Dr Scott Manaker Looks to the Future of Physician Compensation at CHEST 2024

One of the first sessions to kick off CHEST 2024 in Boston looked at the future of physician compensation, which highlighted the consolidation of physician practices, unionization of physicians, the future role of Current Procedural Terminology codes and fee-for-service payment in value-based care, and the impacts of facility reimbursement, inflation, and market conditions.

Session chair Scott Manaker, MD, is a pulmonary critical care physician and the vice chair for Regulatory Affairs of the Department of Medicine at University of Pennsylvania Health System. In this interview, he discusses the critical junction of physician compensation amid shifting health care dynamics. Rising practice costs, inflation, and Medicare fee-for-service cuts over the past 4 years have reshaped the traditional practice model. Nearly 80% of physicians now work in employed settings, reducing their ability to negotiate contracts.

As more beneficiaries move to Medicare Advantage plans, the effectiveness of existing reimbursement models is increasingly questioned, especially as compensation has steadily declined—by 3% in recent years, with another 2.8% cut expected in 2025. These pressures are driving changes such as growing physician unionization and the decline of independent practices, signaling significant shifts ahead for the health care industry.

This transcript has been lightly edited for clarity.

Transcript

Can you discuss your CHEST 2024 session "The Future of Physician Compensation"?

I was asked to put together a session on the future of physician compensation. As you can imagine, the problem with predicting the future is it's difficult. So I gave a talk really looking at some of the macroeconomic and current trends that are going on that are adversely affecting physician reimbursement. That would include rising practice costs and inflation compared to, for the last 4 years, cuts in physician reimbursement in the Medicare fee-for-service program, the loss of independence by physicians who might have been in a private practice group and able to negotiate, whereas now, some estimates are as many as almost 80% of physicians are in a variety of employed models, whether they are for academic medical systems, venture capital and private equity, who are buying practices in a variety of medical specialties. And even insurers, like Optum is the largest single employer of physicians in the United States, with I believe about 30,000 physicians in their direct employment.

Other adverse economic trends are the shrinking of Medicare fee-for-service beneficiaries, where now more beneficiaries in Medicare are enrolled in the Medicare Advantage plans, rather than the fee-for-service program that winds up being largely negotiated contracts with a variety of payers. As you're well aware, payers will trigger off the Medicare fee-for-service system and pay a percentage, perhaps 80%, perhaps 120%, perhaps 220%, of the Medicare fee-for-service program, but it represents a different patient population with different outcomes as more and more articles are coming out and demonstrating. So the applicability of the reimbursement structure in the Medicare fee-for-service program may be increasingly disparate from the types of care that need to be delivered, both for Medicare Advantage patients, as well as in the variety of other insurance or health care coverages that are out there.

I think the last point I would make is the Medicare fee-for-service program has reduced physicians’ compensation by about 3% for the last several years, with another 2.8% cut predicted for 2025. I don't think anyone can name a single industry where the workforce is paid less 4 years in a row, and you still have a stable workforce, which is leading to a variety of consequences, such as the extermination of physician private practices, physicians having a variety of employment models, physician unionization, which is burgeoning all across the country, not just for trainees, but for large physician groups. As an example, at Christiana Medical Center in Delaware, a 500-physician group recently just voted to unionize. And trends like that are increasing all across the country. I believe currently, only about 7% of physicians are in unions, but there's a rapid increase over the past year or two.