Assessing physician compensation is complex. It's not just about what feels right but what is equitable, sustainable, and linked to health outcomes. Today, when attracting skilled physicians is more competitive than ever, making it essential to understand what drives their compensation.

From experience and specialty to geographic location and the complexity of care they provide, multiple elements determine how much physicians earn. Evidently, physician compensation isn't just a matter of numbers—it's a pivotal factor in attracting top talent, ensuring their satisfaction, and directly influencing the quality of care patients receive.

In this article, we'll delve into the factors that shape how doctors are paid, explore variabilities, and offer strategies for negotiating better contracts.

Factors Influencing Physician Compensation

Fair and effective compensation practices are crucial not only for the well-being of doctors but also for the quality of patient care. When physicians are compensated fairly, they are more engaged, less prone to burnout, and better positioned to provide the best care possible. Before we dive into the modern situation, it is important to explore the key factors that shape compensation level and variability.

Understanding these underlying elements can provide insights into current trends and is essential for developing systems that support both healthcare providers and their patients effectively.

• Experience and Expertise

It's straightforward—doctors with many years under their belts and those who bring specialized skills to the table often earn more. Their deep knowledge and ability to manage complex cases make them invaluable.

• Specialty and Subspecialty

The field a physician works in significantly impacts their compensation. Specialties that are in high demand or require a longer, more intense training period tend to offer higher salaries. For instance, anesthesiologists and urologists typically have higher earnings compared to their peers in family medicine.

• Economic Factors

Both broad economic trends and local conditions affect physician pay. For example, a global health crisis or economic downturn can alter compensation dynamics, as can local needs like a shortage of certain types of doctors or new accreditation requirements.

• Geographic Location

Where a physician practices also makes a difference. A doctor working in a region with a lack of medical professionals or in underserved communities might be offered more to serve there, compared to one in a metropolitan area with a glut of healthcare providers.

• Patient Volume and Productivity

More patients and more procedures mean typically more money. Physicians who see more patients or who are more productive in terms of procedures and revenue generation are often eligible for additional incentives.

• Value-Based Metrics

In the era of value-based care, outcomes matter. Health systems are increasingly rewarding physicians who excel in delivering high-quality care, achieving patient satisfaction, and keeping costs down. Excelling in these areas can lead to bonuses and performance-based pay.

• Academic and Research Contributions

Physicians who also contribute to the academic side of medicine—through teaching, research publications, or leadership roles at educational institutions—might see extra compensation or stipends for their dual roles.

A Look at Physician Compensation Report

To grasp the complexities of physician compensation, it's crucial to examine the current trends and data. Doximity's 2024 Physician Compensation Report reveals that while the nominal average pay for physicians in 2023 was $414,347, marking a 6% increase from the previous year. However, the reality of their financial gains isn't as rosy when adjusted for inflation.

Despite the nominal increase, the actual buying power of physicians in 2023 averaged at $332,677, showing a decrease of 3.1% compared to 2017. This figure was calculated according to the U.S. Bureau of Labor Statistics Consumer Price Index (CPI), indicating that real income for physicians has barely shifted over the last seven years.

This trend of stagnant or even declining real compensation is troubling, especially as physicians face increasing workloads, heightened safety risks, and widespread shortages in the healthcare sector.

The decline is particularly stark for Medicare physician payments. The American Medical Association points out that, adjusted for inflation, Medicare compensation has plummeted by 26% since 2001. A report by the Neiman Health Policy Institute also highlights a discouraging scenario where physicians are seeing lower reimbursements despite higher Relative Value Unit (RVU) volumes, a measure of value used in the United States Medicare reimbursement formula for physician services. From 2005 to 2021, even though RVU volumes increased substantially, Medicare conversion factor decreased and inflation eroded the actual value of payments. In stark contrast, compensation for nonphysician practitioners surged by 207% during the same period.

These figures underscore a broader issue: despite high nominal incomes, financial security remains elusive for many physicians.

Pay by Specialty Variability

In a comprehensive review of 42 medical specialties between 2017 and 2023, nearly all witnessed a decline in real compensation adjusted for the Consumer Price Index (CPI), with only two exceptions.

Hematology experienced the most significant drop in earnings, with a decrease of $57,201, closely followed by neurosurgery and allergy and immunology, which saw reductions of $49,417 and $45,515, respectively. On average, nonsurgical specialists faced a 7% reduction in pay ($22,177), whereas surgical specialties saw a smaller decline of 3.6% ($16,766). Primary care salaries also dipped by 4% ($9,419), although family medicine did see a slight increase of 0.4% ($972) since 2017, offering a small buffer against the overall downward trend.

The escalating cost of medical education amplifies the financial challenges for physicians, particularly affecting those in lower-paying specialties like pediatrics. Often considered one of the least financially rewarding fields, pediatrics and its subspecialties are less attractive to medical students burdened with significant debt upon graduation.

