Part 1 What is your worth Maykel

I owe you behind the knife fans. It's Scott here. And super excited to have a part of this series where we're looking at the financial aspects of medicine. And I'm super pleased to have one of my good friends and the division chief of colon and rectal surgery at UMass Memorial health and UMass Chan medical school, Dr.

Justin Makle. Justin, welcome to BTK. Thanks. I'm excited to be part of this. So tonight we're going to talk a little bit about finances and specifically more from the aspect of knowing your worth and I'd like you to first tell the Listeners out there just a little bit more about yourself Where'd you train and kind of give us a little bit of background about you before we dive in?

Yeah, sure. So I did my medical school training at tufts university in boston and then Did my general surgery residency at Beth Israel deaconess Also in boston and then Went west to the University of Minnesota where you and I did our colorectal surgery training together

and my first job out of fellowship was that University of Massachusetts Medical Center And I've been a division chief since 2007 So for all of you who don't know Justin is actually given a similar talk to this all around the country and has Really provided a lot of insight So when we decided to put together this series I thought nobody better than Justin to kind of come on and talk a little bit about from the physician side about its worth So with that in mind, I love when you give this talk a little bit about saying what is the dictionary definition of worth?

What does that mean when you talk about what is? a knowing your worth all about You know, it's it's a complex topic, I think, as it comes when it comes to health care, because I think that, we as doctors, physicians, surgeons have been valued in society you know, and it may even be one of the reasons why some people chose, chose this as a profession, but, from a financial

perspective, it's funny how, although, you know, one of the key take home messages from this is that we all do very well financially.

We're in the top 1 percent of earners in the United States, but, you know, our society values A lot of different industries that are much higher than health care from a financial perspective. If you just look at, athletics and sports and the astronomical salaries that people bring in. But, you know, worth is really, it's more than finance, right?

It's what's it's esteem, it's respect, it's it's basically What I think sets us apart from a lot of other professions and that being a doctor is really a vocation and We don't want to really harp on the financial side of things I think it's one of the reasons why doctors in general don't make this a priority.

We in general, we're not, you know really great business people but I think it's really important to have conversations like this so that we learn from one another And it brings us

to the forefront of, you know, what can we do to advocate for ourselves financially as our careers evolve. So Justin, you know, if this is our listeners first podcast in this series that they're listening to, maybe just having a little bit of background about kind of ins outs, fluid balance, all the other thing.

I know, as you always say, you're not an MBA, but you don't need an MBA. So give a little bit of background before we jumped into a little bit about more things in terms of our views. Yes, sure. So it's you know, in no way am I an expert in this. And I think that what I can share with you and with the listeners is what I've learned over the past 20 years.

And there's a lot that I don't know. And what is clear is that it really depends on the hat that you're wearing. We all have very, very different perspectives. You know, for example, you've had a different perspective on this topic when you were a solo practitioner to a division chief, to a department chair, and now as a hospital president, you see things very

differently.

And I think that I can provide At least the perspective from a practicing surgeon. And I think that a lot, a lot of what we'll talk about is really geared towards, you know, docs who are early on in their practice and trying to get a better handle or grasp on this to to better understand the business side of things.

So, you know, it's funny, I like to use the analogy, keeping it simple of ins and outs, right? So when we make rounds every day as surgeons, we're looking at vital signs, we're looking at ins and outs and people kind of get lost in the finances of medicine. And I think it's actually pretty straightforward.

So the ends of the revenue, right? So it's the dollars that we're generating as we do work, but when the money comes in, there are also expenses related to that. So there are direct costs and there are indirect costs. And so when we sit down with our hospital administrators and they tend to talk a little bit of a different language.

It's important that we understand and we can communicate appropriately with them. And so when they talk about contribution margin, that's a, it's a big term that they like to

throw around. And really what is this? The revenue is the money that you bring in minus the direct cost and the total margin.

Another common term is that contribution margin. So the revenue coming in minus the direct costs and minus the indirect cost. At the end of the day, you know, those different Values can be used in different different conversations. But typically we're talking about the contribution margin and the total margin for what the value is for the work that you do as a surgeon.

So speaking a little bit about value, one of the things that is in our wheelhouse as a lot as this, Idea of an RVU and we throw RVU all the way around work rvu, regular rvu. You hear RVU all the time. And so what is a relative value unit, the RVU, and how does it pertain to physician salaries and what we're talking about here today?

Yeah, so a relative value unit or an RVU is a measure of work. Associated with physician services, but that could be an encounter, or it could be as a surgeon. It could be a procedure or a surgery that we perform and those are views are

set by the AMA. There is a REC committee, the specialty society, relative value scale update committee.

And what they do is they evaluate the RVU value for the work that we do on a five year cyclical basis, and it's supposed to reflect the work that we perform, the expenses associated with our work, and then the malpractice costs of running your practice. And it's completely independent of charges sorry, of charge schedules.

