicians are fed up with “the army of businesspeople around them and the impact of administrative costs.” While “doctors want to do well by their patients,” one expert said, “other constituents, such as device manufacturers, pharmaceutical companies, and even hospital administrators, may not necessarily have that perspective.”

So how are some physicians responding to these ballooning costs? We’ll cover that in an upcoming post.

In the meantime, what are your thoughts on the salaries earned by healthcare administrators? As physicians looking for jobs, have you ever considered moving into administration yourself?

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