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Do we make too much money?

November 2007

Do hospitalists make too much money? I’m not posing this as an ethical question, such as whether it is fair for a schoolteacher to make $40,000 dollars a year when a guy who can hit a baseball 400 feet makes $15 million each season. I am thinking about this as a hospitalist who has to present a budget to administration and realizes that there is only so much money to go around.

What I am asking is this: Is there a point where the laws of supply and demand drive our salaries so high that our profession winds up damaged? Here is my short answer: As individual hospitalists, we should make whatever the market is willing to pay us. My longer, more complicated answer: As a field, we should spend some time considering what this question means and the implications of how we answer it.

So, what might be the effects of earning, individually, a heap of dough? For those hospitalists not subsidized by a hospital, the more they make the better, for our field and for physicians as a whole.

High salaries for independent practitioners mean that both insurance companies and the CMS recognize the value of the “cognitive” practitioner, as compared to the subspecialist, who is paid according to a piecework model, per procedure. That said, I don’t really see a lot of unsubsidized hospitalists reaping those big bucks, especially those not willing to work 80 hours a week, 52 weeks a year.

The majority of hospitalists are employed by groups that depend on a subsidy, whether that group practices in an academic setting or a community one. Subsidies continue to increase as demand for hospitalists drives up salaries. More likely than not, upward pressure on subsidies will persist as we produce less revenue, given the growing numbers of uninsured patients and the decreasing reimbursement per case.

Then there’s the possibility that in the future, insurers may deny payment to hospitalists just as they do to hospitals for admissions that they believe are not justified. Additional pressure on hospitals comes from others demanding sizeable subsidies, as many subspecialists want to be compensated for taking hospital call.

Hospitalist medicine is a “value added” field. Although I agree that this value is enormous, one could argue that there must come a point where the costs outweigh the value.

That tipping point is likely very different for every organization and is determined by what the non-hospitalist options would look like. We know that primary doctors are not coming back to the hospital, so the most likely alternative would be allied health professionals.

I had the pleasure of hearing Dr. Wachter discuss this topic with great insight during his “state of the hospitalist” address at this year’s annual SHM meeting. As I understood his remarks, allied professionals would not be as attractive as physicians for a number of reasons: Physicians don’t have unions, we don’t expect to work only 40 hours a week and we are reimbursed at higher rates. These arguments make a lot of sense, but it would not surprise me if some hospitals traded these advantages if they decided that the subsidies had grown beyond what they were able to pay.

I am not suggesting that for the collective good of the field, we should all demand a 5% pay cut the next time our contracts come up. Nor am I implying that hospitals have reached that tipping point yet.

What I am saying is that we should start attending to questions of salary–and to the pros and cons for individuals and institutions–even if it is just an academic exercise. By doing so we can ensure the health and effectiveness of our profession in the long run.