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Managed Care

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Income for most physicians has declined substantially since the advent of HMOs

The growth of health maintenance organizations (HMOs) has clearly reduced physicians' income, concludes a study supported in part by the Agency for Healthcare Research and Quality (HS09196). It found that as early as 1990, prior to the more aggressive market behavior of HMOs in recent years, a doubling of HMO market penetration into an area reduced physicians' annual earnings by 7 to 11 percent and hourly earnings by 6 to 9 percent. This was presumably accomplished through a combination of fewer visits and lower payment rates for patients covered by HMOs, note Georgetown University researchers, Jack Hadley, Ph.D., and Jean M. Mitchell, Ph.D.

The researchers used data from a 1991 nationally representative sample of 4,577 physicians younger than 45 years to develop a model to estimate physicians' annual and hourly income. They used the Group Health Association of America's study of HMO market penetration in 1991 and the 1991 Area Resource File to construct HMO market penetration (percentage of the population in each market area with HMO coverage) in the 704 market areas of the surveyed physicians.

Results revealed that HMOs had a greater impact on the income of physician employees than self-employed physicians. For example, the average income from medical practice in 1990 was $137,500, with self-employed physicians averaging much higher earnings ($172,000) than employed physicians. On average, physicians who were self-employed earned about $44,000 more per year and $13.33 more per hour than physicians who were employees. As expected, specialists earned significantly higher incomes than primary care physicians, ranging from $72,870 to $99,480 more per year. Differences in hourly earnings generally followed the same pattern. Between 1990 and 1997, overall enrollment in HMOs is estimated to have more than doubled, increasing from 33.6 to 72.3 million people. It remains to be seen what further impact HMO market penetration will have on physicians' incomes.

See "HMO penetration and physicians' earnings," by Drs. Hadley and Mitchell, in the November 1999 Medical Care 37(11), pp. 1116-1127.

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