Will Specialist Pay Be a Target of Health Care Reform?

Health policymakers are well aware of the pay differential between primary care and specialist physicians. Given this disparity, it's important to recognize how the divergence arose. To the extent that training programs are limited for each specialty, that's a natural barrier to entry that is hard to remedy without a great deal of investment in specialist education--or broadening of medical education generally. However, Ezra Klein quotes a comment on his blog which suggests a more artificial basis for specialist prosperity:

Specialist salaries aren't just determined-- they are based on volume of procedures and payment rates for their procedures. The "best" specialties are fluid, as are the best salaries (with exceptions, like Neurosurgery) primarily because physician payment reform is not keeping up with the changing practice of medicine.

Specialties typically have a couple of bread-and-butter procedures that change based on changes in technology, diagnosis and clinical practice. Typically, these bread-and-butter procedures start small, are paid well per procedure, and physician groups figure out out they do a ton of those procedures to drive salary.

Opthamologists used to make a lot more money than they do now. Why? Because cataract surge[ons] used to get paid a lot more [two to five times more per case than they is paid presently]. These docs figured out how to be more efficient so they could do more cases per day, and it takes a while for payors to say-- you're doing one every 20 minutes instead of every 90? Then we're cutting back fees accordingly. In the meantime, Ophthalmologists rake it in and are a "top" specialty for medical students.

Eventually, payors and Medicare figures things out and start putting pressures on rates. But it takes a while. The same story is now true for Gastroenterologists, Radiologists and Dermatologists. Radiology was one of the easiest fields to get into 15 years ago. You work in the dark, have little contact with patients, its frankly a weird field for people who went into medicine looking to help people. You used to have a couple of nerdy introvert types who liked being in the dark that chose the field. Now because of the explosion of imaging, and practice efficiency, these guys are reading 3x the images they did 15 years, and making three times as much.

Payments will eventually come down for them too. But in the meantime, Radiology is now one of the hottest fields for medical students. Fixing this perverse dynamic is a key question. PS: General surgeons are the wrong specialty to pick on. What specialty has had vacant spot in the residency matching process the last few years? General surgery. Its a pretty tough life-- in terms of lifestyle impact, they deserve the $75-100K more than the P[rimary Care Physicians]. It's the Radiologists and Dermatologists that have PCP hours but are making 300-400K that are the problem.

This strikes me as a step toward the truth, but it raises as many questions as it answers. After following Medicare's struggle from 2005 to 2008 to update rates paid for out-patient procedures performed at ambulatory surgical centers, I can attest to the slowness of federal updating. (There may have been a lag from 1990 to 2008 if I am reading the rulemaking documents correctly there.) Meanwhile, private insurers may not have the purchasing power needed for foist an adjustment on thriving specialists. If specialists are coordinated or powerful enough, they can refuse to be part of a network--and that refusal can be more harmful to the network than to the specialists.

But one of the key questions here is how did the specialists increase the volume of the procedures they were able to complete? We can sketch two scenarios schematically. In one, exogenous technological change simply makes it easier to do more procedures more quickly. In another, innovation by specialists themselves makes their practices more efficient. It seems that payment systems ought to reward the latter type of efficiency gains.

Pondering the difficulty of distinguishing between these two types of efficiency gains may make one long for a more normal market determination of the price of physicians here. However, the idea of a "just wage" has to enter into policymaking. Pay should be reasonably correlated with the amount of work the physician puts in each week, the value of the services rendered, and the investment of time and money the physician put into her or his training. But when inequality is pronounced and a large proportion of citizens is dependent on public aid for their care (as in virtually every developed country in the world, including the US), the pay of physicians must reflect that fact as well.

I predict that the specialist pay conundrum will only be solved by carrots and sticks that lead to compression of physician incomes and life chances generally: greatly increased educational aid to physicians (so that they can be debt free at the end of their schooling), balanced by lifelong obligations to either take on a percentage of Medicare, Medicaid, and SCHIP patients, or pay others to take on their share.