The media often reports that doctors are dropping Medicare patients because they are “losing money on Medicare.” Given the vagaries of the Medicare fee-setting process, it’s definitely the case that certain medical procedures are under-reimbursed, and that others are over-reimbursed, creating winners and losers within the medical profession. More generally, do doctors really lose money by simply seeing a Medicare patient for an office visit? This American College of Physicians blog post claims that is the case.
It’s possible to perform some simple calculations to check the veracity of this claim. Assume that a doctor sees 16 patients a day for half an hour each, for 8 hours of patient time per day. With two hours of overtime work that makes for a 10 hour day, or 50 hours per week. That’s busy, but not an uncommon workweek for many professionals in the US. If the physician works 48 weeks per year, 5 days a week, that’s a potential 3840 patient visits a year. Assuming a 10% vacancy rate in appointments, whether due to cancellations, additional vacation, or otherwise, this leaves 3456 appointments per year.
Medicare reimburses office visits at around $85 per visit , though precise reimbursements vary by region. At $85 per visit, a primary care physician seeing nothing but Medicare patients could expect to receive $293,760 in annual reimbursements. Subtracting out the physician’s annual overhead provides an estimate of the physician’s salary. According to this physicians’ overhead spreadsheet, 50% is a good target for a primary care physician’s overhead. Overhead cannot fall below 100-150k for most physicians, as many expenses are fixed. This would leave our example physician with net income of roughly $147,000 annually.
This isn’t a terrible income, as it’s more than triple the average American income, but it is slightly less than primary care physicians’ average pay nationwide. These numbers do show conclusively that it is possible for a family practice physician to make a living on Medicare patients alone!
While Medicare reimbursements may be sufficient for a primary care physician to make ends meet, what is the situation with Medicaid reimbursements? Medicaid pays significantly less than Medicare, with reimbursements averaging roughly 60% of Medicare. This implies that Medicaid would pay less than $50 for an office visit. If our example doctor saw only Medicaid patients, they would gross $172,800 in annual reimbursements. Unfortunately, overhead costs tend to be fixed, so the doctor would still have around $147,000 in overhead, leaving a net income of only $26,000! This helps explain why only 40% of doctors nationwide will accept all Medicaid patients.
With hard work, it is possible to make an extraordinary living even from Medicare and Medicaid reimbursements. I know a family practice physician who works incredibly hard, seeing patients 6 1/2 days a week for 10-12 hours a day, and averaging close to 40 patients a day! He lives in a poor community with many Medicaid patients, but his patient volume (due in part to his efficiency, seeing a patient every 15 minutes) makes up the difference since overhead is relatively fixed. By having over 12,000 appointments a year, this doctor is able to take home roughly half a million per year, likely in the top 1% of all family practice doctors nationwide. While this cannot be expected of all doctors, it is possible to make money while serving the poor on Medicaid!
 This link provides example reimbursement amounts for pediatricians in Colorado based on both Medicaid and Medicare schedules. While reimbursement varies by type of procedure and geography (Medicare bases reimbursement in part on local costs), $85 seems appropriate based on this data. Physicians are sometimes able to bill multiple codes for a single visit, increasing their potential reimbursement.
73 thoughts on “Do Doctors Really Lose Money on Medicare?”
The bottom line is that people should become much more proactive in maintaining good health, thereby going to the doctor’s office and hospital as little as possible. Patients are not responsible for “forever” reimbursing doctors for their decision to become doctors, and the cost of maintaining their offices and medical equipment. Many college educated people have made similar choices and yet, payment for their education, offices and homes are theirs alone. And, these financial burdens seldom factor into their career salary worth.
In regards to the time the average doctor invest in his patient, I have never met one person who a doctor has spent more than 15 minutes with- including cancer payments. Time is money. Doctors are people not Gods. The hippocratic oath means very little these days only money. We go to the doctor and few, if any, are cured. We are simply held up each month by poisonous medications. The medicine that maintains us in one health situation destroys a vital organ or organs.
As for doctor visits and payments. The billing for medical services provided by doctors is often woefully incorrect and a scandalous lie. New office visits are often 3 to 4 times the average office visit cost and the doctor often doesn’t do a thing. His office staff may take your blood pressure, your weight, stick you in the finger, if you’re diabetic. Somehow, the doctor bills his patient $270.00 for these few services. But that is not the end, The doctor charges even more for the little medical services that you actually receive. Such as a flu shot, electrocarnigram, or inspection of your toes.The final new office visit to the patient is now $355.00.
