Physicians Keep Increasing Revenue for Hospitals

Ken Terry

February 27, 2019

The average amount that physicians generate for hospitals has jumped significantly since 2016, according to new survey results released by Merritt Hawkins, a leading physician search firm.

The survey shows that independent and employed physicians generated an average of $2.38 million each for their affiliated hospitals, a 52% increase from the $1.56 million they generated when the firm last conducted its survey in 2016.

The survey focused on inpatient and outpatient revenues from admissions, tests, treatments, and procedures performed or ordered by doctors. Referrals by primary care physicians to specialists were not considered because they didn't involve direct orders.

Of the 18 specialties included in the survey, cardiovascular surgeons generated the most revenue. Full-time cardiovascular surgeons generate an average of nearly $3.7 million a year on behalf of their affiliated hospitals, followed by invasive cardiologists at $3.5 million, neurosurgeons at $3.4 million, and orthopedic surgeons at $3.3 million.

Family physicians (FPs) added an average of $2.1 million in net revenue annually for their affiliated hospitals, while general internists generated almost $2.7 million, on average. That was more than the average revenue generated by some nonprimary care specialists, such as nephrologists, neurologists, ophthalmologists, otolaryngologists, and psychiatrists.

FPs and general internists also accounted for far more hospital revenue than pediatricians did. And they more than pulled their weight in terms of salaries. For example, employed FPs were paid an average starting salary of $241,000, based on Merritt Hawkins' data, while generating nine times that much in hospital revenue. By comparison, orthopedic surgeons averaged $533,000 in starting salary while generating six times that much in hospital revenue.

"Primary care physicians such as family physicians represent an excellent return on investment, which is one reason they have been our number-one search for the last 12 years," said Travis Singleton, executive vice president of Merritt Hawkins, in a news release.

Explanations for Increase

The survey, which was conducted from October 2018 through December 2018, elicited 62 completed questionnaires that provided data on 93 hospitals. Despite the relatively small data set, Merritt Hawkins said it believed the results were reliable, "in large part because the overall number for average annual revenue generated by all physician specialties for their affiliated hospitals has remained relatively constant."

One reason for the jump in the revenues doctors generate for hospitals, the survey report suggests, is the increasing trend of physician employment by hospitals.

The percentage of physicians working for hospitals and medical groups increased from 44% in 2012 to 49% in 2018, according to another Merritt Hawkins survey. Employed primary care physicians, in particular, may be more likely to direct tests and procedures to in-house resources than to outside providers such as radiology groups or labs than they did in private practice, the new report notes.

Moreover, primary care physicians may also admit more patients to the hospitals that employ them than they would if they were in private practice. This may partly explain the high revenues generated by primary care doctors in the 2019 survey, the report suggests.

The report also points to the growing volume and cost of hospital services, many of which are provided by physicians or result from physician-ordered admissions. While hospital admissions are slowly declining, outpatient visits have more than tripled since the 1970s, the report notes. Moreover, the average cost per hospital outpatient visit has jumped 62% since 1995 after adjusting for inflation.

In addition, the report cites the additional medical care needed by an aging population. People over 65 form only 14% of the population but generate 34% of inpatient procedures, 37% of diagnostic tests, and 34% of total spending, the report said, citing data from the Centers for Disease Control and Prevention.

Finally, the report notes that the still-prevalent fee-for-service model drives up hospital revenues. While many healthcare systems are trying to curb costs to prosper under value-based reimbursement, the survey "suggests that emerging value-based delivery models have yet to inhibit the revenue generating power of physician specialists," the report concludes.

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