Primary care doctors are set to lose more than half of their salary

Fortunately, the 27% reduction in Medicare payments to physicians that is set to take place in a matter of weeks unless congress acts is getting some press.  Fox News published a piece recently, as did the Washington Post. Writer Merrill Goozner breaks things down nicely in his article, “Is There a Doctor Fix in the House … and Senate?”

However, one thing that seems to be getting confused in all the media reports is the difference between physician payments and physician salary. A doctor’s income is what he takes in (payments) minus expenses or overhead. Physician overhead (staff, office space, electricity, malpractice, equipment,etc.) is very expensive. One of the reasons, but not the only reason, a doctor’s overhead is so high is because we need to hire extra staff just to deal with the insurance bureaucracy.  (See “Your 10 minute office visit needs 8 people and 45 minutes of work) While payments from Medicare to physicians have not really increased over time, overhead has gone up dramatically.

Physicians, patients, and policy makers need to understand that a 27% cut in physician payment will have a far greater impact on physician salary because of this overhead.

An article from the American Medical News discussing the issue of the “doc fix” has an interesting table with current payments and proposed payments.  Let’s say a family physician sees 25 Medicare patients a day, 5 days a week for 50 weeks out of the year. At the current rate of  $68.97 per visit, this generates $431,062 in revenue. At 60% overhead of $258,637, this family physician’s income would be $172,425 per year. Now any doctor reading this will tell you that 1) no physician would see exclusively Medicare patients because they just don’t pay enough (at current rates) to sustain a practice; and, 2) you can’t see 25 Medicare patients in a day because patients 65 and up have multiple medical problems and you simple couldn’t see them all in 15-20 minute visits. However, the income is very close to$168,550 which is the average salary for a family physician. Thus, the numbers are good for the purpose of discussing the impact of Medicare cuts on not just payments but salary.

Now, if the 27% Medicare costs go into effect, Medicare will only pay $51.07 for that same visit.  Using the same numbers, the revenue generated is only $319,187 (26% decrease in Medicare payments), but the $258,687 in overhead stays the same.  This leaves the primary care physicians with a $60,550 annual income. That’s a 65% cut in physician salary.  Even if my numbers are off, its clearly more than a 27% cut to salary, and much greater than 50%.  The bottom line is that if these cuts take place, primary care physicians will certainly stop seeing new Medicare patients, and many will stop taking Medicare patients altogether. Many already have.

Now, most pundits seem to think that since seniors vote, and Medicare is a big issue for them, and that the election is less than a year away; Congress will find a way (like they have for the past few years) to find the money to cover the cuts for at least another year.  However, I wouldn’t be so sure.  I would advise anyone who is on Medicare, has a loved on on Medicare, or who plans on having Medicare in the future to call their representatives and ask them to ensure that these payment cuts not go into effect.

Matthew Mintz is an internal medicine physician and blogs at Dr. Mintz’ Blog.

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  • http://www.facebook.com/profile.php?id=558041620 Vikas Desai

    Dr. Mintz, as underpaid as we are from medicare, most of my private insurance patients actually pay even less than medicare does, its pretty depressing. What a joke 60,000 a year as a PMD for the same work, thats one third of what a nurse anethetist gets paid, I could go train to do IT for six months at devry and make more than that. I doubt it will happen though, the senate has done a good job putting a band aid on it.

    • http://pulse.yahoo.com/_2LRZNHDZS6DU45WQ567LPQ7CMI ninguem

      I assume you’re East Coast?

      I hear that a lot from there.

    • Anonymous

      yes same here Vikas.  In NYC medicare is sadly one of the highest payers.  None of the private insurers have raised rates ever for my practice duration (about 8 years).  A few of the commercial insurers pay extra for weekend or emergency visits, and eliminate the “84%” problem with dual-eligibles (this is where medicare pays 80% of allowable and medicaid decides that 20% OF 20% is sufficient to cover the difference, of course with no balance billing allowed).

      But otherwise, we are really at the mercy of medicare and commercial insurers, and their unilateral policies.  I am almost looking forward to all the self-appointed obama-lovin’ health gurus and pundits (who’ve never seen a patient or had to make a living treating patients) eliminating fee-for-service altogether, and then they can give me a mediocre salary but with full government benefits, then i can work like a VA doc – in at 10am, lunch from 12-1:30pm, meetings from 2:30-4pm, then home, and no call or weekends (that’s what residents are for!)  I think in that scenario it’d be hard for them to justify paying an MD any less than an NP.  Screw the next generation of physicians at this point, now it’s about just staying afloat until hopefully doing something more gratifying.

  • http://makethislookawesome.blogspot.com/ PamC

    “Medicare: now accepted nowhere.”

    • Anonymous

      Medicare? Accepted nowhere by prima donna primary care doctors! Neighborhood Health Centers are accepting Medicare patients regularly and the mass migration is growing every day. When prima donna primary doctors say “NO!” to Medicare, our seniors have no choice but to go to a local clinic. More and more, seniors are finding that they get better care and more face-time without the ignorant and disparaging remarks about Medicare not paying enough. Screw the greedy prima donnas! We need more Community Health Centers and less prima donnas! Obamacare encourages Community Health Centers and encourages Accountable Care Organizations. Both a breath of fresh air when compared to the fee-for-service prima donna doctors. The prima donna primary docs need to dry up and blow away!

      • Anonymous

        Community Health Centers LOVE Medicare patients because they get paid 3x as much for seeing them as docs in other practices. You want to see greed: look at the payments made to CHCs.

      • Gil Holmes

        Yes, us prima donna doctors just love having our pay cut by 2/3. Who wouldn’t love that.
        Why everyone I know is willing to spend $10 in order to get $7 back. Not $7 profit, $7 total.

      • http://www.facebook.com/people/Steven-Reznick/100000549195050 Steven Reznick

        So far Primary Care doctors have not said ” NO” to Medicare patients. In areas like South Florida where Medicare pays more than private insurers, the effect of a big reduction instantly will probably result in specialty doctors opting out of Medicare long before PCP consider it. It has already happened in the ” ROAD” specialties where cosmetics and aesthetics practices and dermatology practices charge cash up front.Most of the procedural oriented medical and surgical specialties have started charging an annual fee to their patients in addition to the visit and procedure charges.  Interestingly many of the same individuals who complain about a $25-35 copay per PCP visit have regular appointments for botox and filler injections and nip and tuck procedures where they pay cash up front regularly.
        For those enamored with future ACO’s and Community Health Centers I can only point out that in my area of the country these are being assembled by hospital systems who in the past have tried these 2-3 times previously and failed miserably. Even with massive government subsidies it remains to be seen whether they can actually efficiently and compassionately care for patients in the new setting and not go bankrupt again?
        Non health care providers never quite appreciate having a doctor for the long haul until they develop a complex multisystem multispecialty medical or surgical issue that requires coordination and advocacy or until this type of ailment strikes a loved one that they are trying to assist and care for. You can warn people that there is a pothole ahead and to avoid it but some of them need to mis step into it , turn their ankle and feel the pain before they listen to the advice you have given .

      • Anonymous

        More gubmint. Sounds great.  Then we can be more like Europe because they are so forward thinking.  Oh, wait…they went broke on their socialist dreams.  But, hey it’s the thought that counts. We can promise free health care for everyone everywhere.  We will just print the money for it and tell the doctors to be quiet and just take whatever gets doled out to them.
         Disliking those dedicated to providing care around the clock is not great public policy.

        • ulmus

          Just had to reply. Swedish MD, working at a state-financed hospital, providing what I believe to be first class medical service. We do have an issue with availability, at times unprioritized have to wait up to 3 months for an appointment, but anything prioritized get same day or within a few days. I earn roughly 80k $/year and pay almost half of that in taxes, but education is free and I never pay more that $150/year for healthcare (I have no private insurance and don’t see a point in having one). We get a year and a half in combined maternity/paternity leave and five weeks of vacation and the Swedish finances are stronger than most (look it up, economist.com)

