An expected shortage of doctors is blending with this country’s aging population and an increase in care settings to spike physician salaries to a rate higher than what some recruitment firms have seen.
According to Irving’s Merritt Hawkins, starting salaries jumped for 19 of 20 medical specialties that the recruiting firm tracks, including double-digit boosts for family physicians and psychiatrists, two specialties that typically have shown little salary growth. But both of those are growing in demand, particularly in Texas, which has a need for each in its wide-open rural spaces and its more economically disadvantaged pockets of urban centers. (In Texas, 185 of 254 counties, or 73 percent of the state, lack a general psychiatrist.)
Phil Miller, a senior vice president with Merritt Hawkins, says this is driving up those starting salaries. The competition is steep. According to the Association of American Medical Colleges, the country will have a shortage of about 90,000 doctors by 2025, raising concern that the practitioners will be able to keep up with the demand of a population that adds another 10,000 men and women older than 65 years old each day.
“That’s only 14 percent of the population, but they generate about 50 percent of the diagnostic tests and 37 percent of the inpatient work,” Miller says. “Even though we’re hoping to create a system that’s more prevention based that utilizes resources better and only sends people to specialists and diagnosticians when necessary, we still have other trends that are overwhelming that.”
Namely, the demand for care is increasing. And physicians make their employers a lot of money. A different Merritt Hawkins report from April found that the average physician generates $1.56 million annually for their affiliated hospital (that’s according to a query of chief financial officers). Specialists bring in about $1.6 million whereas primary care generates $1.4 million. The competition to attract these men and women is steep. And while 90 percent of Merritt-Hawkins’ search assignments were for employed physicians (whether that’s in a hospital, medical group, urgent care center, or other employer), 5 percent came from independents. That may not seem like a lot, but two years ago that number barely scratched 1 percent.
“It’s probably more of direct-pay, concierge style practice,” he says.
Nationwide, family physicians are starting with offers that average $225,000, up from $198,000 in 2014. Psychiatrists can expect a ballpark of $250,000, an increase from $226,000 the year prior. General surgeons are up to an average of $378,000, leaping over $339,000 in 2014. Cardiologists are booming: Starting salaries for noninvasive now average $493,000, up from $279,000 in 2014 (although that seems like it’s an outlier; in 2013, the specialty averaged $442,000 and in 2012 the average was $447,000.) Invasive cardiologists are seeing $545,000, up from $525,000.
“So what’s driving demand, right? Why do most consumers go to doctors? Because of the technology advances, the direct to consumer advertising on medications, the new treatments that are being found for chronic illnesses that may not have been easy to treat,” says Dr. Jim Walton, a former president of the Dallas County Medical Society and the president and CEO of the Genesis Physicians Group, the largest independent group in North Texas. “We have a growing number of consumers in our market. We’re rapidly growing, and we can’t produce enough doctors at a fast enough rate.”
Walton echoes the sentiment that many in the industry feel—advanced practitioners, like nurse practitioners and physician assistants, will offer integral support services to fill the voids left unfilled by new physicians. As such, they also saw year-over-year increases in starting salaries: NPs can expect an average of $117,000 (up from $107,000 in 2014) and PAs are looking at an average of $114,000 (also up from $107,000 in 2014).
“We know that we can’t produce and service the population just with the rate of physician production,” Walton says.
The report also notes modest increases in value-based payment models, but they still make up only 6 percent of total physician income. Fee-for-service, which pays for volume, is still an entrenched component of the modern reimbursement system. But incentives that reward for outcomes are being layered on top. The study, both Miller and Walton agree, shows that healthcare is still in a transition period and have only dipped a toe in on value-based incentives.
Medicare directives may change that, but we won’t know for years—the Centers for Medicare and Medicaid Services will ding doctors for bad outcomes via Merit-Based Incentive Payment Systems and Alternative Payment Models, which began rolling out in 2015 and will continue until 2021. Those APMs will pay out lump-sum incentive payments over the course of 2019 through 2024, and providers will be given higher annual payments in 2026 when they meet certain outcomes.
“Right now, I don’t know that anyone has really come up with a perfect system,” Miller says. “But they’re trying … and it’s one more thing to turn the boat around.”
He adds that, financially, it’s a pretty good time to be a doctor. Typically he’ll see anywhere from eight to 12 specialties spike in starting salaries. But never before have nearly all of them—the main holdout was emergency medicine, which dipped from $350,000 in 2014 to $304,000 in 2015—incurred increases.
“We kind of expected this to happen, but it didn’t happen until this year,” Miller says. “We knew there had to be some big increase in salaries coming because pressure is mounting” to load up to avoid a shortage.