Hospital Income From Employed Physicians Represents 5-10 Times Their Salaries

A new survey of hospital CFOs by Merritt Hawkins, a physician search firm, shows that hospitals typically earn 5 to 10 times more in revenue from employed physicians than what they pay them in salaries.

Salaries for employed physicians are limited by legal requirements on paying physicians "fair market value" for their services, derived from the Stark law, anti-kickback laws and IRS requirements.

While the survey shows that the average physician earns a hospital $1.54 million a year in admissions, procedures, diagnostics and other services, some specialties bring in substantially more.

Neurosurgeons top the list, generating $2.81 million a year for the hospital while their average salary is $571,000. Next come invasive cardiologists (generating $2.24 million on a salary of $475,000) and orthopedic surgeons ($2.11 million on a salary of $481,000).

Primary care physicians are also top-earners, although they get paid substantially less. A general internist is paid $186,000 a year but generates $1.67 million for the hospital, and a family physician makes $173,000 a year but generates $1.62 million.

The difference between salary and generated income makes some specialties a better deal for hospitals than others. Hospital income from internists and family physicians represents 10-12 percent of their salary, compared with 20-22 percent for neurosurgeons, invasive cardiologists and orthopedic surgeons and 28 percent for gastroenterologists.

"The recession and declining reimbursement have prompted many physicians to seek closer relations with hospitals," observed Mark Smith, president of Merritt Hawkins. 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."

View Merritt Hawkins' "2010 Physician Inpatient/Outpatient Revenue Survey" (pdf).

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