Physician Compensation: Is Parity Possible?

Physician Income: Is Compensation Parity Even Possible?
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The compensation disparities between primary care physicians and specialists and between male and female physicians continues to be a subject of ongoing concern.

The US Bureau of Labor Statistics consistently ranks physicians among the highest-paid of all occupations.1 However, data and literature dating back decades have demonstrated significant differences in compensation among individuals within the profession of medicine.

These differences exist both across and within specialties. Specifically, primary care physicians — defined here as those practicing general pediatrics, general internal medicine, or family medicine — earn less than many of their specialist and subspecialist colleagues.2

Additionally, even within higher-paid specialty fields — such as cardiology — professional societies have reported that, on average, female physicians earn less than their male counterparts.3 The compensation disparities between primary care physicians and specialists and between male and female physicians have been subject of ongoing concern.

How are physician salary disparities created and maintained? Do recent data related to physician compensation disparity show that progress is being made? Are there any viable strategies that facilitate the closing of these income gaps?

To answer these questions, this article will provide a historical overview of physician compensation structures in the United States, describe the gender pay gap in medicine and the income disparities between primary care physicians and specialists, and discuss what policymakers and health care organizations have done to promote physician compensation parity.   

A Historical Perspective of Physician Compensation

Physicians in the early years of the United States were primarily self-employed individuals. Patients or their families paid these independent practitioners directly for services rendered. During this time, physicians were free to set their own fees and accept various forms of payment, including money, goods, or services-in-kind.4

Third-party payment to physicians by insurance companies gained traction during the Great Depression, as patients were becoming increasingly unable to afford medical care on their own. For the most part, early insurance plans still allowed physicians to set their own service fees within a system called the Usual, Customary, and Reasonable (UCR) payment system.

Under the UCR payment system, fees would be paid as long as they were similar to the fees charged by other physicians in the same geographic area. Early insurance plans that operated through the UCR payment system were helpful in defraying the costs of hospitalizations, surgeries, and radiographic tests. However, many of these insurance plans did not offer broad coverage and did not include the typical services provided during office visits with primary care physicians.5 

The RVU System

In the 1950s, the UCR payment system was replaced by the relative value scale. The relative value scale was created by the California Medical Association’s Committee on Fees. This committee compiled a list of medical services, associated each service with a code, and assigned a relative value unit (RVU) to each service code.

The RVU system consists of 3 components: physician work, practice expense, and malpractice. Physician work RVUs denote the relative time, skill, and effort required on the part of a physician to deliver an individual medical service. Practice expense RVUs represent the costs associated with delivering a medical service, including auxiliary staff and supplies.

Lastly, malpractice RVUs account for the cost of malpractice insurance associated with an individual service. Each of the 3 RVU components receives a designated numerical value, and their sum constitutes the total RVU for a given service. Services are monetized into fees by multiplying the total RVU by a conversion factor that is determined by individual insurance companies. Under the original relative value scale, RVUs attached to procedures, hospital stays, and imaging were greater than those attached to activities associated with outpatient primary care visits,5 a trend that has persisted over time.

The Resource-Based Relative Value Scale (RBRVS) payment system took effect in 1992 as a part of a Medicare payment reform effort and was soon adopted by commercial insurers. Although many believed that the RBRVS system would alleviate the payment imbalances present in the RVU system, it failed to live up to those expectations.

In the late 20th century, compensation models for physicians expanded beyond the traditional fee-for-service model due to concerns about rising health care costs without associated improvements in quality or outcomes. Additional compensation models included capitation, salary-based, and pay for performance.

Physicians practicing medicine in the 21st century may be paid via a blended compensation structure that involves a combination of compensation structures. The Affordable Care Act of 2010 ushered in value-based care as a payment and compensation model. Attempts to transition away from fee-for-service compensation and toward value-based compensation are ongoing. As of 2023, the fee-for-service compensation model still predominates physicians’ compensation packages.