The patient has no allies in Congress, State Legislatures or insurance commissions. Patients have no lobbyists to bring about fairer laws or legislation and no money to give politicians for their reelections. With no help from Medicaid, Medicare and state and federal agencies, you can bet it will only get worse. The medical financial burdens of people in this country will undoubtedly become worse, challenging their health, as well.
if i were going into primary care. i would not take insurance, medicare or medicaid. i would require a payment to reserve an appointment time (non-refundable). it would be a fair amount and transparent to the patient. i would never want a medical insurance company or the government telling me how much my service is worth. i will advertise my price, patients can pay if they want, or find another physician. i hate that my years of hard work and medical training will go to waste – if im asked to spend some 25-30% of my time running a claims operation for the government of blue cross. insurance and medicare should be used for catastrophic instances, not to pay the doctor. would you use homeowners insurance to pay for a plumber? would the plumber take what the insurance company tells him to? i see medicine as no different. pay the cost, or find another provider. i want to spend time with my patients. the 10 minute appointment is the death of medicine and i don’t want to be that kind of doctor.
If you can”t even CAPITALIZE a sentence and write coherently, I would loathe to come see you as a patient. I don’t know what kind of education you have, but you write worse than any professional. I absolutely have NO CONFIDENCE in you at all, no matter what you charge. You can’t PAY ME to come see you!
I don’t know where you get the idea that Medicaid reimburses office vists at $80+; that’s simply not true. Try $20-$30 for a primary care office visit, and around $40-$50 for a specialist. This in a world where you have to pay a mechanic $75 to get a diagnosis on your car.
I just wanted to comment on your friend that sees 40+ patients a day and grosses $500,000. Is it that he is a hard worker or that he wants to make a lot of money despite the quality of patient care. I was recently contracted to covere a couple pediatric offices in a small underserved town. I saw 40+ patients a day. The first few days were stressful trying to meet the quality of care I am use to offering parent during sick and well child visits. As the days went on I was not able to keep up and had to practice as the physician I was covering recommended. Minimal charting and giving patients what they want (ex. over prescribing antibiotics). I left feeling sad that the population was not receiving quality care and education. Many of the parents told me that their physician had never spent that much time with them and they never could ask general questions (ex. during well child visits, which a large purpose of the well child visit is to cover parents questions and concerns, parental education). I spend 30 min on medicare physicals easy and believe me those patients want more time. Physicians go to school for many years and their training is rigorous. You can say that other doctorate degrees require more and get paid less, but caring for peoples mental and physical health is strenuous, and it takes dedication and diligence to practice medicine ethically.
No, they do not.
Doctors that choose to accept Medicare or Medicaid already expect to be paid in accordance to the standard benefits offered by those agencies.
Sure, but they don’t expect to be screwed by Sequestration or cut backs on SGR!!!
However, you do not even factor in the vastly I creased amount of time it takes to see a Medicare patient and the greater amount of forms and paperwork needed to be completed. The doctor would be seeing less patients already with visits taking longer and would either have to hire someone else to do this added secretarial duty or see even less patients. Your data is skewed pro-medicare
When I initially commented I clicked the -Notify me when new feedback are added- checkbox and now each time a remark is added I get 4 emails with the same comment. Is there any manner you possibly can take away me from that service? ThanksRepliche Omega De Ville Co Axial GMT Orologi
Food for thought, Medicare reimbursement is different based on the type of PCP you are as well. I’m a Family Nurse Practitioner and I take a 20% reduction off the top. So with our practice of 2 midlevel providers and 1 physician, Medicare is a money loser for us.
Great article detailing a family physician in Maryland, and how his income has dropped from over 300k to 130k as a result of reimbursement cuts and spiraling expenses.
On page 3 of the article, we finally find out what’s killing his practice: he has $420,000 in total practice expenses, most from 10 part-time employees! So his practice’s gross revenue is $550,000 – and he nets very little, even though he owns his own building, because he has too much overhead. At the end of the day, this comes down to how efficiently you run a business – if he could halve his overhead, he’d be right back to making north of 300k per year.
Can it be done? I know multiple other small town physicians who do it today. While the hassles and bureacracy of insurance have increased, no solo practice should need 10 employees. Ironically, Dr. Sroka (from the article) would probably do better if he turned down all insurance EXCEPT Medicare, as he could reduce his overhead by 80% by dealing with only one insurer, while likely reducing his revenue much less, as the article states that most of his patients are on Medicare.
I am 73 and my pcp quits and I go to a new physician in town that is accepting medicare. My first initial visit was 15 min. My next visit (for something that ails me) was 15 min. Two other visits were the wait 2 hour and she sees me for 5 min. Along with that an xray that should have been taken 3months before was finally done and then she wants not want me to go to a specialist.
How does this apply to the topic? Well,if you calculate the per hour rate on my visits the 15 min visit is $340.00 an hour and the 5 min is $1020 an hour. Not bad.
Med school costs and start up costs. Hey, if you wanted to go to college and your parents didn’t have the money then you got student loans. If you wanted to start your own business you got a loan if you didn’t have enough capital.
