Salaried docs vs. fee for service

The Happy Hospitalist, generally an excellent blogger, wrote yesterday about how salaried docs must be delivering better care than those greedy FFS docs, because the Cleveland Clinic does a terrific job with docs on a salary.  I suspect their excellent outcomes have nothing to do with reimbursement model and a lot more to do with systemness and a strong gatekeeper model.

He totally missed the elephant in the room in the Big Group Clinic model: who gets the money for doing the work.

He cites as an example a GI doc who left the Clinic for independent practice and quadrupled his income.  Let’s say he’s working as hard as he did in the Clinic; is he billing more than the Clinic did?  I doubt the Clinic wasn’t billing the usual amount for the work, so 3/4 of this docs’ billing went where?

I suspect it went into the overhead of the Clinic.  This isn’t a knock on them, it works for their group, so fine.  Other groups do essentially the same thing.  It’s legal and morally defensible, and some docs don’t mind being salaried.

Salaried docs in a big Multispecialty Clinic have different incomes, but not as radically disparate as the non-clinic model.  As a way to somewhat equalize RVRBS issues it works (I wouldn’t want to be in the room when salaries come up, though).

What salaries do not do is get docs to work harder, see more patients.  Some docs are very dedicated, motivated people who would work for rent and grocery money.  Others on a salary would do the minimum: if every patient is more work and more liability without more pay, well, why work more/harder?  As an incentive to produce nothing beats getting paid for it.

(This isn’t an endorsement of excessive or un-necessary procedures; there are greedy jerks in all professions).

Also, a happy side effect of getting paid for what you do rather than for having a pulse is those who work hard resent those that don’t (but who would make the same on salary) a whole lot less.  Way less inter-group stress.

Salaries aren’t all bad, but they’re not the Key to Great Healthcare.

Discolsure: I’ve worked ED’s both ways, and much prefer fee for service.


  1. TheNewGuy says:

    I saw how the “salaried system” worked in military medicine, where there was absolutely ZERO incentive to do anything extra. Clinics closed at 4:30 PM… you were SOL at 4:31. Once appointment slots were gone, they were gone, and everyone else got sent to the ER.

    No thanks. I’ll take the incentive-based systems every single time. Waaaaaay easier to get patient taken care of.

  2. CholeraJoe says:

    It works the same in the military. When I was a newly-minted Pulmonary/Critical Care doc in an 8 person Internal Medicine clinic for the USAF, only half of my clinic patients had pulmonary problems. The rest were the usual mix of general IM problems – diabetes, hypertension, chronic anticoagulation, Rheumatoid arthritis, thyroid, etc.

    I was used to a fast-paced clinic environment so I would see 20-25 patients per day plus having inpatient responsibilities. The Chief called me in and told me I was making the other docs look bad because most of them were seeing one-third fewer patients. So instead of expecting the others to increase productivity, I was told to slow down. Meanwhile the waiting times for a new patient were 3 months. I just shook my head and walked away mumbling.

  3. Hey doc. I think you misrepresented my position (read the comments in the post). I am not a fan of salaried model of care. A salaried model, unless the payment is “fair” and the culture is great, does not foster a hard working atmosphere.

    I trained at both an academic university and a VA hospital. The culture of care at the VA was limited by the slowest common denominator. The support staff (nurses, techs, administration) all took the path of greatest resistance. And things were painfully slow. If you were a lazy doc by nature, you loved the VA. If you were a hard working doctor, you hated it. And it rubs off on you after a while. Many VA only docs were much lazier then their VA and University docs. You get used to doing less

    That’s not to say that salaried only is bad. Salaried can work, if you have a culture of excellence and doctors, nurses and all others foster that excellence. That’s really hard to do if you pay poorly and expect excellence. But it is possible.

    Still, the salaried model is not my choice. I would far prefer a model that paid doctors well to practice quality episodes of care AND work hard. You can bundle episodes of care that gives doctors the incentive to communicate, think about their decisions to offer the appropriate evidence based therapies, not just more therapies. AND it gives doctors a chance to profit from the cost effective nature of the decisions they make AND encourage them to see more patients by becoming more efficient in their practice.

    If I could offer great care in a bundled approach and see 2000 patients a year, I should earn less than I would If I saw 3000 patients a year in a bundled system of care. BUT I shouldn’t earn more to see 3000 encounters in fee for service when only 2000 was required on those in a fee for service.

    While some FFS doctors may be greedy, I think a bigger component of the uncontrollable health care inflation has to do with a lack of accountability. It’s just easier to do more than it is to think about whether your recommendation is a cost effective approach to the problem in front of you. If doctors cannot consider the cost of their quality care, then we will never find a way to slow the growth of our care. Because WE are the ones ordering all the tests.

  4. Steve Lucas says:

    It is important to remember that the Clinic is a very large business, with very large profits. They are the 800 pound gorilla in the Cleveland economy. Our local affiliate did a $80M+ expansion and financed it internally and with tax abatement.

    I would guess much of the interdisciplinary activity has more to do with efficiency and billing than any great medical model, although the medical successes are impressive.

    Steve Lucas

  5. I don’t know that the military/VA is a very good basis for comparison, because there is no incentive to provide service at a high quality, since there’s no competition for the patients nor bonuses based on any metric. I would presume that the clinic referenced has performance bonuses of some sort.

  6. There might be a middle ground. I understand your arguments against salaried docs, and a good analogy to that is the academic doc vs. private practice doc. Academics generally earn less, see less patients, but make up for it with publishing and teaching responsibilities. The tradeoff there is one of giving back, intellectual or ego satisfaction with being the leaders in the field.

    However, if there is no discernable tradeoff, many docs would (as you say) be unhappy and less productive on a salaried basis.

    On the other hand, the fee-for-service does have a lot of problems too: cost-control issues, does not value the time of the doc-just the diagnosis, and conflict-of-interest issues w/AMA owning the CPT codes.

    So I’ve come up with a solution: that is based on an hourly base that is adjusted up for more years of training,completion of CMEs, experience etc…and also complexity of patients (e.g. neonatal and elderly, HIV). This values the time of doctors, allows them to focus on complex/chronic disease patients, and has the added benefit of making patients happy and cost-wise is self-limiting (only so much time available) and on my blog you can see how I propose to prevent abuse of this system.

    While you and others make fine arguments against ideas, I’d like to see more people in medicine proposing possible solutions.


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