Productivity vs Fixed Physician Income Consequences Explained.

For centuries, physician practices have been small  business enterprises built on the sweat equity of intensive medical training.  It was an economic reward system that often had physicians sacrificing family life for patient care.  It continues today as the  foundation of  fee for service.  We know it as the eat what you kill model of health care.

In the last ten years, physician practices have seen a dramatic shift from independent business practices to hospital owned practices. With  that shift has come a titanic move toward the fixed salary as  opposed to  productivity  compensation model based on RVUs generated with different CPT® codes.  Review the AMA's CPT 2014 Standard Edition as the definitive authority on CPT® coding, available below and to the right from Amazon.

Is this a good thing?  Is a salaried physician better than a productivity based physician? That question can't be answered because good depends on which part of the medical industrial complex you belong to and what you consider good.

As a physician, the answer on whether to become a salaried vs productivity based physician can only be answered after one defines what they value most.   We know, across the board, that physicians who work in a 100% productivity model earn the highest income in their specialty and often by a large degree. However, on average, they also see the most patients and work the longest hours.  That holds true whether one is a hospitalist, a pediatrician or a surgeon.  Even the SHM hospitalist salary  survey of 2010 and 2011 strongly confirms the association between higher take home pay and a productivity based compensation model for physicians.

Productivity is most often defined  by the relative value unit (RVU) system using the constantly changing work RVU (wRVU) and total RVU (tRVU) components.  The more patients one sees as a physician, the more RVUs one will generate and the more income one is going to earn, on average, in a productivity model. It also brings incentive for physicians  to include higher RVU valued procedures as a normal scope of their daily practice. Higher income will follow assuming stability of other  input variables such as payer mix and overhead expenses.  

For the most part, the generation of higher hospitalist RVUs  probably explains most of the difference in take home pay between the salaried hospitalist or doctor and the productivity based hospitalist or doctor. Salaried doctors, on average, generate fewer RVUs than productivity based doctors. The question of whether that increased productivity leads to better care is endlessly debated by the wonks in the chocolate factory.  Some folks believe that all physicians should be salaried to minimize economic incentives in health care.  Again, that comes with benefits and risks to patients and unintended consequences that are under appreciated.

For example, I remember my days in residency training at the VA hospital.  One resident colleague of mine used to schedule dead people into his clinic, month after month, to make sure he had "no shows" in the clinic.  This is taking the salaried model to the extreme, but the concept of seeing less patients under a salaried model is exposed for what it is.  If money is not going to be the motivation for physicians to see more patients, than what will be?  Grocery stores doe not accept thank you notes as payment in full for a bag of tomatoes.  Just the other day, I spoke with a local salaried physician.  This is normal human psychology at work.
Happy:  I'm sorry to interrupt your day, but I wanted to discuss a mutual patient of ours
Doctor:  Don't worry, I had a no show and am free for the moment.
Happy:  I'm sorry.  I know, back in my residency days, no shows were "gifts".  But in your world of private practice, no shows are a business expense.
Doctor:  Don't worry.  I'm salaried.  This no show is a gift.
Something for the hospital and  policy folks  to think about in the psyche of the physician mind.  We are no different than the guy on the factory floor.  If you salary a physician, they will stop working as hard and there is nothing that can be done to fix that.  And to think, all this just as the baby boomers are heading for peak mass.  We are definitely living in interesting times.  Make sure to visit my other hospitalist resources filled with information important to your practice.


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