I think one point that has been made in these posts is that years ago doctors WORKED. It seems nowdays doctors want the money first and then maybe work.
By the way, when you are over 65 and the only insurance you can get is medicare I don’t like to hear the doctor is not making money by seeing me.
You know, Rimrock, you’re right. Your doctor doesn’t deserve you. I recommend you leave her and her millions and find another doctor that appreciates you more.
I would seriously doubt that that ever comes to pass. We are constantly under threat of having our reimbursement CUT by 10-25% every year by CMS. I wouldn’t forsee a significant increase in the future.
I also wanted to take issue with one of your comments fro earlier in the year:
” I agree the PCPs should probably be able to see more than 16 patients a day….An incredibly hard-working and efficient doctor might be able to see 4 or more patients an hour, and some do – I noted one example above!
Efficient, maybe, but I would call that physician incredibly lazy, spending a trivial amount of time on patients that deserve more but don’t know any better.
Michael, I’m not referring to SGR cuts where Medicare total reimbursement is deeply cut – I’m referring to reimbursement changes similar to those enacted by rule in 2009. Cardiologists and radiologists saw their fees drop about 10%, while PCPs saw their reimbursements rise by 7% on average.
Click to access E9-15835.pdf
See table 39 for details.
You’re correct that the big across-the-board cuts are unlikely to ever occur. But I wouldn’t be surprised if CMS makes more cuts to imaging and other services that are handsomely reimbursed today.
Michael – a bit more on the doc seeing the high patient volume: he’s a pediatrician, so he really can churn through high volumes of sore throats, flus, colds, etc in the winter and so on without sacrificing much. That is perhaps how he’s been able to make the volume (and revenue) work while having so much Medicaid in the mix. Incidentally, I recently came to know that this particular pediatrician still takes direct patient phone calls – on his home phone. I don’t know a single other doctor that does that anymore. Now that’s customer service!
I do. But that’s for self-pay patients who pay a subscription of $99/3 months for email, telephone, text, and videochat access, and disease management of chronic, stable illnesses. Of course, that also pays for their labs…great for chronic disease management.
Michael, I just looked at your site – http://www.doc2me.net. I’m very impressed to see that you’re embracing technology, and embracing direct-pay medicine. It’s great to see doctors that are eschewing the traditional structures, and in essence taking medical practice back to basics in a sense – serving their actual customers, the patients!
I hope it’s going well for you, and I hope to see this sort of service expand.
Wow. $85 per visit? If that were the case I’d drop all of my private insurance and only see medicare. Statitistics are all well and good, we all know that we can bend then to support anything we want. I am a family physican in NJ practicing for over 10 years, and I can tell you that I do not make even close to that for a visit. It’s closer to $50. So argue your statistics and send me to all of the links you want- it’s simply not reality. Follow up visits are much more common than new visits- you can only charge a new visit once obviously. And 1/2 hour/patient? That would be a luxury. Sure, and then watch me lose patients when I can’t see them for 2-3 weeks because I’m only scheduling one every 1/2 hour. Then when I do schedule every 15 minutes to try to accomodate patients (and make a deserved income God forbid), I’m told that the wait is too long. It’s a lose/lose situation.
Jim, thanks for adding your thoughts. Let’s do some quick math with your numbers: at $50 a patient, with 15 minute intervals, you can make $1600 in baseline office revenue a day by seeing patients for eight hours. Assuming you need two more hours for paperwork etc, that makes for a 50 hour work week. If you work 50 weeks per year, that’s $400,000 per year in gross revenue.
Using the numbers from my original post – if 50% of that is consumed in overhead, that leaves you $200k in income. I’ve left out collection rates, copays, other billables, and a whole host of other things here, but the simple point is that you can make ends meet with that kind of revenue. Did I say it would make you rich? No. Medicare rewards some procedures (too) handsomely, but not office visits. But does it pay GPs enough to operate a practice and make a reasonable income? Yes. One positive development is that CMS is slowly moving in the direction of cutting specialist reimbursements, and using the funds to raise GPs reimbursements – hopefully that trend will continue.
That’s not true. My doctor will charge me a new visit every time if I haven’t seen him in a 3 yr. period.
Your basic philosophy seems to be that after a certain amount, you’ve made enough. And that seems to be the going government rate of $150K max for any kind of doctor.
Been in the military. Been in private. Military, after 20 years of paying them back, highest yearly income was $150K – gross. Not bad, but won’t go any higher no matter time served or rank. That is the top rate.
By no means is that my philosophy! I’m merely commenting on the fact that Medicare pays enough for office exams for doctors to get by – not to get rich. Medicare does pay some specialists enough to get rich on certain procedures, but that’s a different story.
