By Jackie Kimmell, Senior Analyst
There's no question that physicians are among America's highest-paid workers: The typical U.S. physician earned $299,000 last year—about five times more than the median U.S. household income.
But that high average salary conceals a great deal of variation. So why do some doctors get paid two or three times as much as others (or more)? Here's what the research shows.
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Physician compensation has always been controversial. While some say that high—and rising—compensation is to blame for high U.S. health care spending, others note that physician wages only account for about 20% of total national health spending—and that high pay is necessary to compensate doctors for medical school tuition, malpractice insurance, long hours, and significant administrative burdens.
But regardless of how anyone feels about the appropriateness of physician pay, the data show that it keeps rising. Average compensation has increased steadily over the past seven years, which reflects, according to Tommy Bohannon, VP of Merritt Hawkins, the fact that "the physician workforce is relatively stagnant in terms of growth, [while] demand for physician services keeps rising."
Still, physician pay increases have actually been smaller than increases in hospital management pay. One study found a 93% rise in inflation-adjusted nonprofit hospital CEO pay from 2005-2015, and an 83% increase in hospital CFO pay. During this time, orthopedic surgeon compensation increased by 26% (which the study authors chose to represent the high-end of physician salaries), while pediatrician compensation increased by 15% (which was chosen to represent the low-end).
On the other hand, registered nurse compensation grew by only 3%.
Among physicians, the increase in compensation has occurred among both those who are employed and self-employed, although compensation for employed physicians is growing slightly more slowly—perhaps due to a greater use of productivity-based compensation models in the past few years.
To learn more about the changing landscape in physician compensation models, make sure to read our Report from the Frontier of Physician Compensation.
As would be expected given the basic forces of supply and demand, less-populated areas in the country tend to provide doctors with the highest salaries. According to Medscape's 2018 Physician Compensation Survey, physicians in the North Central region of the country tend to have the greatest compensation (at $319,000 on average), while those in the Northeast tend to have the lowest (at $275,000 on average).
By state, Medscape found doctors working in Indiana, Oklahoma, and Connecticut made the most, while those in Washington, D.C. made the least. This aligns with Doximity's survey of over 65,000 physicians which found that salaries in the cities where physicians were most interested in working—Los Angeles, San Francisco, and Washington, D.C.—also tended to have some of the lowest average salaries. For instance, the average salary in D.C. is 23% lower than Charlotte, North Carolina—the metropolitan area with the highest average salary.
According to survey data from Medscape, orthopedic surgeons had the highest average compensation of any specialty, followed by invasive cardiologists and radiation oncologists. Even so, only 51% of physicians in orthopedics said they felt fairly compensated, which was 4% below the average for all physicians.
The lowest-paid specialties—internal medicine, family practice, and pediatrics—reported earning less than half of the annual salary of those in the top. However, most of these fields have experienced greater-than-average growth in compensation over the last few years, with salaries for pediatricians and family medicine doctors 5% higher in 2018 than 2017. Advisory Board's Hamza Hasan and Sarah O'Hara believe this growth is largely due to more organizations adopting a population health-based approach and investing more in primary care.
Breaking down compensation by race and ethnicity shows that Caucasian or non-Hispanic white doctors earn more than those of other races. For example, the Medscape data show non-Hispanic white doctors earn up to 16% more than African American physicians. While choice of specialty likely plays into these results (African Americans are 13% more likely to go into primary care than white doctors), there may be other factors at play, including possible bias or less access to higher-paid specialties.
Medscape data also shows that female specialists earn 36% less than their male peers, while female primary care physicians earn 18% less than their male peers. While some of this likely comes down again to specialty choice (females account for 60% of pediatricians while only 8% of cardiologists) and a 10% greater likelihood of working part-time (less than 30 hours a week), there are also probably other factors at play. Advisory Board's Veena Lanka, for instance, says that part of the difference comes down to a lack of maternity leave for female physicians and inflexibility in the workday and workplace for breastfeeding and pumping.
Physician employment has been on the upswing, and according to Medscape's 2018 report, 69% of physicians are employed. These employed physicians tend to earn less than their self-employed peers (28% less in 2017), although they report facing fewer of the administrative or business demands of their counterparts.
Just over a quarter of physicians report participating in accountable care organizations (ACOs), significantly fewer than reported being involved in 2017 (36%) and 2016 (31%). And, despite the hype about concierge and cash-only practices, only 2% and 5% of physicians, respectively, reported being involved in these payment models. However, those that did reported making anywhere from $13,000 more (for just concierge) to $85,000 more (for both models) than their peers who were involved in neither.
Finally, just more than a third of physicians reported that they expect to participate in MIPS, and even fewer plan to participate in alternative payment models (APMs) under MACRA. However, this number will likely increase as, according to Advisory Board's Naomi Levinthal, CMS is planning to broadly expand the definition of MIPS-eligible clinicians in the coming years as the program expands.
To learn more about new physician compensation models, like guaranteed salaries and value-based models, make sure to download our Report from the Frontier of Physician Compensation.
Then, learn more about how your organization can attract physician talent without necessarily raising salaries—though tactics like ensuring a sustainable work-life balance and offering excellent training. Discover the four requirements for successful recruitment in today's competitive market with our research brief, Win the War for Physician Talent.
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