Obamacare The Business of Healthcare

The Problem With Compensation Surveys – Why Assume That You’re Average?


Let’s assume for a moment that physician compensation surveys are statistically significant.

What’s the problem with them?

Well, I suppose they’re fine, that is, if you’re content with being average.

OK, I can hear it now, some reader yelling that physician compensation surveys indicate more than just what’s average; they show the 70th, 80th and even 90th percentiles as well.

But, once again, what are they measuring?  And, is the yardstick that they are using the yardstick that you want applied to you?

First, and again assuming that these are statistically significant surveys, they are broadly measuring how physicians are being compensated for rendering patient care services. They are not measuring the added value that is obtained outside of providing services, through providing special, or “strategic,” value to the group’s customers, whether a hospital, referring physicians, or patients.

Take for example, one of the purest form of strategic, or entrepreneurial, medical practice: cosmetic surgery.  In some markets, the expertise, or, rather, the appearance of expertise and of a type of celebrity, wholly manufactured in most cases, has such value to potential patients that they will gladly go significantly more out of pocket to obtain treatment from Dr. A as opposed to from Dr. B.

Groups which practice in the traditional hospital based specialties often, quite improperly, view themselves as providing a commodity service. They themselves do not believe that there is a qualitative difference between their group’s Dr. A and another group’s Dr. B, such that there is no strategic value from obtaining services from their group as opposed to from another group. It makes you wonder why they are surprised when they are replaced.

Unless groups structure themselves and position their practices to create a new and different experience, they will be readily replicable and readily replaceable.

At the same time, groups need to understand that even the world’s best buggy maker was mooted by the paradigm shift, the creative destruction, away from horse-drawn transportation to the automobile.

Similarly, in light of the paradigm shift going on now within healthcare and, in particular, the advanced velocity of change going on within some specialties, physician groups must tailor their unique offerings, their unique delivery of service, to either ride the wave of the new paradigm or find a way to swim around that current.

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