I applaud plastic surgeons in that they earn most of their salary directly from customers, and I begrudge them not one bit. If doctors don’t like government reimbursements for healthcare, they can simply stop seeing government-insured patients, or demand cash only. It’s not Medicare’s job to pay the top rate – it’s Medicare’s job to get a good deal for taxpayers.
That was also the way I took your position, praveenghanta.
The original proposition was “do doctors LOSE money on medicare.” If Medicare pays 1 dollar, then the answer is “no.” But of course if it costs the doc 3 dollars to earn that dollar, then they’ll stop seeing medicare patients.
I recently read the string regarding economics of Physicians and Medicare patients. I can only state based on my experience that Medicare payments are overly generous based on economics. I am an entrepreneur in the Long Term Care niche with Medicare as the payor target and made significantly more than these providers as a result of Medicare largesse. Specifically, I owned mobile radiology businesses, medical supply businesses, and pharmacy provider businesses. Medicare is my largest payer at nearly 50% of collections, third party insurance 25%, hospital payer (Medicar Part A) 25%. The common industry fee schedule for my industry is Medicare 100% CMS fee schedule, third party insurance 80% CMS fee schedule, Hospital pays less than 80% fee schedule. Medicare pays within 14 days, Insurance and Hospital payers average 45 days with 5% bad debt. In what other industry does the largest, fastest pay customer with no bad debt pay the most for the product? My business operates at a 20% Net Income, My consumer base (the elderly) is growing exponentially, and Medicare continues to increase my rates. As a matter-of-fact a Private Equity group is currently purchasing a third of all providers nationwide at 7 times EBITDA in my niche because the Medicare business is so lucrative. I did not game the system, my point is that in my long term care arena Medicare is far too generous.
Your post does a great job proving that medicare overpays diagnostics,medical supplies and pharmaceuticals. This has nothing to do with the economics of running a medical practice. Since your field is is lucrative, medicare should cut your reimbursements.
Your facts on Medicare reimbursement and cost to run a Family Physicians solo practice office is wrong! The only true statement was that reimbursement varies on each physicians area of speciality and geographic location. $150,0000.00 a year or $12,500 a month for expenses to operate a solo Family Physicians office? Please enlighten us on how you came up with anything close to this figure! $12,500 a month is to cover rent, utilities, phone, malpractice insurance, slip & fall insurance, property insurance, licensing fee’s, independent Practitioner Association fee’s, office supplies, medical supplies, employee salaries and benefits, equipment supplies, equipment service fee’s, magazines and subscription fee’s, CPA fee’s, tax’s (property, employer tax, …) and miscellaneous items such as equipment, computer, building repairs and promotional/marketing fee’s.
Feel free to provide your own data on the cost to run a practice if you feel you have better numbers. My numbers are based on personal experience, and on the overhead percentages that I reference in the article above. Keep in mind that $150,000 per year might represent a single physician’s share of overhead in a group practice, and not the total overhead amount.
All this talk of money makes me sick! If docs want to make money, why not go become a hedge fund manager or wall street person? So pathetic for all the talk of money. Eye opening for me as a patient, having been so naive/gullible and trusting. Now I will have a $$ sign as an image when I look at a doc”s face. How sad!
Without a margin, there is no mission.
Everyone makes money. That’s life.
You can take that off your taxes as expense
You don’t “take it off your taxes”. You don’t pay taxes on that amount. It’s not like there’s a tax credit.
Overhead is overhead.
Sorry, I meant to say:
This is just another example of how you cannot simplify a business like medicine to profit=gross income-overhead.
I know this doctor who makes $X/year or that doctor that works 10 hrs a day 6 1/2 days a week or I cant get a doctor to answer the phone at 3 am. You make too many wrong assumptions based on anecdotal evidence.You cannot conclude that in order to make money on medicare or medicaid patients all a doctor has to do is see more patients, become more efficient or move to a rural area.
You cant use the neurosurgeon in NY or the ophthalmologist in Iowa to support your case. You don’t know their specific income/overhead to draw these conclusions.
If you were truly a student of statistics as you represent yourself, you would know that population statistics does not necessarily apply to a particular person. You yourself said”If we look at individual examples, they are all over the spectrum.”
I’ll end this post with the opening statement in my first post.
This is just another example of how you cannot simplify a business like medicine to profit=overhead-gross income.
Feel free to provide your own calculations – I’ve done my homework, as posted in the original article, and it speaks for itself. The only meaningful critique that you provided was around Medicare/insurance denials – if you have good data on that, I’d be happy to add it to my analysis.
You never responded to my first post.
I did indeed respond, here’s the link to the comment if you’re having trouble finding it:
I would like a response to my post. But first let’s return to the main question here. You ask if doctors really lose money on Medicare as reported by the media. In general physicians are paid by 3 sources.1. The govenment (medicare and medicaid) 2.Private insurance (BCBS,Aetna,United..) 3. Cash.