  • http://twitter.com/chasedave Dave Chase

    The only plausible “doc fix” I’ve seen is the ones that doctors take themselves. I’ve written about the Direct Primary Care model (i.e., concierge medicine for the masses). See http://www.kevinmd.com/blog/post-author/dave-chase for examples. Not only is this model supported in the PPACA, it even has a GOP/MD rep from Louisiana who was a vocal opponent of PPACA proposing to pay for Medicare using the DPC model (HR 3315). An explosion of DPC models are happening right now. There’s a blend of independent DPC practices (e.g., AtlasMD, OrganicMedicineNow) and orgs (e.g., MedLion) that are teaching other docs how to move to these models and providing enabling business models and technology. I don’t see how the handwriting on the wall could get any clearer that the way we pay for primary care is severely flawed. The good news is there’s a model that pays docs well, saves patients money and reduces downstream costs. When the co-pays for a public health center are more costly that the entire fee structure of a DPC practice (and the doc is making a healthy living), you know there’s change afoot. 

    My latest piece (follow link above) was “Overcoming barriers to building a direct primary care practice”. Docs all over are taking action now before they get hammered by the reductions that are just getting worse (but are already pretty bad).

  • http://www.facebook.com/knasky Kevin Nasky

    Maybe it’s my paranoid streak, but I’ve got a suspicion that the overarching goal is to rid the market of primary care physicians, and have mid-levels step in to fill the void (at much lower reimbursement rates, mind you).

    This is going to happen. Just watch.

    • http://twitter.com/DoctorIZ Jonthon Izbicki

      You are not paranoid…it’s reality.  I am a PCP and just sick as can be.  No one really cares, who takes care of them, as long as they get what they want!  Dr. Google

  • James Lewis

    Interesting challenges ahead – Lets take a look at which clinicians are most likely to stop seeing M’care patients if and when these cuts actually take place.  If we look at the new physicians entering the primary care (PC) market and the elder PCs about to depart from the market then we have 2 pools of clinicians who will most likely continue to take these patients, i.e. with new physicians the number of M’care patients who they would stop seeing wouldn’t be enough to make a dent in their salary and the departing physicians would ultimately go bankrupt if they stopped seeing these patients.  This leaves a huge pool of clinicians in the middle who could decide to stop seeing M’care patients and throw the system into an even greater access conundrum.  The Feds couldn’t possibly be looking to push out these MDs/DOs since they are the lowest on the food chain.  When cuts take place, I believe they will be ultimately taking from the rich and passing on to the poor, i.e. reducing procedural payments and increasing visit payments.

  • http://pulse.yahoo.com/_UDJTUH45CFUC6LKCBLB6FGRDKU Diane

    Well I was going to say that Medicare payments set the standard for other insurance companies, but Dr. Desai points out that they often pay more. In our business, we rely on those Medicare, Medicaid, a few private insurance and a handful of cash customers. Our professional journals tell us that Medicare and Medicaid payments affect every step of health care as the government trendsetters. Then again, why should private insurance pay higher – more money in Mr. CEO’s pocket. (oh, I mean for all the good causes they sponsor).

    Many years ago, a huge OB/GYN practice stopped accepting the largest private insurance carrier in our area b/c of it’s crummy payments. You can imagine the uproar that followed and the action that a bunch of hormonal, angry pregnant women can take. And this was long before smart phones were on the block. Many businesses stopped taking their insurance as the revolt grew. It took a long time before BIG insurance was able to regain it’s reputation. So it’s not unheard of to rebel. I suppose you just have to have enough power in the numbers…

  • http://twitter.com/DavidGelberMD David Gelber MD

    A 27% cut in Medicare reimbursement translates into a 27% cut in all reimbursements, at least in our general surgery practice. Every insurer we contract with ties their reimbursement to Medicare rates. Most are slightly above, exactly at, or slightly below Medicare rates. Of course, the private insurers also make up their own “rules”. If I do multiple procedures on one patient, Medicare pays me 100% of the most expensive, 50% of the next most expensive procedure and 25% of any other procedures done at that time. Private insurers often pay 100% of the least expensive procedure and consider the rest incidental.

    Such a large cut in reimbursement will likely result in some doctors quitting, most looking for ways to make up the difference and some just shrugging their shoulders and taking it as best they can. In our practice, I can see my older partners simply retiring, as the cost of practicing reaches the point where reimbursement doesn’t cover overhead.

