Physician Compensation Trends

Posted on April 2, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Don’t Give up Medical Practice; Just Yet!

Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]

By now, all physicians, medical practitioners, nurses and healthcare executives know that in 2006 the Medicare Trustees Report projected a 4.7% reduction in physician reimbursement for 2007, and 37% in cumulative cuts over the next nine years.  

It also noted that each year in the next decade will feature a 5% cut in doctors’ pay, while physician costs will increase 2% annually www.ama-assn.org/ama/pub/category/16221.html 

The Bush administration also called for $36 billion in Medicare reductions over five years, in 2008, and advocated pay-for-performance [P4P] reimbursement metered against predetermined quality standards. 

Alarming Trends 

As regular readers and subscribers to the Executive-Post realize, the direct results on physician compensation are predictable, but other trends may be even more alarming. 

For example, medical student debt burdens (averaging $100,000-$250,000) are economically devastating.  

In FY 2000, the federal Health Education Assistance Loan (HEAL) program squeezed significant repayment settlements from its Top 3 deadbeat doctor debtors, and excluded 303 practitioners from Medicare and other federal/state programs; even more occurred thru 2001-07. 

And, the flight of doctors out of states like California and Massachusetts; and/or taking early retirement, is particularly noteworthy.  

“Don’t Give Up” 

Dr. Regina E. Herzlinger, the Nancy R. McPherson professor of business administration and chair at Harvard Business School, and mother of a physician-daughter, opines that there is little wonder that some physicians become depressed and want to give up their careers entirely when pondering the future of medicine, managed care and related compensation issues. 

Nevertheless, Herzlinger implores in her classic book, Market Driven Healthcare, “don’t give up practice, yet.”  

Pragmatically, the future is bright and offers great opportunity to early adaptors who have the foresight to change medicine for the better and be handsomely compensated, too!  

But, physicians’ inability to deal with competitive market forces – and HIT – is well known and many are loath to deal with them.  

Assessment 

One way is to seek additional management education through a traditional Master’s Degree in Business Administration (MBA), or use an online distance-education resource like www.CertifiedMedicalPlanner.com  And, tuition, textbooks and fees may be tax deductible.  

In this way, doctors may hope to maintain their place as salary and compensation leaders in the U.S. labor force. 

Another way is to read, post, and comment, opine and subscribe to in the Executive-Post.  Make it your professional health economics social network-of-choice. 

Conclusion 

  • Will you stay the course, or retire from medical practice early?
  • Will you re-educate and re-engineer; or just give up on medicine?
  • Is medicine a viable career option for your children, or grand-children?  

Please opine. Your comments are appreciated.  

Related Information Sources:

Practice Management: http://www.springerpub.com/prod.aspx?prod_id=23759

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact him at: MarcinkoAdvisors@msn.com  or Bio: http://www.stpub.com/pubs/authors/MARCINKO.htm

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Hospital Cafeteria Plans

Posted on April 2, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

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“Use it -or- Lose it” … Features

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief]dr-david-marcinko 

Under a hospital employee cafeteria plan, each eligible physician, nurse, technologist or employee may choose to receive cash or taxable benefits -or- an equivalent of qualified, non-taxable fringe benefits.

Not Taxable to Employees 

The amounts contributed by the employer are not taxable to the employee. In effect, the employee pays for the benefits with before-tax dollars.  They remain non-taxable even though the employee could have elected to receive those amounts in cash.  

An additional benefit for both employee and employer is that nontaxable cafeteria plan benefits are not subject to FICA taxes, thus saving 7.65% on amounts that would otherwise be under the Social Security wage base.  

However, if the healthcare worker or employee does not use all of the monies that are diverted into the cafeteria plan, the unused amounts are forfeited [“use it -or- loose it” provision]. 

C-Plan Essence 

The essence of a hospital cafeteria plan is that it permits each participating employee to choose among two; or more benefits.

In particular, the employee may “purchase” non-taxable benefits by forgoing taxable cash compensation.  This ability of participating employees, on an individual basis, to select benefits fitting their own needs, and to convert taxable compensation to non-taxable benefits, makes the cafeteria plan an attractive way of offering benefits to employees. 

Many Non-Taxable Benefits 

Cafeteria plans may include the following non-taxable benefits: 

  • 401 (k) or 403 (b) retirement plans
  • health and accident insurance
  • adoption assistance
  • dependent care assistance
  • group term life insurance including premiums for coverage over $50,000,
  • and more! 

Cafeteria Plans and Healthcare 

It is always to the tax advantage of a healthcare employee to receive employer-provided health and accident benefits in a tax-free form, rather than paying them with after tax money.

Note there is the potential draw back of employees thinking of health care benefits as an implicit condition of employment instead of true non-cash compensation. 

Because of increases in healthcare costs, employers are not always willing or able to provide coverage for all of an employee’s medical expenses. This means many employees must often pay for a portion of their medical costs under a co-pay provision.  

If an employee is fortunate, the employer may establish a cafeteria plan to allow the employee to fund the co-pay healthcare costs with before-tax dollars. 

Example: 

If an employee must spend $3,000 annually to provide healthcare coverage for his or her dependents, then the income-tax savings to the employee could be as much as $1129.50 annually, if the employee is in the 30% tax bracket ($900 in income taxes and $229.50 of FICA taxes).

The employer saves $229.50, the 7.65% of gross pay “matching” FICA taxes.   

Other Benefits 

A cafeteria plan may also be expanded to cover more than just medical benefits. It may offer participants a choice between one or more nontaxable benefits, and cash resulting from the employer’s contributions to the plan or the employee’s voluntary salary reduction. 

Participants in cafeteria plans are sometimes given a choice of using vacation days, selling them to the employer and then getting cash for them, or, buying additional vacation days.

Some cafeteria plans also include one or more reimbursement accounts, often referred to as “flexible spending accounts” or “benefit banks.”  Under these plans, cash that is forgone by an employee, by means of a salary reduction agreement or other agreement, is credited to an account and drawn upon to reimburse the employee for uninsured medical or dental expenses, or for dependent-care expenses.

Many cafeteria plans include both insurance coverage options and reimbursement accounts. 

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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