For most, medicare and medicaid pay the least. So if a physician sees a medicare patient instead of a BCBS patient for example he makes less money for that patient. He loses the difference in payment between the two. I believe that is what most doctors are saying.
Eyeguy – if you define things that way, then of course you’re right, taking a Medicare patient is an opportunity cost, since you might have filled that slot with a higher-paying patient.
But articles like this:
in which the doctor claims that Medicare is not covering his overhead, are either examples of hyperbole or very poorly run practices. If you can’t cover your office expenses by taking a Medicare patient visit, then I think your cost structure is too high.
At any rate, US government finances are such that the entire health care system is going to implode soon (whether or not the Dems’ plan passes). It will be very interesting to see what happens then. I have no idea. I think it will involve a great deal of fiscal pain for many specialists and hospitals that have built their business on “oddities” in the CPT reimbursement structure.
I agree. Any way things go, the situation in its present form is probably unsustainable. (Of course, I think the same thing will happen with a socialized system).
It never ceases to amaze me when I look at my health insurance premiums (around $15,000 a year). I realize that I could make just as much money if 800 patients paid me $400 a year to be at their beck-and-call, through reduction in overhead through the staff I could let go and the time that would be freed up by not having to follow an insurance company’s (or Medicare’s) documentation rules.
One amusing anecdote: I once had a patient make an oblique reference to “how much money he paid me every month.” I thought maybe he had a balance that was being worked out on monthly installments. I glanced at his superbill, saw that he had a zero balance. I asked him “what money?” I eventually figured out that he was referring to his BC/BS premiums that were coming out of his company’s paycheck. To this day, I *still* don’t think that he understood that, no, I don’t actually get that money every month 🙂
Or the average plumber?
I wish we could all have high deductible insurance with an HSA! That is precisely the system that Singapore implemented for universal insurance. Sadly, not likely to happen here.
But if we’re going to compare hourly wages, let’s not be disingenuous. We all know that plumbers make less than practicing doctors (not residents), even on an hourly basis. Here is the data from the BLS on median hourly wages:
Plumber: 21.65 / hr
Lawyer: 53.17 / hr
Family Practice: 75.60 / hr
These are broad based statistics based on interviews, and so that would include time for night calls, weekend calls etc.
I agree that PCPs are under-compensated, but they’re not paupers either. For a more complete analysis on the ROI (Return on Investment) of career paths, including medicine, which includes years of education, tuition, lost income, etc, take a look at the articles on my blog on that issue:
In your example the Doc is earning $61/hour. Given the professional education of a physician this is not good. What does the average attorney earn?
If all Docs spent 30 minutes with all patients there would be a 3 month waiting list to see one.
This is just another example of how you cannot simplify a business like medicine to profit=overhead-gross income. Your first assumption that physicians work a 50 hour workweek is not always true. What about call coverage for your patients? Your hard working friend, if he is in solo practice, works a lot harder than you think . He’s on call 24hrs 7 days a week. That’s an extra 4368 hrs a year. Factor that in and now he’s only making around $50 per hour. Now do the math for the average MD making $147K. Comparing a physician’s workweek to other professional’s workweek is absurd. How many lawyers,bankers, and accountants can you call at 3 am and get help?
You also dont take into consideration bad debt. What about all the denials of payment from medicare and third party payers? How about the interest lost in delayed payments from medicare? What about deadbeat patients that dont pay their copays or deductibles?
Your analysis uses information obtained from mature practices. What about new physicians? Opening an office today is extremely difficult. When I opened my practice 3 years ago I saw patients for close to a year before I saw a single dime from medicare. It took me months to enroll in private insurance plans. I had to take out a 5 year loan of $125 K just for start up expenses. Equipment was another $125K. Include that loan with my student loans and I am barely scraping by.
Of course all businesses have added complexities, and my analysis was intended to prove a simple point – that Medicare payments are sufficient to run a practice upon. Not the most profitable practice, but not one unable to keep the lights on or pay the mortgage, either.
If we look at individual examples, they are all over the spectrum. I know a gastroenterologist and a general surgeon who both walked into 3 year, $400k guarantees to go practice in a small town. I also know a family practice doc who joined a practice in metro Atlanta starting at only $120k. As for your case, starting a new business is always a challenge (I’ve been there), and I empathize even more with PCPs who try to do it.
Now – as for hours worked – you cannot count the entire year as hours worked for the purposes of determining an hourly rate. Further down the comments thread I pulled the official median hourly wage for Family Practice according to the Bureau of Labor Statistics, and it is around $75 an hour. While many doctors do take night calls, neither my own PCP nor my children’s PCPs do, and I think that’s fairly common these days. Other than my relatives, I can’t think of a single doctor that I can call at 3AM to get help! They’re a dying breed, I think. It’s a far cry from my father’s work schedule, I remember him getting up all hours to do trauma cases. But most docs just don’t do that anymore, as they are in large groups with set coverage schedules – and family practice doctors almost never have done so.
