How Much Money Do Doctors Make For Their Hospital?

A reader sent me a link to a revenue survey by Merritt Hawkins in 2010 called the  Inpatient/Outpatient Revenue Survey.  This survey discussed  how much money doctors in revenue    for their hospital based on their specialty.  You'd be surprised who's highest and who's lowest.  Hospitals are on a buying spree, snapping up physician groups left and right.  Why?  Because the laws of economics still apply to hospital based medical care.  It's all about market share.  If you have five hospitals competing with each other within a 60 mile population radius, the only way they are going to survive is by keeping their beds filled with death and disease and by driving revenue year over year.

In the current fee for service model of care, hospitals only get paid if their beds are occupied.  They don't get subsidies like farmers.  They don't get social security like the elderly.  If the beds aren't full, they don't get paid. Administrators get fired.  Nurses lose their jobs and nd the cleaning crew loses their pension.  So why are hospitals buying physician practices?  Is it because the physicians are failing or because hospitals need them for a guaranteed revenue stream?  Hospitals don't take care of patients, physicians do.   Hospitals don't own patients, but most patients will loyally follow their physician to the hospital of their choice.  Many patients will go to the hospital where their physician tells them to go.  It's as simple as that.  That's the way it has always been.   If the physician is owned by a hospital, the patient is owned by the hospital out of default.  

Imagine if you have a small town doctor involved in a dispute with their local  hospital.  Piss off the doctor and he'll just send all his patients to the next county.  It happens.  Hospitals need physicians much more than physicians need the hospital.  Why? Because there is always a hospital down the street with a nicer doctor's lounge and a cl amednews oser doctor's parking lot waiting to welcome new revenue with open arms.  Hospitals bend over backwards to keep physicians happy because that's were the money is.  You've got to be wondering how lucrative us physicians are to a hospital to want us that badly.  On April 6th, 2010, published a report from Merritt Hawkins showing how much revenue, on average, every specialty made for a hospital.  You'd be surprised who's highest and who's lowest.  Why is this survey important to hospitals?  As Merritt Hawkins explains in their report:
The survey is intended to provide benchmark data hospitals can use to develop a “quantitative analysis” of their physician recruiting programs. A quantitative analysis as defined by the U.S. Internal Revenue Service (IRS) establishes the financial benefits that newly recruited physicians may bring to a hospital. These benefits may support the hospital’s mission of providing quality care to the community by creating revenue streams necessary to its continued or its enhanced operation.
It is of course, all about money.  Here are some highlights from the  Merritt Hawkins 2010 Physician Inpatient/Outpatient Revenue Survey showing revenue per physician per hospital per year.  These numbers are not how much money the physicians earn. These numbers are revenue for the hospital.   
  • Neurosurgery: $2,364,864 
  • Invasive cardiology: $2,240,366
  • Orthopaedic surgery: $2,117,764
  • General surgery: $2,112,492
  • Internal medicine: $1,698, 341
  • Family practice: $1,622,832
  • Heme/Onc: $1,485,627
  • Gastroenterology: $1450,590
  • Urology: $1,382,704
  • Ob/Gyn: $1,364,131
  • Noninvasive cardiology: $1,319,658
  • Psychiatry: $1,290,104
  • Pulmonology: $1,204,919
  • Neurology: $907,317
  • Pediatrics: $856,154
  • Ophthalmology: $842,711
  • Nephrology: $696,888
These are strict revenue numbers. I suspect a big driver of the absolute revenue is the volume of service generated by each specialty and the case based payment rate, ie the RVUs generated for each admission.  I suspect hospital revenue for internal medicine is greater than most of the subspecialites because they are involved in a much larger percentage of the patients.  Neurosurgery is highest, not because they see the most patients, but because the case based payment rate per patient is much higher.

The report lists a side-by-side comparison of revenue vs salary for each specialty.  The data is telling.  While internal medicine is one of the greatest drivers of revenue, it is one of the lowest paid specialties.   Why is that?  It's because the way physicians are paid in Medicare Part B and has nothing to do with how much value they bring to a hospital's revenue stream.  Physician practices are valued not in how much revenue they can generate under Medicare Part A, but rather how much they can generate under Medicare Part B fee for service. 

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