  • http://www.facebook.com/rfdbbb Robert Bowman

    Actually the impact is worse. Each year the cost of delivering primary care goes up about 12%. Since the government has incented extra costs and since primary care workforce is even more difficult to find and retain, the annual cost is likely to increase faster. An effective 40% difference is likely if the 27.4% cut holds.  

    MedPAC proposed a 7 year freeze on primary care. This is slow torture. Under the Rule of 72 with 12% annual increase, the cost of delivering primary care doubles in 6 years. Even small percentage increases such as the typical 3 or 4 % make no sense. Primary care has been substantially underfunded except the few years after 1965 and the few years after reforms in the 1990s.

    This is also why primary care remains at the 1980 design for numbers of graduates and why primary care volume steadily declines as does primary care workforce.

  • Anonymous

    One could say though that a physician, at least not living in a place like Manhattan could live comfortably on 60k. This “I need to be rich because I’m a doctor” thing is pretty crazy. If the cost of med school wasn’t so out of line the salaries wouldn’t have to be as crazy as they are to compensate. My girlfriend is getting her second PhD (far more education and likely small segment of the population than most doctors) and will likely make 80k or less afterwards. She does it because she loves the work. Perhaps we’d have better doctors if being a doctor wasn’t a get rich scheme.

    • Gil Holmes

      Virtually anyone who can get into medical school could have easily done well in the business world and be making more money for less hours. Anyone who goes into medicine these days for money is going to be sorely disappointed.

      The CEO of most hospitals makes more than most doctors. Forget hospital system CEOs. They crush doctor salaries.

      Many doctors simply could not live on $60K practically. They are already 7 years+ behind other college grads and have $250K in loans that cost $1300/month if they stretched the loan out over 25 years. If they hope to have any money for retirement they’d have to live as if they earned $35K or less. Sure there are many many people in this country who do live on that. That is true. But you’re not going to get many to go thru 11+ years for that ‘opportunity’

      Also not entirely sure a second doctorate actually equates to more education time than any doctor, let alone a sub-sub specialist.
      BA/BS +PhD = 8 years typically. 2nd Phd 2-3 years =10-11 years
      BA/BS+MD+minium 3 year residency=11(last 3 are 70-85hrs/week actual work and then reading time on top). Throw on a 3-7 year fellowship and I do believe that is far more time than 2 PhDs.

      I also have yet to see a PhD in the ER/ICU at 3:30am seeing a patient who will pay them $0.

      Oh, and I love my profession. Several aspects of the job extraneous to the profession stink, but being a doctor is great.

    • http://medschoolodyssey.wordpress.com/ Med School Odyssey

      Anyone that believes becoming a physician is a “get rich scheme” is completely out of touch with the medical landscape today.  The amount of money, time, and energy that goes into becoming a physician is enormous, not to mention the interest rates for paying back unsecured educational loans, huge taxes, malpractice insurance, and the threat of litigation, which hangs above them like the sword of Damocles.

      For many physicians, the 60k you mention to “live on comfortably” barely covers the cost of malpractice insurance.

  • Anonymous

    If you peek inside my pants pocket, you’ll see a little man playing the smallest violin in the world. Geez! Who ruined our health care system? You think your patients did? You think the consumer ruined health care in America? If you want the truth, go down to K Street in Washington DC and ask the folks at AHIP and AHA and the AMA and PhRMA and every other lobby group you prima donnas send your donations to. They are the shysters that ruined America’s health care system! Not the consumer! The shysters on K Street and the health care industry that supports these corrupt lobby groups own the entire Congress. Stop whining! Stop crying about the industry you ruined! You milked the cow dry! The teats are worn out! You’ve sucked them dry! The consumer has nothing more to give! You and you lobby groups have killed the goose! No more golden eggs doc! There gone! 

    • Gil Holmes

      Doctors have good lobbyists? Is that why income relative to inflation is distinctly negative over the last decade? Is that why overhead costs and regulaton have increased substantially? Is that why electronic medical records that have not shown any actual benefit in any study are being forced down doctor’s throats? Is that why doctors are telling there children NOT to go to medical school? Is that why the AMA(the doctor lobbying group that tends to advocate against positions doctors want) is losing members left and right?
      Seriously?
      I think you confused insurance companies and pharmaceutical companies with doctors and pharmacists. The two groups are more enemy than co-lobbyist.
      Seriously?