I’m not saying that doctors should take night calls, I’m just saying that we should count the hours actually worked – and if you do, as the BLS has, you will see the real median hourly wages.
With regard to bad debt and new practices, these are valid points. I am looking at mature practices. I don’t have any data on the rate at which Medicare rejects payments – but my impression is that they deny less often than private coverage, though I could be wrong. If you have anything to share on that front, please do.
Do you think starting a new practice in the present health care reform climate is advisable? Please answer ASAP if possible as I am on the verge of accepting a new job but the location does not work for my husband`s job.
There are so many variables to consider here, but I’ll just throw out a few: if you are considering total family income when looking at jobs, consider your husband’s job prospects at the new location. For instance, let’s say your husband is in technology, and he will lose his 100k job if you move to a small town. If a small town hospital offers you 300k, that’s the same as a 200k job in your current location, as it may be unlikely that your husband will find work in the new location.
A doc I know (interventional radiologist) is of the opinion that starting a new practice now is quite difficult, as hospital chains and other large providers are rapidly buying out practices and are no longer referring patients out once they have in-house staff. Joining a larger practice insures that you might be better shielded from this. The NY Times article at top corroborates this.
Last thought – starting a new practice is starting a business. If you are interested in that, and feel that you have or could gain the business acumen needed to successfully run your own practice, then consider it. If that’s not for you, then it may not be worth it.
I suspect that, in most cases, medical practices can die a “death by a thousand cuts,” just like any other business. I think that the real issue is the unreimbursed activity that we, as physicians, undertake. The 5 minute phone call. The forms that we fill out. The call to the “pharmacy benefit manager” to argue for a particular medication.
I bet that most practices that go belly up simply have too high overhead.
Of course, with the example of your friend who sees 40 people a day: I suspect that I would not personally want to see him for anything more than a sore throat.
I empathize with the PCP’s plight overall, and am not implying that they are over-compensated, or even appropriately compensated.
I do not empathize so much with the absurd way in which Medicare (and thus all) CPT code reimbursements are formulated, thus enabling certain specialties to game the system and make 3-5 times that of a PCP with only one year more training in some cases. I support the cuts that Medicare recently made to Cardiology and other specialty reimbursements – and it’s great that the money is being used to bolster PCP reimbursements. I think CMS should go much further to rebalance the specialties versus primary care.
That’s not to say that specialists shouldn’t be compensated for the extra training – but to say that you “earned” $750k instead of 150-200k because you did a two year fellowship? In reality that extra compensation is a mere glitch in the CPT reimbursement structure, and it helps perpetuate the overuse of overly-profitable codes by specialists. One hopes that CMS will continue to reform this. Not this is the biggest issue in health care right now – but that’s another story entirely.
I don’t want to turn this into a specialist versus primary care PHYSICIAN issue (just want to thank you for not using the word “provider” in your post).
I never thought you implied that physicians are overcompensated.
Your analysis is straightforward, although I’m not convinced that it applies to everyone. What DOES, however, apply to everyone are certain truths. If your business is leveraged by debt, you are in a weaker position. If your revenue source is controlled by a third party, you are in a weak position. If your overhead is high, then, yes, it will impact your income.
What is not said in OTHER blogs/article comments that I have seen about physician income, however, is the burden that comes with being a physician who takes Medicare (or really practices at all). It’s the constant worry that you might miss something, not just because of the risk of being sued, but because you genuinely care for and worry about your patients. Because if you told every parent of every child with a fever ALL the things that could be going on with their child, their hair would turn white. It’s because you know that hundreds of competing interests are pulling at the threads all the time, vying for your attention and therefore time…and therefore income. It is the knowledge that many of the “medicare for all” diehards mention the low overhead of CMS, neglecting the massive overhead that their physicians accrue due to dealing with the CMS bureacracy, vis-à-vis the electronic medical record farce. It’s knowing that CMS headhunter “RAC”s are circling like vultures, to look for any (perceived) mistake in coding that 99213 or 99214, so that 3 years of already-earned income can be recouped by a bankrupt system (and that said RACs are paid a percentage of what they fine you, resulting in a perverse incentive). It’s dealing with regional Medicare payers who issue their own interpretations of proper coding of patients charts. And it’s the knowledge that the majority of my time is spent documenting in a medical record that is, in truth, a billing record, not a medical record.
Now, all of those things go way, way beyond the scope (and intent) of your post.
Now, can we just give everyone high-deductible insurance with HSAs, and get rid of Medicare and third-party insurance? Please? 🙂
Well said. It is a matter of degree, and my basic point was simply to refute articles which state that doctors can no longer make a profit seeing Medicare patients for office visits. Patient mix, volume, location of practice, overhead efficiency, etc will all be factors in how well any particular practice performs. You note that a complete Medicare practice would see many complicated patients – but that should entail more 99214’s and even some 99215’s, should it not? And the half hour per patient that I put in my estimates is quite reasonable even for a more complex patient, I think.
At the end of the day, there will be a spectrum of practices, from those barely scraping by or folding up, to those doing quite well even in a lower reimbursement environment. But the basic point of my post was that a PCP can make a living close to the average for the field while seeing virtually nothing but Medicare patients.
One thing I will say is this – when I hear about docs struggling to get by, it does amaze me a little bit. I grew up in a small town – my father moved there to practice because it was underserved, giving him an opportunity. There are thousands of small towns across America capable of supporting lucrative medical practices, but with few doctors. I know it may be less fun to work in the middle of nowhere, but sometimes we have to go where the work is!
In my state, the total reimbursement for a sore-throat type of visit, a “99213”, by Medicare is $61.82. Yes, the Medicare patient is required to pay 20% of that amount. The $61.82 is the TOTAL received for the visit. A 99214 “moderately complex” visit pays $91.95.
It’s very difficult to compare between practices. You use your friend who nets half a million dollars a year as an example. A lot of that has to do more with PATIENT mix than PAYER mix. I’m sorry, but a completely-Medicare practice would entail very complicated, at risk patients as a whole, who require a lot more time.
The easy answer to your question is that, no, a doctor does not lose money on a Medicare patient. Neither would I lose money if I netted $1 in an entire year of caring for people. It’s all a matter of degree.
I disagree that physicians are overpaid, and that other Ph.D degrees are more difficult. How can someone compare studying two foreign languages with the skill of a neurosurgeon? Or an oncologist?? Doctors have to make decisions about life and death matters every day.How often are lawyers sued for malpractice? You cannot even compare the two professions.
Sorry, but you are wrong. I am a family physician. My average reimbursement per patient is about $90 – that includes all insurances. I take home $125K. If I only saw Medicare, my average reimbursement would fall to about $75, and my income would fall to about $80K, because overhead is fixed – it is not a percentage of anything. You can work it out to be a percentage at any given time, but you cannot use that percentage looking forward if you change any of the other variables.
Thanks for your comment. Are you including all copays in your Medicare reimbursement number of $75? If not, cash copays might bring that up to right around my estimate.
I have updated the article to state more clearly that overhead cannot fall below 100-150k for most physicians, as that’s obviously the case. I did state that later in the post, but not clearly enough.
If your average reimbursement is $90, and your take home is 125k, this implies that either your overhead is quite high, or you are not seeing a high patient volume. I didn’t make up the example about the family physician that makes 500k, I have known him for decades and am quite familiar with his practice. He is an extraordinarily hard worker and an absolute exception – but I think much can be learned from his example. Not every doctor can see 40 patients a day and keep overhead low (his office staff is 4 total including his wife), but it can be done!
I’m answering the physician who nets $125,00 plus the article and comments in general.
The thing that most physicians, and even the general public, don’t seem to be able to grasp is that they are, in general, grossly overpaid compared to most other individuals with doctoral degrees. In addition, it is much harder to obtain a doctoral degree in the law, sciences, math, or humanities than it is to go to medical school.
The hardest portions of the medical degree are completely unnecessary, “good-old-boy,” out-of-date, and dangerous hazing rituals, such as requiring doctors in training to see patients with little to no sleep.
In order to receive a Ph.D. (not in education), it is required to be able to read one and perhaps two other languages. The candidate often has to teach half the day. Some of the programs take 7-10 years. And then, after 14 years of education beyond high school, often the starting salary is $50,000-$60,000.
It is a myth that medical school is the most difficult doctorate. Law requires more analysis and better presentation skills, still with no guarantee of employment or salary at the end.
I wonder how long it will take the public to wake up to this.
Agree and disagree. I have both a PhD (in Physics) and an MD. The PhD was much harder than my MD. Once you are in medical school, the degree is almost a given. In contrast, the attrition rate was over 50% in graduate school. Unfortunately, the PhD degree is becoming worth about as much as the sheepskin it is printed on. Medical schools maintain rigorous standards. Graduate schools do not.
The cost of medical school was significantly higher. I paid nothing for graduate school. I had a research assistantship. People that actually pay for graduate school need to have their heads examined.
That being said, my life as a surgeon is infinitely harder than as a junior faculty member. I would not want to go to a physician that is being paid $50,000. And there is now shortage of applicants for jobs at universities.
