Why are some docs getting the shaft?
Two family medicine docs do the same amount of work. One of them earns $60,000 more than the other.
What gives? Why are some docs getting the shaft?
This post examines why Dr. Lucky earns $60,000 more per year than Dr. Shaft, even though they’re equally productive.
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Why are some docs getting the shaft?
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Dr. Lucky and Dr. Shaft are both family medicine physicians. Their productivity is nearly identical. Both perform about 6,000 work RVUs per year. However, Dr. Lucky takes home $300,000 per year in compensation while Dr. Shaft takes home $240,000.
The $60,000 difference in their compensation is explained by three factors.
#1 Factor: Reimbursement (75% Impact)
About 75% of the compensation difference is explained by reimbursement. Dr. Lucky’s commercial contract rates are better than Dr. Shaft. Dr. Lucky’s overall average commercial contract rate is 138% of Medicare while Dr. Shaft’s rates are about 125% of Medicare.
For the same work RVUs, Dr. Lucky’s collections for personally performed professional services were nearly $45,000 HIGHER than Dr. Shaft.
#2 Factor: Medical Assistant Staffing
About 19% of the compensation difference is explained by medical assistant staffing. Dr. Lucky staffs 1.2 full-time equivalent medical assistants per provider at $18.50 per hour. Dr. Shaft staffs 1.5 full-time equivalent medical assistants per provider at $17.76 per hour.
For the same amount of work, Dr. Shaft’s medical assistant expenses are over $11,000 higher than Dr. Lucky.
#3 Factor: Employer-Sponsored Health Insurance Premiums
Dr. Shaft pays about 16% more in employer-sponsored health insurance premiums per employee than Dr. Lucky. Dr. Shaft pays about $11,400 per employee compared to Dr. Lucky’s expenses of about $9,850 per employee.
In total, this impacts Dr. Shaft’s compensation by about $8,300 per year.
Cold Hard Math
Business is ruthless, but it’s not complicated. Cold hard math explains why physician compensation can vary 25% or more for docs with the exact same productivity.
Dr. Lucky takes home about $50 per work RVU, while Dr. Shaft takes home about $40 per work RVU for the same amount of work.
You may be surprised to learn that Dr. Shaft actually has lower overall office rent expenses than Dr. Lucky. Yet the combined financial impact of the three factors above (collectively $64,447) outweighs the marginal difference in office rent expense.
This is just one example. Health-Contract.com has identified 11 factors that explain over 99% of the variation in compensation between physicians.
11 Factors Explain 99% of Compensation Variation
1) Work RVU productivity
2) Reimbursement rates
3) Payor mix
4) Office vs. facility-based service mix
5) Office space per provider
6) Office rent rate
7) Support staff ratios
8) Support staff wages
9) Employer benefit expenses
10) Geography
11) Malpractice expense
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