  • Anonymous

    You made my point…

    Seriously? Consumers didn’t ruin health care! The carpetbaggers on K Street did! How? With association fees and with donations they get from doctors, hospitals, drug companies and insurance people. Who do consumers have as their advocate? Their elected representatives? Yeah, right! My Congressman and both of my Senators are completely owned by K Street. Bunch of whores! Maybe it’s time to Occupy Health Care, huh? 

    • Gil Holmes

      Maybe you missed the statement about the AMA losing membership left and right. The majority of doctors are NOT members of the AMA. I am not a member of whatever group lobbies for pharmacists or pharmaceutical companies or insurance companies either. I highly doubt very many physicians are. And if what the AMA is doing has been to my benefit, I’d hate to see what they did if they were working against me. Or, well, maybe I would since maybe it would have the opposite effect as well.

      I am at a complete loss as to how my statements supported your argument.

      Honestly, I am rather unsure of what your actual argument is but I don’t see where ‘consumers’ where blamed in this article or in any response to this article other than in yours.

  • http://www.facebook.com/drmmckinney Michael McKinney

    I am curious. I am also a physician.  It seems that there are a lot of doctor bashers that think doctors have caused the healthcare crisis we now face.  For the past 18 years, there have been steady cuts to physician payments so that the same proceedure I did then pays 1/3 what it pays now.  Maybe there was a time when payments were excessive, maybe not.  That is a differnet argument.   But if we physicians are paid less for the pieces of work that we do, (ie a surgery is paid less, a treatment is paid less, a visit is paid less) what caused the cost of health care to go up?  If you think there is “over utilization” that caused this, I will argue that we have had 5 different insurance companies look at our records and has not found that to be the case.  The review is a standard yearly or every other year process for us and most of the other physicians I know.  A second question is; What do people on this board think a doctor should make?  Understand that an average RN makes $50-70K a year.

    • Anonymous

      Accountable Care Organizations (ACOs) are beginning to slowly form all across the nation in anticipation of January 2014 when ACOs will be allowed to open for business. 

      QUESTION: Would you consider selling your practice to an ACO and begin working for them on a salary basis? 

      • Gil Holmes

        I am not fully aware of all the studies, but I do not think there is any ACO model that has actually demonstrated any actual savings once the additional administrative overhead is factored in, Not to mention the 1000s of little questions remaining about how they will work in the real world.

  • pasala ravichandran

    The congress is cutting physician payments because that is the easiest and the most obvious thing to do to reduce the healthcare cost. The main reason for the increased healthcare cost is the enormous money spent on specialized procedures on very old people (80+) such as cardiac assist devices, transplantations, Biventricular pacemakers etc. The doctors and hospitals and patient expectations are responsible for irresponsible care and increased healthcare cost. Increasing hospital revenue is the main goal of specialists and it affects everybody. It will be nice to have responsible care organizations.

  • http://www.facebook.com/profile.php?id=100001222357028 Stephen Anthony

    I have a Question for anyone reading this. I’m a 2nd year med student interested in Internal-Primary Care.  I noticed that dermatologist income is much higher than a PCP, yet their most common cases are acne & eczema and other issues that are resolved very simply with a quick prescription. If we want to keep PCP alive and if we recognize its importance in population health, why not create a certification program in some of these bread and butter derm cases that are easily managed with a prescription and boost salaries dramatic. Is the reason derm reimbursements are so high simply because of acne and warts ? If so why not add a certificate program or two and put these skills in the hands of PCPs to make PCP viable in the future. Same goes for other bread and butter cases of various specialities that are very easily managed by a Primary care /family care physician.

    • Anonymous

      Most of the well-paid dermatologist make most of their money doing procedures (biopsies, Mohs surgery, etc.), not from seeing acne and eczema.  

      Primary care residencies definitely train their graduates to care for straight-forward acne and eczema, but some refractory and complicated cases do require consultation with a specialist.  Many patients prefer to see a specialist, and many primary care physicians don’t feel comfortable managing even straight-forward cases because it was not part of their training.  There’s some great CME out there targeted at primary care doctors for many dermatological conditions.

