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How Much Should Doctors Make?

Salaries, happiness, life, and meaning

Kent Bottles

 When I lived in Iowa City and worked as a physician at the University of Iowa College of Medicine, the townspeople eagerly looked forward every year to the issue of the local newspaper that listed all the university physician salaries.  While the physician salaries were relatively modest when compared to national averages, my neighbors were always astounded by how much doctors made.  Some of the humanities professors would argue at dinner parties that they spent just as much time in training, and yet their salaries were much lower than mine.  It was always a little awkward, and I left some of those parties feeling depressed and defensive.  How much am I worth as physician? How should physician salaries, or any other salaries for that matter, be calculated?

I will never forget walking with my wife (Ann L. Steiner, MD) in Philadelphia just after I signed a contract to become Professor and Chair of Pathology at Allegheny University of the Health Sciences.  I was basking in the more than $100,000 raise I received by leaving Iowa, and she said, "There is only one thing wrong with this picture; you are not worth that much money."  She declined an offer to work for the same medical school and accepted a position at the University of Pennsylvania, where she still sees patients today.  Soon after we moved our family from Iowa City to Philadelphia, my medical school declared bankruptcy.

More recently, I heard a NPR interview show that featured two university presidents, and an angry caller criticized one of the presidents for her more than half a million dollars a year salary; the other president jumped to her defense and argued that her recruitment was the result of a national search, and the salary was based on fair market value.

Fair compensation for physicians is on my mind; what is fair?  I remember California Governor Jerry Brown years ago proposing that people with interesting and stimulating jobs should be paid less than people with boring jobs. This proposal did not go very far, but I have always thought it raised an interesting point of view. I vaguely recall that Ben and Jerry set a limit on executive salaries at the ice cream factory and that it was eventually eliminated to attract the right chief executive. Public surveys have shown that two-thirds of Americans belief that doctors are too interested in high salaries.

I was reminded of all these memories by reading Piecework: Medicine's Money Problem by Atul Gawande (The New Yorker, April 4, 2005) and The wages of healing: ethical issues in the compensation of physicians by Richard B. Gunderman and Mark Adam Hubbard (Med Sci Monit, 2005; 11(2): SR5-10). These two very different works have really made me think hard about physician compensation.

Gawande (the author of the book Complications) describes his inept salary negotiation for this first faculty position in surgery at Brigham and Women's Hospital in Boston; after a guaranteed three year salary, he would basically be on his own in private practice with the department taking 19.5% for overhead. He, at first, had no idea what initial salary to ask for.

His valuable, brief history of physician reimbursement ranges from the Code of Hammurabi in 18th century BC Babylon to William Hsiao's relative value units that after 1992 AD determined Medicare payments to American physicians.  Doctors in ancient Babylon received two shekels for a life saving operation on a slave and ten shekels if the patient was a free citizen.  In the mid-1980s, American physicians got $40 for arriving at a difficult diagnosis by thinking for an hour and $600 for spending an hour performing a colonoscopy and removing a polyp.  Performing a procedure has traditionally been paid more than thinking in the American medical experience.

Gawande interviewed a successful general surgeon who does not accept insurance, charges whatever the market will bear, and has made more than a million dollars a year for the last ten years.  This physician told Gawande:  "'For doctors to think we have to be altruistic is sticking our heads in the sand.'"  He believes doctors are businessmen--nothing less, nothing more.  Gawande remained unconvinced by this colleague:  "I still believe that doctors remain fundamentally motivated by the hope of doing meaningful and respected work for society."  Gawande finally comes up with a number to ask for in salary (he doesn't reveal what it is) and accepts his first job as a surgeon.

This week I had dinner with Richard Gunderman who came to Grand Rapids to speak to the radiology and pediatrics residents.  He described an article he is writing about a group of private practice pediatricians in southern Indiana who do extremely well financially, "by doing good." Gunderman and I are discussing an article for MPM that would explore what this concept would mean for any private practice.

I googled Gunderman and found his article on ethical issues in the compensation of physicians.  Gunderman summarized several possible approaches to determining the appropriate income level:  market worth, comparable worth, societal worth, and fairness.

Market worth is certainly straightforward:  the appropriate salary is whatever the salary is in the open market. Of course, American medicine with its state licensure, board certification, and fixed number of medical school and residency slots is hardly the kind of free market that Adam Smith and Friedrich von Hayek advocated.

Comparable worth holds that each occupation has an inherent value apart from its market value. Hsiao's relative value unit system is an imperfect attempt at implementing this approach; it is biased toward rewarding activities that use expensive technology.  Levels of skill, amounts of responsibility, and years of education could be relevant factors to put into a comparable worth calculation. Gunderman noted that the big problem here is who decides comparable worth.

The societal worth approach seeks to rank occupations in terms of their contributions to the community. This utilitarian approach tries to determine which occupation promotes the greatest good for the greatest number of people. Again who decides in this approach?

The fairness approach asks the question are different jobs being justly compensated?  Gunderman noted that context is essential in this analysis. Radiologists are fairly compensated compared to professional basketball players, but overpaid when compared to elementary school teachers.

Gunderman concluded by observing that factors other than compensation contribute to satisfaction with a job.  The presence or absence of intellectual challenges, opportunities for growth, appreciation from co-workers, and meaningful interaction with others may all contribute more than money to a person's level of job satisfaction.  These observations echo Peter Drucker's description of what make for job satisfaction among knowledge workers:  challenges, continuous education and growth, measurable results, believing in the organization's vision, and believing individual efforts make a real difference.

Psychologists have recently formally studied what makes people happy; these investigations into subjective well being have identified traits that are associated both with entire cultures and individuals.  D. Myers and E. Diener, two of the leaders in this emerging field of study, conclude that "A flood of new studies explores people's subjective well being....These studies reveal that happiness and life satisfaction are similarly available to the young and old, women and men, Blacks and Whites, and the rich and the working class."  For the individual four internal traits identify happy people: self esteem, sense of personal control, optimism, and extraversion.

It is also noteworthy that Americans are not the happiest people in the world; people in rich countries are happier than people in poor countries, but increased wealth after basic needs are met does not increase happiness.  The American happiness quotient has declined 5%, which represents 14 million people, over a period of time when the Gross Domestic Product has doubled.

As we in the MPM Community make our practices run more efficiently and cut costs to increase the bottom line, we perhaps should also pay more attention to less easily quantifiable factors that make being a doctor special and meaningful. Perhaps the current malaise affecting many American physicians is less about eroding reimbursement and more about wondering if we lead meaningful professional lives that make a difference for ourselves, our patients, and our communities.