Conversely, plastic surgery stands out with an increase in real compensation, reporting a 5.2% rise to $497,643 in 2023 from $473,212 in 2017. Unique among medical fields, plastic surgery often includes a cosmetic component that is not covered by insurance, operating instead on a cash-pay model. This allows plastic surgeons to set their prices based on market demand, providing them a degree of financial autonomy not available in most other specialties.

The Influence of Location

Across various metropolitan areas, physicians have generally seen a decrease in average real compensation, although there are a few exceptions. From 2017 to 2023, Sacramento, San Jose, and Baltimore bucked the trend with increases in physician pay by $5,215, $4,771, and $3,376, respectively.

Conversely, major cities experienced notable declines. Philadelphia's average physician compensation dropped by $5,006, while Houston saw a decrease of $10,143. Larger decreases were observed in Los Angeles ($11,433), Boston ($12,917), Miami ($16,119), Atlanta ($17,232), Chicago ($20,762), and New York ($22,210).

The most substantial declines were recorded in regions primarily in the South and Midwest. Milwaukee-Waukesha-West Allis topped the list with a sharp drop of $66,345, followed by San Antonio-New Braunfels and Charlotte-Concord-Gastonia, which saw decreases of $61,576 and $57,377, respectively. Other significant reductions included Kansas City, Tampa-St. Petersburg-Clearwater, and Indianapolis-Carmel-Anderson, with declines of $55,060, $47,520, and $47,321, respectively.

Amid these changes, many physicians report that compensation has remained stagnant for over half a decade, despite taking on more responsibilities. Not only are work-related raises infrequent, but even basic cost-of-living adjustments to keep pace with inflation are exceedingly rare.

Understanding the Impact of Credentialing on Physician Compensation

Despite these sentiments, most physicians (63%) either haven't asked for a raise or haven't succeeded when they did. Rather than pushing for higher pay, many in the medical community prefer trading some of their earnings for more autonomy and a better work-life balance—75% of those surveyed are open to accepting lower compensation for such benefits.

As reimbursements dwindle, numerous physicians are moving away from independent practice. Some relocate to states with a lower cost of living, while others shift towards a more stable, employer-based model. A growing number join large, hospital-owned practices which often offer stronger negotiation leverage with insurance providers. According to the American Medical Association, the percentage of physicians employed by hospitals or related entities rose from 5.6% to 9.6% over ten years, and those in hospital-affiliated practices increased from 23.4% to 31.3%.

Credentialing presents another layer of complexity, differentiating itself from licensure, which confirms a physician's qualifications and rights to practice. Credentialing involves extensive verification, including checks on malpractice claims, required by many insurers including Medicare to ensure a doctor is a safe and trustworthy provider.

Physicians who are credentialed with various insurers can submit claims for a wide range of treatments and get reimbursed without delays. Being listed as an in-network provider not only boosts a physician's visibility and credibility but also attracts more patients. Credentialing also expands patient access to more insurance benefits, making healthcare more affordable and accessible.

For hospitals, efficient credentialing can streamline administrative duties, cut down on billing and claims processing costs, and improve patient care by enhancing coordination with insurance carriers.

Negotiating Physician Salaries: Best Practices and Tips

Navigating physician salaries demands strategic planning and savvy decision-making. We have gathered proactive strategies physicians can employ to steer their careers and enhance their financial well-being, ensuring their professional journeys are both rewarding and lucrative.

Negotiate Your Contract

Before you dive into negotiations, arm yourself with knowledge about the typical salary ranges for your specialty in your region. Recognize the unique skills and experiences you possess that may warrant a higher compensation.

Request a detailed breakdown from potential employers on how your compensation is structured. This should include your base salary, any potential bonuses, and benefits. Fully understanding your contract's total package is essential for making well-informed choices.

Develop Your Career Skills

Invest in continuing education and seek additional certifications to bolster your qualifications and competitiveness in lucrative specialties.

Consider specializing further in areas where there's a high demand but a shortage of specialists. For instance, focusing on a niche within cardiology or oncology could yield higher compensation due to the limited availability of specialized expertise.

Choose the Right Work Setting

Consider working in various environments such as private practices, group practices, hospitals, or academic settings, each offering different compensation models and benefits.

As noted, opting to practice in rural or less competitive areas can also lead to an increase in salary, driven by higher demand and a lower cost of living.

Manage Your Finances

Explore opportunities to diversify your income, such as undertaking locum tenens roles, consulting, or engaging in part-time positions across different medical settings.

Think strategically about financial investments, including ventures into real estate or the stock market, as part of a comprehensive approach to boosting your financial security and overall net worth.

How we help

At Credsy, our team is dedicated to simplifying the complexities of managing multiple licenses, credentialing, and renewal processes. With our support, you can seamlessly navigate the requirements for working in various states, positioning yourself in regions that offer better compensation.

Utilizing our streamlined credentialing platform allows you to focus more on your practice and less on the bureaucratic aspects of your profession. We help you maintain compliance with all necessary regulations while ensuring you're positioned to take advantage of the best possible financial opportunities.

By partnering with Credsy, you gain the freedom to expand your professional footprint without the usual stress and time consumption associated with license and credential management.