      If you’re interested in treating things like acne and warts with something other than medications, look into family medicine.  In general, outpatient procedure training is more extensive in family medicine residencies.  If you prefer the internal medicine training model, make sure to address outpatient procedure training when you look at residency training.  It’s great to be able to place central lines, but for most primary care physicians you’ll need to freeze a wart or biopsy a weird rash a lot more often.

    • Matthew Mintz

      First, I am glad you are considering primary care, and commend you for keeping up with policy issues. You are already off to a good start as a professional.

      As MirandaHuffman stated, dermatologists don’t make their money off of acne and eczema. In addition, both primary care internists and family practitioners can do some simple procedures (skin biopsies, sking tag removals, etc.) and these procedures pay slightly more than the typical office vist. The problem has less to do about certification, ability or training; but rather how reimbursement is determined. The private insurers pay very close to what Medicare pays.  Medicare reimbursment is determined by a secret panel called the RUC. See the many posts on KevinMD (such as this one http://www.kevinmd.com/blog/2011/08/specialists-join-primary-care-ruc.html ) on this topic.  The physician panel which says who should be paid how much and for what is over-represented by non-primary care doctors.  Even if an internist sees a patient with acne for the same amount of time and prescribes the same medication as a dermatologists, the dermatologist will get paid a lot more. The AAFP is so fed up with the RUC, they have threatened to leave. In fact, six brave Georgia family docs have sued the federal government over this (http://www.kevinmd.com/blog/2011/10/cms-settle-primary-care-plaintiffs.html )

      Specialists train longer the primary care physicians, and have greater expertise in their particular area. However, the disparity in reimbursement between primary care physicians and specialists have widened to such an extent that primary care is extremely undervalued. The looming Medicare cuts will hurt every physician, but will hurt primary care the most because they operate on the margins.

    • Anonymous

      My PCP is in his mid 50s. He’s been my PCP for the past 30 years. He is an honest man. He tells me that 85 percent of his work can be performed by a nurse practitioner (NP). The other 85 percent is handled either by him or he refers the patient to a specialist. Health care becoming less and less “designer care” because more and more Americans are opting to be uninsured due to outrageous cost. Much of the remaining primary health care will be done by neighborhood clinics or by ACOs or, quite possibly, by places like WalMart. WalMart is already making noises like they may find a way to take some of the primary health care market. The doctors, insurers, drug makers and hospitals have milked the consumer dry. There’s no more milk. Because of their greed, they’ve killed the goose that lays the golden eggs. They have killed your future as a newly minted PCP that, in the past, could open a private one-man practice. Those days are coming to a rapid close. For decades, our health care system has worked for the health care industry and for their Washington lobby groups and the consumer has been sucking hind teat! At least 50 million Americans do not have health insurance and another estimated 25 million more are underinsured. Does that tell you anything? Are you getting the hint? My suggestion? I strongly urge you to find another line of work because an NP will be doing most primary care in the future. 

    • http://medschoolodyssey.wordpress.com/ Med School Odyssey

      There is far more to dermatology than managing eczema and acne.

  • Anonymous

    It’s not a “doc fix,” but a “Patient Fix.” Should nothing be done to solve these payment issues, more PCP’s will stop taking new Medicare patients. 

    • Anonymous

      If docs decide to stop taking Medicare patients, they should never be allowed to participate in that market again. If more docs refuse our elderly and the most needy in society, maybe it will speed up that advent of ACOs and the “big-box” style of health care that doesn’t use the broken fee-for-service model. We are tired of docs that use threats to cut off the elderly as a way to negotiate higher and higher payments. These greedy docs need to be forced out of business by a Home Depot or a WalMart style of health care. Nothing but shysters!

  • http://twitter.com/EKrumbeck Erika Krumbeck

    I’m surprised none of the commenters have mentioned concierge-type practices or cash-based practices.  I think the future of primary care may be in one of those models.  Frankly, it’s cheaper for patients to pay cash at a doctor’s office (even for very expensive visits) than it is to buy monthly insurance.  I think many more patients will be willing to pay cash as insurance rates skyrocket.  Some companies are also offering health-savings accounts in lieu of insurance – these could be applied to cash-pay office visits.  Frankly it is a win-win for both parties.  The problem is offering patients affordable catastrophic coverage in case of hospitalization…

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