Employed physicians' paychecks reflect a fraction of what they earn for hospitals

Employment models have been touted as a win-win for physicians and hospitals in recent years. But a new report by physician search firm Merritt Hawkins reveals that hospitals may be getting a better deal than originally thought, paying doctors just one-fifth to one-tenth of the dollars they earn for their hospitals.

Due to limitations posed by Stark law, anti-kickback laws and the IRS, the amount a hospital can legally compensate an employed physician is finite. And the study did not compare hospitals' profits on physicians to the amount of overhead those doctors would have to spend to run their own practices.

How much physician-generated revenue a hospital pockets depends on the specialty. For example, neurosurgeons draw an average revenue of $2,815,650 and are paid an average salary of $571,000 (20 to 22 percent of what they earn for the hospital). Primary-care physicians, including family physicians and internists, bring in about $1,650,586 and take home an average of $179,500 (10 to 12 percent of their revenue).

"The recession and declining reimbursement have prompted many physicians to seek closer relations with hospitals," Mark Smith, president of Merritt Hawkins, said in a statement. For hospitals, "the most powerful tool in healthcare remains the physician's pen," he added. "Hospitals depend on doctors to drive patient care, which in turns drives revenue."

To learn more:
- read the Becker's Hospital Review article
- check out this entry in the Wall Street Journal's Health Blog

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