Gender/Sex Disparity

Income differences between male and female physicians have been reported in the literature since the 1970s.2 A variety of behavioral reasons have been proposed to explain why women in medicine earn less than men, including: 

  • Women’s affinity for lower-paying specialties;
  • Women choosing to engage in part-time work to accommodate domestic responsibilities;
  • Women opting out of long hours and undesirable call schedules; and
  • Lower RVU generation among female physicians due to increased time spent talking with patients.

These are just some examples. There are plenty of others.

However, numerous research studies have found persistent income gaps, even after controlling for specialty choice and a host of behavioral factors. For example, authors of a study published in 2011 in Health Affairs examined 10 years’ worth of starting salary data from physicians leaving residency programs in New York State.6

The authors found significant differences in income that could not be explained by specialty choice, practice setting, or work hours. Additionally, authors of a 2016 study of academic physicians published in JAMA found an income gap of $19,878 between men and women after adjusting for confounding variables such as faculty rank, age, specialty, publication count, and total Medicare payments.7

Professional medical organizations and societies have recognized the gender/sex disparity in physician compensation. Several of these organizations, including the American College of Physicians,8 the American Association of Medical Colleges,9 and the American College of Cardiology10 have called for the closure of gender-based income gaps in medicine.  

The income gap between male and female physicians does appear to be narrowing. According to Medscape’s 2023 Physician Compensation report, male primary care physicians outearned female primary care physicians by 19%,11 which is the lowest gap reported over the past 5 years. Additionally, male specialists outearned female specialists by 27%, which is a decline from 31%12 in 2022.

Specialty vs Primary Care

In the early 20th century, nearly all physicians in the United States were general practitioners who treated a wide range of diseases, delivered babies, and performed surgeries. The rise of medical specialization can be attributed to advancements in science and technology and to The Flexner Report of 1910.

Scientific and technological advancements allowed for improvements in disease understanding, diagnostic methods, and treatment options. These improvements, in turn, paved the way for physicians to develop more in-depth, specialized knowledge. The Flexner Report, written by Abraham Flexner and funded by the Carnegie Foundation for the Advancement of Teaching, was a landmark study on medical education that influenced medical education system reforms.

The Flexner Report emphasized rigorous scientific training, advocated for the extension of postgraduate training, emphasized the importance of specialized knowledge in specific medical fields, and called for the establishment of medical boards and specialty societies.13

The compensation gap between physician specialists and generalists emerged early on and can be traced back to World War II. During this time, the military began recognizing physician soldiers with specialty training and rewarded them with higher ranks, preferred geographic placements, and higher pay than their generalist counterparts.14 The implementation of the RVU, and later the RBRVS payment system, also contributed to the pay discrepancies between primary care and specialist physicians, as most of the work of primary care physicians lies in the cognitive rather than in the procedural realm.

Today, the income gap between primary care physicians and specialists remains wide. According to the Medscape Physician Compensation Report of 2023, primary care physicians earned an average of $262,000 annually, while specialists earned an average of $382,000.12

Outlook on Compensation Models To Reduce Income Disparities

Policymakers and health care organizations have been attempting to eradicate physician income disparities. Some have even been met with success.

Mayo Clinic is an example of a health care organization that has been able to close the gender-based income gap. In 2020, Mayo Clinic reported that their implementation of a salary-only structured compensation model successfully led to compensation equity between men and women within the same specialties.15

Additionally, in 2022, Merritt Hawkins published a report on current physician recruiting initiatives that showed that some larger health care organizations offer primary care physicians attractive compensation packages that take into account the value of primary care practice activities — including population management, care coordination, and prevention and counseling.16

Author Bio

Christina Nelson, MD, earned a BA in communication from The University of Pennsylvania in 2015 and an MD from the Frank H. Netter MD School of Medicine at Quinnipiac University in 2023. Christina is passionate about improving the health of American families.

Originally appeared on MPR


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16. Review of physician and advanced practitioner recruiting incentives 2022. AMN Healthcare. Published 2022. Accessed July 19, 2023.