Physician wages are relatively high, and fees may increase with market concentration

A study in the June 2015 issue of Health Affairs comparing wages of health sector employees to those of similarly qualified workers in other sectors found that although healthcare workers are paid only slightly more on average than their counterparts in other sectors (adjusting for education, experience, and demographics), health-sector professionals (e.g., nurses and physicians) earn much more than professionals in other sectors with similar qualifications. By contrast, non-professionals employed in hospitals and physicians’ offices are paid similarly to their counterparts outside of the health field, while non-professionals in nursing homes are paid significantly less than their equivalents, according to the study.

“At the mean, nurses earn about 40 percent more than would be predicted based on education, experience, and demographics, and physicians earn nearly 50 percent more than would be predicted.”

– Sherry Glied and colleagues, Health Affairs

In the same issue of Health Affairs, researchers at Stanford University looked at changes in market concentration among orthopedic practices between 2001 and 2010, and found that physician fees for total knee replacements increased with market concentration.  Although there was an overall $261 decline in fees for knee replacement surgery during the 10-year period, in markets that became much more concentrated (meaning they moved from the bottom to the top quartile of concentration), private payers paid $168 more per surgery (a nearly 7 percent increase).

“…spending on physician fees more generally accounts for a substantial portion of the level and growth in national health expenditures. Understanding the relationship between market concentration and physician fees more generally therefore has important implications. The case of total knee arthroplasty may serve as a useful example of physician fees for surgery, since it is a commonly performed procedure whose use nearly doubled between 1991 and 2010.

– Eric Sun and Laurence C. Baker, Health Affairs

This study adds to a substantial amount of research indicating a correlation between concentration in hospital markets and higher private insurer payments to hospitals.