I think it’s tough to assign “value” to a profession, and I don’t wish to do so here.
it’s an apples and oranges argument. But from my medical/apples side of things, I would say that the term “doctoral degrees” paints too broad a stroke. I’m sorry, but not too many with “doctoral degrees” carry the same day-to-day risk associated with medical practice. And while you argue that “The hardest portions of the medical degree are completely unnecessary…” many others would disagree. Including me. (Not the grueling 100 hour work weeks, though.)
Physicians get what they can get. That much is true. What is also true is that many don’t get as much as others think they do.
Your overhead estimate of 50% is flawed. WHile PCP overhead averages about 50-55%, this assumes a better payer mix than just Medicare. Overhead is relatively fixed and is not expected to be adjusted downward if re-imbursement falls. For a physician’s salary to make sense as an economic model, you have to also account for the costs of education that have to be payed back with interest, and the oportunity costs lost with typically 7 additional years of full time training after college. During these years, no income, no savings for retirement, no savings for you children’s education. Then when a doc finally is fully paid, they are paid well, and consequently, a larger portion of their income is lost to taxes than someone who was paid 20% less, but had a 25% longer career so total compensation overall a lifetime was comparable. This of course does not factor in the nature of the business which includes nightime phone call (at a minimum) which is non-reimbursed work.
I absolutely agree that overhead doesn’t fall with reimbursements, and I noted that fact in the post. I have approximated overhead for a single doctor practice at $150,000. In my personal experience with doctors (half my family) this is reasonable in many circumstances, though it won’t be in all locales, as local cost-of-living makes a difference.
I have also analyzed in detail the full career ROI not only for doctors, but also for a great number of professions. These calculations take into account educational opportunity cost, tuition expense, lost wages, present value of money, etc. I found that PCPs do not rank highly in career terms from a salary perspective, and probably do deserve more compensation. I also found that certain specialists have an extraordinary career ROI when their true salaries are used in the calculations, which shows why most med students are opting out of primary care.
A doctor spending a half hour with a patient ? Has that ever happened ? I think 5 minutes is much more realistic. My doctor has 4 waiting rooms and they are always full. A office worker leaves your chart on the door, the doctor comes in, reviews your chart, asks you a few questions, writes a script and runs out the door. And I have waited two hours for that kind of service. If she is getting $85 a pop, she has a good thing going!
I agree the PCPs should probably be able to see more than 16 patients a day, and quite a few do. However, keep in mind that 30 minutes per patient includes quite a bit of overhead time, as the administration of health care in the form of record-keeping is quite intensive.
An incredibly hard-working and efficient doctor might be able to see 4 or more patients an hour, and some do – I noted one example above!
I am an adult nephrologist. All follow-ups are scheduled for 30 minutes. All new patients 60 minutes. No overbooking. The truth it, we make no real money in the office given overhead and real payment collections. We make it up in dialysis and hospital work + medical director fees.
“This implies that Medicare would pay less than $50 for an office visit. If our example doctor saw only Medicare patients, they would gross $172,800 in annual reimbursements. ”
I think you mean Medicaid in those sentences.
Michael, thanks for the catch. Corrected.
I am a retired physician and an MS patient. I am reviewing a statement from Medicare re an office visit with my neurologist last month. They paid him $52.11 for the office visit. This is a specialist highly regarded in his field. How can a primary care doctor be paid more? I question your data.
Thanks for your comment.
I linked to my data above, here it is again: http://www.cchap.org/storage/newsletter-three-files/article%201.pdf
If Medicare paid your Neurologist 52.11 for the visit, then his total compensation for the visit would be $65.14, since Medicare pays 80%, with the balance paid by you or your supplemental coverage.
Your Neurologist’s compensation for a standard office visit is probably very similar to that for a PCP office visit, since the billing codes used are often identical. Keep in mind that new patient visits are billed at a significantly higher rate than established patients, and that moderate and high complexity patients are also billed at a higher rate. In the sample data from Colorado that I provided, a low-complexity established patient office visit is only $52.17, whereas medium complexity is $81.49. Low-complexity new patient visits are $94.95, and moderate-complexity are $134.28. High complexity patients are billed at even greater rates. This is why I put the average at $85 – though I did not have sufficient data to do a weighted average across procedure types for a typical PCP practice.
Here are some great articles on office visit billing:
Also, if a physician’s office nurse performs certain tasks during an office visit, those can be billed separately. Many doctors leave money on the table in the medical billing game, but Medicare and other payors can’t necessarily be blamed for that (though they do deserve blame for making the reimbursement process more difficult than need be).
An office visit is an office visit is an office visit. The physician is paid the same, regardless of training.
However, where specialists have previously made more money is in the use of CONSULTATION codes. For a consultation, another physician must specifically request the visit with the other physician, and certain key points have to be followed (written followup letter to the referring physician).
I say “previously”, as CMS no longer pays for consultations as of this year. Yet another reason that Docs are dropping Medicare.