The Better the Hospital, The Lower Doctors’ Salaries

doctors' salaries
These docs’ salaries might make hundreds of thousands of dollars apart just because some choose to work at academic hospitals instead of go into private practice

When you’re deciding where to work after medical school, where do you think you’d make the most money? Harvard Medical School? Johns Hopkins? You’d be very wrong. I’ve received an up close education to the world of physician compensation after I helped my girlfriend search for jobs this past year, and the results are very surprising. As a general rule, the better the hospital, the lower doctors’ salaries. 

Academic Medicine: Rewarding, but Not Monetarily

If you decide to work at an academic hospital as a professor, you can expect to make 20% to 50% less than your counterparts in private practice. You will probably have much better benefits and paid time off, but in most cases the value of these extra benefits will be worth much less than the salary differential.

Why is that? After all, to get a job at an academic hospital, you have to be among the best in your field. Wouldn’t you expect that the best surgeons would be compensated more for their expertise?

That’s what I thought too. However, top teaching hospitals know that their reputations make doctors want to work for them. In the same way that you might be cool with a lower salary if you worked for the President instead of a lobbying firm, many of the very best doctors seemingly do not care about compensation at all.

How Much Money Can You Make in Private Practice Compared to Working for a Hospital?

Accenture finds that the share of independently employed physicians will continue to decline in the face of a challenging health care market with hefty fixed costs. Private practice doctors must maintain expensive malpractice insurance, worker’s comp insurance, and business liability insurance including slip and fall coverage. They must pay for retirement plan administration, bill pay and scheduling software, office rent, and any necessary medical devices and machines. They need to hire office managers, receptionists, nurses or nurse techs, and more. To top it off, private practices must battle with insurance companies and Medicare for reimbursements. It’s no wonder that so many talented doctors want nothing to do with the business of medicine and join hospital staffs.

Even so, for those doctors willing to put up with the hassle, private practice is a better financial decision. I had my first realization of the money present in private practice when we met with a disability insurance adjuster. She evaluates the health of doctors who seek to buy an insurance policy. The adjuster mentioned that she had just worked with a fellowship trained specialist going to a small town in Texas. His annual compensation package was valued at more than $800,000. In contrast, that same specialist working in a prestigious academic hospital might only make between $200,000-$300,000 annually.

To top it off, that Texas physician has far more options with physician mortgages in Texas compared to physician mortgage programs in big cities in the Northeast.

My dad is a buddy with a local judge in our town who handles divorce cases for doctors. The judge gets to see the monthly income from these doctors to determine if any alimony should be paid to their spouses. The judge mentioned to my dad in between workouts at the local gym that $80,000-$100,000 income a month is not unusual for a private practice doctor who owns his or her own practice. Sure they have overhead, but annoying insurance policies and $50,000 office manager salaries are minor compared to the extra profit available.

What Drives the Private Practice Compensation Difference?

I’m not saying that all doctors make this amount of money in private practice. Also, keep in mind that these incomes require 10 years+ of training at $50,000 a year incomes while six figure student loans accumulate. Still, how do the private practice doctors make so much more money than their hospital employed counterparts with professorships at prestigious institutions?

The short answer is when insurance, Medicare, or Medicaid pays for procedures, the service provider submits a claim code. Hospitals take a huge portion of this for their own business, and distribute a fixed amount to their doctors in the form of salary. In contrast, a private practice takes the entire sum, pays fixed costs like office rent, staff, and utilities, and keeps the rest. Ever wonder why hospitals have such beautiful buildings and pay for expensive advertising campaigns? It’s because they stand to make an enormous amount of money from each doctor who does not care about the business of medicine. If they can draw doctors into working FOR them instead of WITH them, the hospital will have complete control over those doctors’ lives and careers.

How Doctor Compensation Might Influence Your Next Healthcare Decision

Private practice docs make money based on the number of procedures performed. Doctors at academic medical centers make a fixed salary. In other words, the professor surgeon at Johns Hopkins is could be less likely to suggest surgery than the private practice doctor at the privately owned surgical center down the street.

So keep in mind that doctors all have conflicts of interest. You will probably find the fewest conflicts at academic medical hospitals, simply because the surgeons that work there make less money and have more of a fixed compensation model.

Questions for You All

1. If you’re a doctor or doctor in training, does this make you more or less likely to pursue employment at an academic hospital where you’ll make less money?

2. What do you think about the fairness of the best doctors making less money because they want the prestige and benefits of a professorship at a well regarded university?

3. Do you agree or disagree that the best surgeons work at academic hospitals?  

2 thoughts on “The Better the Hospital, The Lower Doctors’ Salaries”

  1. This is a very generalized article. I don’t know what field your gf is in but not all academic doctors are salaried only. Most are base salary plus incentive based on productivity. It also really really depends on the specialty you are in. I make less than my private practice counterparts but with much much less headache and incredible benefits (employer match for retirement accounts, pension, free or discounted insurance (medical, life, disability) including paid maternity leave.

    1. How long have you been working? Her benefits for disability don’t start til after one year and her match doesn’t start until after 2 years. She doesn’t get a pension though her health insurance is cheap. She gets a very small incentive bonus like 10k something like that. But her hospital is very prestigious. She got a base + incentive offer at a less prestigious institution where she would have made like 50% more but without the research potential

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