Do Doctor’s Get Paid Too Much ? Part 1

Stanley Feld M.D.,FACP,MACE

On July 29,2007 Alex Berenson wrote a lead article in the Sunday New York Times business section entitled "Sending Back The Doctors Bill." I believe everyone should be exposed to all opinions. However, Mr. Berenson’s article needs rebuttal because he simply does not know what he is talking about.

In my view the quality of the news in the New York Times has deteriorated recently. Alex Berenson is producing yellow journalism. It is sensational and does not accurately address the problems in the healthcare system. Following on the heels of “Sicko” and the misinformation and disinformation contained in Michael Moore’s film. Mr. Berenson’s article can make people believers of the wrong conclusions. A review of Mr. Berenson’s recent articles confirmed my opinion of his sensational reporting tendencies.

This article confuses the issue of how to repair our dysfunctional and broken healthcare system. I had hoped there would be resounding public outcry against his article. Unfortunately the response was meager. I have struggled with my response because the physicians’ incomes are not the problem in the rising costs of the healthcare system. In fact, cognitive physicians (internists, and family practitioners) are not paid enough. The hospital fees, the insurance industry fees, and the exorbitant administrative fees and inefficiencies of the hospitals and insurance industry are the problem.

Let us do some math. Health costs are now $2.2 trillion per year and rising in the U.S. Physicians’ gross revenue represents about $500 billion per year of the total exclusive of overhead. The $500 billion dollars in revenue represents 22% of the healthcare costs. Therefore 78% of the healthcare cost are spent in other places. Medicare has proposed a 10% reduction in physicians’ reimbursement in 2008. Since the insurance industry adjudicates the claims for Medicare they will also try to reduce payment by the same amount for the private healthcare insurance policies they service. A 10% reduction is $50 billion dollar or 2.3% of the healthcare expenditures. The 2.3% reduction represents an insignificant reduction in the overall cost of healthcare. This reduction will generate much pain and resentment. The cost of care reduction must come from areas that generate the other 78% of expenditures. The other stakeholders have been responsible for the yearly increase in healthcare costs while physician reimbursement has decreased. A $4,000 to $30,000 a day hospital charge should raise some eyebrows.

The physicians’ payments are not the cause of the rising healthcare costs. It is the insurance industry’s fees, insurance industry’s administrative waste and salaries as well as hospital fees, administrative waste and salaries. If we knew their costs (price transparency) and we saw their profits and we forced them to eliminate waste, we would truly reduce healthcare costs.

The only way to accomplish this is by adequate governmental rules, and a consumer driven system to stimulate competition.

If we are going to have a conversation about the ills of the healthcare system this is where Mr. Berenson’s energy should be expended. Mr. Berenson has created a smoke screen with sensational reporting to distract the conversation from the real causes of increase costs to the healthcare system.

Mr. Berenson says,

“But many health care economists say both sides are wrong. These economists, some of whom are also doctors, say the partisan fight over insurers and drug makers is a distraction from a bigger problem: the relatively high salaries paid to American doctors, and even more importantly, the way they are compensated.”

He then goes on to say that “Doctors in the United States earn two to three times as much as they do in other industrialized countries.” We should probably earn more if we compare incomes and the necessary skill level required in medicine to the salaries paid to less comparable skill levels in other industries in the United States of America.

The temptation of practicing physicians is to become defensive about their income. In my mind all the defensive arguments are valid but unnecessary. It has become easier for physicians to communicate with people and each other since the advent of blogging.

Richard Reece M.D. says

“Given the years of training that doctors require, the stress, and the responsibility of their jobs, few would disagree that they should be well paid. In addition, with a year of medical school now about $30,000, many doctors leave school deeply in debt. And many doctors would argue that cutting salaries would only persuade talented, college graduates to pursue better-paying professions. These actions will worsen the doctor shortage. Presently this shortage is estimated to be about 50,000 physicians. The shortfall has been quoted to be 200,000 by 2020.”

Ask yourself, why would any bright young person spend 11 to 15 years preparing for a profession in which systematic fee reductions are guaranteed ?

Dr. Rob Oliver in Plastic Surgery 101 nailed it.

“Completely missed by the author (Mr. Berenson) is both the expense of training physicians and the "opportunity costs" invested in becoming a Doctor by highly educated people in their early twenties.”

“For sake of comparison I'll use myself as an example:

• Tuition and living expenses during college ~ $150,000
• Tuition and living expenses during medical school ~ $85,000
• Average wage during my intern year in 1998 ~ $5.80 /hour
• Average wage my 8th year in surgical training in 2005 ~ $9.75 /hour
• Spending ages 22-35 in the library or hospital ~ PRICELE$$

It is important to note that Dr. Rob Oliver is a young physician. I applaud his frankness. In the past, policy wonks have used the argument that young physicians will not have experienced the “golden age of medicine”. Therefore they will not know any better. I believe the policy wonks are going to be in for the surprise of their life. Bravo Rob Oliver!

How do you calculate how much someone is worth? How much is Barry Bonds worth? How much is Kobe Bryant worth? How much is Paul Levy CEO of Beth Israel Hospital in Boston worth? $1.2 million dollars a year? He thinks so. How much is the CEO of United Healthcare worth? $1.8 billion dollars? How much are the CEO’s of Fortune 500 companies worth? Are any of these people worth more than $150,000 per year?

How much is the discovery and effective treatment of an illness that saves a life worth? These questions are not questions that are going to be answered by Mr. Berenson’s yellow journalism. They are also not questions that are going to be answered by academic policy makers with little to no clinical experience in the trenches. They are questions to be answered by the marketplace. The sooner we understand these questions the faster we will be able to develop a formula to repair the healthcare system.

Consumers understands these questions, especially when they become sick. However they have been rendered powerless by our present healthcare system. The people are going to have to drive the repair of the healthcare system. Government policy should be to express and service the needs of the people efficiently and effectively. Government policy should not be driven by facilitators’ vested interests.

Comments

[dr. rob oliver]

Thank you for the props Dr. Feld.

What I was trying to explain to lay people is this disconnect Berenson had with what it costs a person to become a Physician.

I love what I do, and I'm a 4th generation surgeon, so I kind of knew the score going into medicine. But suggestions like that NYT piece just miss the boat with the workforce in medicine and just how fragile the system is.

[Marc Chasin, M.D.]

I enjoyed your post. As a physician I wholeheartedly feel that we are underpaid. Time value of services is the norm in healthcare. There is no consideration for risk and malpractice coverage. We, as physicians are posed as the scapegoat when in all reality we give more free care away that the average business does.

Marc