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The unstable future of physicians’ income


Instability in compensation and the massive move of physicians from private practice to employed models could be indicators of trouble ahead for physician compensation.

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While compensation is certainly not the sole driver for aspiring physicians to enter the medical field, there is no doubt that physician compensation in the past has definitely been something that makes the long years of schooling and residency more palatable. However, current regulatory and economic pressures are challenging that post-residency reality and putting significant financial strain on doctors now and moving forward.

So, what does the future look like for physicians’ incomes?

There is certainly no shortage of debate on the topic and the following trends could indicate that trouble is ahead:

“Desktop Medicine” and Stagnating Incomes

Physicians become physicians to help people, not to spend over half their time on administrative tasks; however, time spent with patients continues to drop as “desktop medicine,” the burgeoning administrative paperwork created by electronic health records (EHR) and complex value-based compensation structures, consumes more office hours in a day than actual patient visits.

This troubling trend is not only turning doctors’ attention away from patient care and causing increased burnout in the field, but is also causing their compensation to stagnate—sometimes at a rate that cannot even outpace an average 2-3% inflation. Since physicians’ salaries don’t often advance with seniority—they advance with productivity—their purchasing power could continue to decrease over time despite their working longer and harder to keep up.

Transitions from Private Practices to Corporate Employment

Even though physicians’ incomes are stagnating, the cost of running a private practice continues to rise. The public likes to attribute the rising costs of healthcare to what they perceive to be a physician’s high compensation, but what they fail to account for are the costs of medical school student loan debt, high malpractice premiums, EHR administration, and unfavorable physician reimbursement rates under Medicare that have made corporate employment much more appealing and popular over the past decade.

As regulations wax and reimbursement wanes, more and more physicians are being squeezed out of the private space and forced into the employment model.

Inflation and the Corporate Achilles Heel

But, even corporate employment brandishes its own negative financial realities. Since hospitals recognize that physicians play a critical role in fueling their business, some are offering compensation packages that far exceed production or physician output in order to keep the corporate coffers full. This is great for doctors looking to take advantage of this supply-and-demand economic reality… for now.

Many speculate about what might happen if we experience a rise in inflation. For now, corporate entities are able to absorb the cost of paying physicians at an escalated rate, but when the economy turns or inflation escalates beyond a certain threshold, these employers may not be able to cover physician compensation subsidies.

This could result in physician lay-offs or compensation pay-cuts.

Protecting Yourself as a Physician

Instability in compensation and the massive move of physicians from private practice to employed models could be indicators of trouble ahead for physician compensation.

Being a physician in the Unites States now means being aware of how these trends in the medical industry could affect your compensation and ability to sustain your lifestyle and accomplish your financial goals in the future.

About the Author
Julianne F. Andrews, MBA, CFP®, AIF® began her career in financial planning in 1988 and co-founded Atlanta Financial Associates in 1992, merging into Mercer Advisors in 2020. She specializes in working with physicians and executives in the healthcare industry. Her passion for working with physicians comes from being a pediatrician’s spouse for more than three decades. Julie has been featured on Forbes’ list of America’s Top Women Wealth Advisors since 2017 as well as Forbes’ Best-in-State Wealth Advisors since 2018. Julie can be reached at jandrews@merceradvisors.com.
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