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Examining Physician Compensation Trends, Attitudes, and Expectations

Jackson Physician Search
January 31, 2024

The average doctor in the U.S. makes $350,000 a year. Why? This attention-grabbing Washington Post headline from last August draws readers in for a deep dive into attitudes about physician compensation trends in the U.S. The article cites figures from the National Bureau of Economic Research, which examined the tax records of nearly one million physicians to arrive at this figure, so the data itself is not in question. Yet the author explains in the opening paragraphs that many physicians were unhappy with the original publication of the data, perhaps feeling like the numbers were without context or not a fair reflection of how physicians are compensated. 

As someone involved in hiring physicians, you know that physician compensation is more complex than any headline or news article can convey. But regardless of how compensation is calculated, physicians are some of the nation’s top earners. As the physician shortage worsens, the competition to win talent often comes down to compensation. Does this mean physicians are motivated by money? In some ways, yes — and that’s okay. It’s fair for a worker of any profession to factor in compensation when evaluating job opportunities, especially in regard to the level of education and training one possesses, the expectations and responsibilities of the role, how influential employee outcomes will be, potential risks or sacrifices associated, etc. These are very normal and understandable considerations for any individual in the job market. 

The problem is that the worsening shortage requires healthcare organizations to continue raising the bar if they want to attract talent, and at some point, this becomes unsustainable. An organization cannot pay physicians more than its revenue supports. So, what then?

We’ve explored at length ways to compete with rising physician compensation expectations. Organizations that cannot afford to increase recruitment incentives and base pay must supplement with flexible schedules, better work-life balance, administrative support, leadership training, and other perks. But even these benefits are increasingly standard, so the question remains — what then? By examining attitudes about physician compensation and looking closely at what’s driving physician compensation trends, healthcare leaders may better understand what motivates physicians today and be prepared to negotiate from more informed positions.

Attitudes About Physician Compensation

General attitudes about physician compensation vary. Many feel that if anyone deserves to earn the big bucks, it’s those healing the sick and caring for the elderly, while others assume big physician salaries are to blame for outrageously high healthcare costs. However, those on the latter side would be wrong. The Post article notes physician salaries account for less than 10% of the nation’s healthcare expenditures. 

Talk of high physician compensation can put physicians on the defensive, and the “Why?” tacked onto the end of the Washington Post headline was perceived as particularly provocative — especially because many physicians earn less than the average it noted. On the other hand, many specialists earn far more. However, asking “why?” doesn’t necessarily imply that physicians don’t deserve to be paid well. No one can dispute that medical students take on an extraordinary amount of debt — $250 thousand on average — and the income they receive in their years of residency, when calculated hourly, is often below minimum wage. The high compensation may even be seen as “back pay” for stunted finances during training.

So, why is there so much indignation about average physician income? One theory is that many physicians go into medicine because they want to help others, and acknowledging their status as top earners might question their motives. However, it is only logical that physicians reference what the market is offering to determine compensation goals, and the market is driving increasingly competitive offers, which leads us again to…why?

What’s Driving Physician Compensation Trends

Supply and demand is the simple answer to the question of what’s driving physician compensation. As the nation’s healthcare needs increase, the number of physicians available to provide healthcare services is not keeping up. The Washington Post article points to data from the Organization for Economic Cooperation and Development that shows the number of physicians per hundred thousand citizens in a list of 31 developed countries. The United States is number 26 on the list. 

This explains why, according to a 2023 MedScape report, U.S. physicians earn significantly more than physicians in other parts of the world. Demand for healthcare services in the U.S. is greater than the supply of physicians available to provide it, so organizations pay a premium to ensure they have enough providers. However, this upward trend is not sustainable. Organizations cannot pay physicians more even as they are being reimbursed at lower rates. The most recent Medicare cost-saving measures have cut physician payments by 3.4%, something 82% of medical group managers (in an MGMA Stat Poll) said was likely to limit patient access to care. This cut alone won’t drive medical groups out of business, but it demonstrates why physician compensation must proportionally align with revenue. At some point, the amount physicians expect will be more than organizations can afford to pay if they hope to remain open.

Physician Compensation Expectations 

At Jackson Physician Search, our internal placement data is consistent with the trend of bigger and more frequent recruitment incentives and higher salary guarantees, seen most often in the areas of greatest need. Of course, at times, physicians expect these large incentives regardless of the market in which they are applying, and this is something we, as recruiters, actively work to adjust. But even if big recruitment bonuses are not standard for your location, it is important to understand where physician compensation expectations come from and be prepared to sweeten the deal in some capacity — flexibility, additional time off, etc. 

Increasing compensation may be your best option to attract candidates depending on the urgency of your organization’s needs and the challenges associated with your specific location. However, it will likely take more than that to convince them to sign, and it definitely takes more to retain them. Yes, physicians are motivated by money, but today’s physicians also want work-life balance, a positive culture, flexibility, administrative support, and more. Organizations that understand the complex attitudes toward what motivates physicians will be better positioned to implement a successful physician recruitment strategy.   

Are you curious about how your compensation offers compare to others in the market? Our physician salary calculator is a good place to start. However, if it is increasingly difficult for your healthcare organization to recruit and retain physicians, it may be time for a full market analysis. The Jackson Physician Search recruitment team has access to industry compensation data for your area, but more importantly, they can share anecdotal data on physician compensation trends happening in your immediate market. Contact us today to learn more.

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