Income Artist

Examining The Different Ways Doctors Get Paid

Author: Jimmy Barron
Published:March 18, 2023
3 mins 47 secs

The medical industry’s wage structure is confusing. For example, between a general physician and an orthopedic surgeon, salary of the former may be higher.

Payroll in the medical industry has many different variables, and personnel is frequently divided into specialized fields with little overlap. 

Yet it’s fascinating to know how the money you spend on medical treatment funds a doctor’s income! Let’s look at different ways in which doctors are getting paid. 

1) Cost Of The service

The traditional method is known as the cost of the service. It is utilized by public health programs (like Medicaid and Medicare) and private health insurance.

When a care provider makes an insurance claim, the insurance payer under a fee-for-service (FFS) system pays whatever the doctor, hospital, or other healthcare provider requests without setting up fees.

Early versions of managed care financing, or “discounted fee-for-service” managed care, were likewise based on fee-for-service payments.

Simply put, it means the service providers consent to offer health services at pre-negotiated discounts from their standard fee-for-service rates. 

Preferred Provider Organizations, or PPOs, are a network of readily available providers, and this structure is the norm for them.

The possibility of the demise of fee-for-service reimbursement means that more complicated payment structures will likely continue to develop.

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2) Capitation

When, irrespective of the expense of the patient’s care, a doctor, health care company, hospital, or comprehensive health system earns a set monthly flat charge for caring for a member of a controlled health care plan it is known as capitation.

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However, capitation arrangements should automatically balance out high utilizers in healthcare plans with those who rely on little to no health care each month since the bulk of persons registered in a health plan won’t ever need medical services.

3) Relative Value Units

It is a system of compensating doctors based on the quality of care they offer and factors such as experience, and education.

In this strategy, the quality of the doctor’s care—rather than the number of visits—drives remuneration.

Using this payment system, a doctor who treats a select group of well-known patients can get more money than a doctor who handles more diverse situations.

It is because an RVU for a general physical examination would be lower than an RVU for a complex surgical procedure.

Instead of the fee-for-service volume-based paradigm, the RVU model emphasizes value-based healthcare.

4) Performance-Based Payments 

In this model, if a doctor performs well for an extended period, then as goodwill, the organization pays bonuses to the doctors. However, it is based on factors like patient satisfaction and clinical outcomes.

This model is becoming common as healthcare moves toward value-based care. Furthermore, one advantage of this model is that it incentivizes doctors to focus on the quality of care.

However, not everything that shines is gold! It has one drawback, which makes it challenging to measure performance based on different parameters accurately and objectively.

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5) Concierge Medicine 

Usually, doctors offer concierge or boutique medical services, in which patients pay an annual fee for access to a range of services, including but not limited to extended office hours, same-day appointments, and personalized care. Through this method, doctors get a monthly payment.

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Also, this prototype gives doctors more control over their practice and allows for a higher level of individualized care, thereby increasing patient satisfaction and accessibility.

However, the downside is that it can be expensive and may limit the care for patients who can’t afford the fees. 

6) Telemedicine Payments 

Last but not least, your doctor might also be getting paid through telemedicine! It involves providing medical services remotely, such as through video conferencing through applications like Skype, Zoom, etc.

For their services, doctors can be paid on the above-mentioned payment methods, such as Cost-for-fee or Salary model, and capitation depending on the healthcare organization they are working with.

In the salary-based model, healthcare providers are paid a salary for their service, regardless of the number of telemedicine visits they provide.

However, on the contrary, in the capitation method, healthcare providers are paid a fixed amount per patient.

Final Word

Various factors can impact a physician’s income. These include their location (where they reside and where they work), the area of medicine in which they specialize, if they participate in Medicare, whether they’re part of a network or are independent providers, and the choices they make about what they prioritize and their preferred method to practice medicine.

So, if you’re planning to be a physician, check out the ways you might get paid before taking on the major step.