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What to Do With the Doctor Cash Cow?


Employed physicians generate a considerable amount of money for their employers. In an era of value-based care and a shortage of primary care physicians, something's got to give.

A recent report from Merritt Hawkins indicated that the average employed physician generates over $1.5 million for his or her employer. Also, while there is a lot of noise about value-based and bundled payment, the reality in the examining room is that “the healthcare environment remains solidly rooted in fee-for-service and other forms of volume-based reimbursement. According to a recent Health Affairs study, 94.7% of physician office visits were covered under fee-for-service arrangements, and just 5.3% under capitation payments.” In other words, docs have one foot in the boat and another on the dock.

In addition, entrepreneurs are creating new care delivery models, like urgent care clinics, new forms of primary care practices, and retail based clinics, and they are looking for ways to attract and compensate docs, particularly primary care docs, in ways that are both motivating and legal and don’t run afoul of Stark Laws.

Furthermore, those doctors that generate the most don't necessarily get paid the most, given that some specialists generate lots of downstream revenue in the form or tests, imaging studies, and procedures, while other specialists generate less. In some instances, doctors generate almost 20x their salaries.

The question of what to do with the doctor cash cows will continue to trouble sick care CFOs for the foreseeable future. Revenue sharing, ESOPS, delayed compensation, and other forms of incentives, may not be viable options because of the nature of sick care, its rules, and regulations.

Here are 10 reasons why it is so hard to kill fee for service medicine.

As we change more from sick care to health care and we see a gradual, real transition to bundled payments via MACRA, there will also be a MOO-vement to do something with the doctor cash cows.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice