Medicare Cuts Will Impact Physicians Salaries, But Working With the Right Insurance Could Help

Like most employees in America, physicians are also dealing with multiple factors—such as inflation and increased interest rates—that make getting the highest salary a critical goal. Unlike most other employees, however, many physicians’ salaries are massively impacted by the legislation around Medicare payouts.

That’s why there’s been some uproar in response to the recently passed 2024 Physician Fee Schedule, which includes a 3.4% cut to physician pay for Medicare services. [1] In addition to compensation concerns, physicians are also worried about the way this proposal will impact patient access to healthcare and add to additional Medicare cuts from the past several years.

To learn more about current and past physician salary trends, Software Advice conducted our 2023 Physician Compensation Survey*. Using this data to compare salary trends from 2022 to 2023, doctors can better understand where they fall on the spectrum of average physician pay, how the CMS proposal will likely impact their practice, and which insurance providers are best to partner with for the financial health of your physicians and practice.

Salary increases covered inflation, but new Fee Schedule includes cuts

The inflation rate has been a big concern for most Americans since it started spiking at the end of 2020. Since then, inflation has risen by at least 3% each year.

While the final inflation rate for 2023 has not yet been determined, the data shows an increase of around 3.3% as of October. Fortunately for most doctors, their average salary increase from 2022 to 2023 was 5.8%. [2]

After accounting for inflation, buying power for the average doctor’s salary rose by about 2.5%. That’s higher than the national average salary increase for all workers in the U.S. of 4.6%.

However, the cut implemented by the CMS appears to threaten that. Passed in November of this year, the new rule introduced a 3.4% conversion factor reduction in Medicare's 2024 Physician Fee Schedule. The conversion factor is the dollar amount assigned to a relative value unit, which comprises the value of services billed out for Medicare coverage. The new payment schedule will cut the conversion factor from $33.89 to $32.74 in the calendar year 2024.

Doctors in our survey estimate that 36% of their existing patients use Medicare, while 66% of those practices accept Medicare. Given these numbers, the impact of this new rule is widespread.

This decision has, understandably, drawn some ire from physicians, but it doesn’t look like changes will be made to the rule anytime soon. [3]

Salary trends provide more insights

There are other notable trends revealed in our year over year salary survey that help to contextualize what the impact of the new fee schedule will be. 

Many doctors have never negotiated their salaries

We asked doctors in our survey if they had ever attempted to negotiate with their employer for a higher salary. While the majority (43%) have successfully done so, 41% say they have never even attempted to negotiate their salary.

Another 12% of doctors in our survey are self-employed, so they have never had a need to negotiate their own salary. However, when asked if these doctors gave themselves a raise between 2022 and 2023, only 35% said yes. 

Nearly half of doctors have a side hustle

We asked doctors in our survey if they currently supplement their existing salary with side work not related to their main practice, and 44% said they do.

Looking closer at this stat reveals that side work is more common among men, with 45% saying they have side jobs compared to only 38% of women. Side work is most common among doctors who work in private practices, followed by those who work at hospitals.

Women still make less than men

Confirming what other research has shown, our survey data found that there is still a discrepancy between what male and female doctors earn. In 2023, the median salary for male doctors was $284,853; the median salary for females was $226,034. [4]

The median salary increase for men between 2022 and 2023 was about 8%, but only 2.9% for women.

Private practices pay doctors the most

Though private practices provide the highest salaries, the margin is not as significant as one might expect.

Physicians working at private practices saw a median salary increase from $253,731 in 2022 to $275,072 in 2023, which was an increase of about 8.4% or $21,341. This represents the highest salary increase in our survey when considering types of practice. 

Doctors at group practices saw a median salary increase from $247,989 in 2022 to $258,713 in 2023. 

Hospitals presented an interesting data set, though. When we look at average salaries for physicians at hospitals between 2022 and 2023, we see an increase of about 3.3% or $9,317. However, median salaries show a decrease from $252,011 in 2022 to $244,373 in 2023. 

This indicates that while most salaries for doctors working at hospitals increased, a few salaries decreased significantly. Despite the dire shortage of qualified healthcare workers, some hospitals did enact hiring freezes and pay cuts early in the year after reporting losses. [5]

How employers can combat pay cuts to retain physicians

For medical employers wondering what they can do about these pay cuts and how to maximize their employees’ salaries, the answer is to establish relationships with the right insurance providers.

According to our survey, one insurance company was far and away the highest ranked provider for payouts: 43% of doctors say Blue Cross Blue Shield typically pays the most for services. United Healthcare followed, with 21% of doctors saying they pay out the most; Aetna came in third at 19%.

If you aren’t maximizing your reimbursements from insurance providers, you can’t afford to pay doctors as much as other practices who are. Based on this survey data, it pays to establish a relationship with these insurance providers.

Tips for choosing the right insurance providers to partner with

If you’re joining an established practice, it’s likely they already have relationships with certain providers that they’ll ask you to participate in. You’ll need to get credentialed for each provider, but you’ll still want to make sure you’re working with insurance providers that pay out well.

If you find your practice is only working with their selected providers because they always have, it’s a good idea to recommend looking at payout data and considering new options. 

Another thing to consider is working with a biller. Usually these professionals will take a small percentage of your bills in exchange for helping you get credentialed with providers and then billing them for your services.

Finally, consider using an EHR that includes billing features or a billing software system that will help make coding and billing easier for you to manage yourself. Billing software can help you: 

• Increase collections

• Code claims properly

• Verify patients’ insurance coverage

• Post payments

• Provide reports on collections and rejections