And patient's insurance coverage or the reimbursement coming from payers. And at the end of the day, hospitals use RVUs as a measure of physician productivity to calculate your physician compensation. So, for example you know, when we do a Colonoscopy, there's an associated CPT code, and there's an RVU value for colonoscopy 3.

2 RVUs. And then as procedures become more complex, so a lap right colectomy has its own CPT code, and the RVU value can be up as high as 23

RVUs, or a more complicated operation like a low interior section, again, its own CPT code RVUs of 35. But we also get, it's not just procedure based, we also have RVU value for, Okay.

Outpatient consultations, inpatient consultations, daily rounds, and so it's basically a reflection of the work that we do as physicians. So do these RVUs ever change or how does that work? They're reevaluated on a regular basis by that rec committee and it's a typically on a five year cycle.

Yeah So I think what's interesting about that is obviously there's a lot of different listeners that are going to go to many different Specialties you and I just happen to be colorectal surgeons, but You know, you can have, as you said, a colonoscopy, all the way up to a J PALS, 37 RVUs, just pretty massive amount in there.

And, you know, colorectal surgery versus other ones, is it how you're paid or how does this per RVU are you paid or what does it go to on the different specialties? How does that all work?

You know, it's one of the things that you don't think about when you're choosing your specialty as a surgeon, right?

You, you choose for a lot of different reasons. That's could be a whole separate podcast, but at the end of the day, there are definitely certain specialties that reimbursed better than other specialties based on RVU, so the revenue generated per RVU can be higher and it can put you in a position where you have more leverage as you're negotiating with the medical center.

And so as it turns out. Colorectal surgery is actually one of the highest revenue generators per RBU. So on average. You will collect about 104 per RVU. Whereas if you compare it to a trauma surgeon, that number may be as low as 52 per RVU. And another, you know, high one, for example, surgical oncology can be as high as 82 per RVU.

And I know we're going to go into a lot of these different concepts in not only this podcast, but as a part of this series in terms of how different providers are paid. But let's just jump in on a very, very

high level in terms of this. How are we paid? How can you, can you go real high level and tell us a couple of different buckets, maybe if you will, of how you're how you're paid?

Complicated. And so that, well, the business of medicine is complicated, but you can try and really keep things as, again, as simple as possible. Think that work. For the work that we do, there's actually two revenue streams. So there are, on bucket number one, there are professional fees, or in the Medicare world, what's called Medicare Part B.

And that is money that comes in for outpatient work and for physician services. So that's like medical group, physician service based revenue. The other one is Medicare Part A, or what's called facility fees. And that's what's coming into a medical center for inpatient care. For and so funds come in through both areas and depending on what your practice setup is, you may see one side and not necessarily see the other.

So I think it's

helpful to sort of go through an example of what that means. So if a surgeon sees patients and we'll talk about this probably a little bit later on about, you know, RVUs and median RVUs, but to take a real life example of a relatively busy colorectal surgeon doing about 8, 700 RVUs per year, they are going to generate revenue.

Based on those professional fees based on inpatient care, outpatient care, and they're going to bring in a total clinical revenue, say, for example, somewhere around 700, 000. Now, you say, okay, great, you just made 700, 000. But remember, there are expenses associated with it. There's a direct cost that we talked about.

So your salary, malpractice, fringe benefits. Office staff, that type of stuff. So then the number is going to drop down. And then to go beyond that, remember, as we talked about total margin, then we're going to be talking about taking out those indirect costs.

And those are a little bit harder to define, but like system allocation costs, collection costs, deans taxes, if you're associated with a medical center.

And then unfortunately, at the end of the day, despite the fact that you generated over 700, 000 in revenue. You are now in the red because of the fact that you've had to subtract out all of your expenses related to direct costs and indirect costs. Now, on the flip side, the good news is that the work that you're doing, the facility is also generating significantly more revenue than what you're bringing in on the professional side.

So for that same volume of work, you're gonna bring in revenue of somewhere around 4. 5 million. Now, of course, they're also going to take out the direct costs associated with that. So hospital based, so OR equipment, nursing care, housekeeping. They're also going to take out indirect costs, finance charges, HR, rent, billing.

The good news is that because of the fact that the revenue coming into the medical center is So

much higher. The facility fees are so much higher that even when you take out those indirect and those direct costs, you're still generating significant revenue in the range of somewhere around 1. 7 million per year.

So when you take the facility or the medical center revenue. And then you look at the losses that happened on the professional side to give you a sense, a relatively busy colorectal surgeon is going to bring in about 1. 5 million per year for the medics. That's pretty amazing. And I, and again, I know this is just kind of, could vary by location, could vary by practice, all the different things, but it's amazing when, you know, most people hear like, man, I brought in a million dollars to the to the facility, or I brought in 10, 000 to the facility.

You know, to go through all these things, there's a lot more behind the scenes. There's other funds though that also come in that, you know, we just lived through a pandemic. We got other, you know, free care people, bad debt, shared

everything. What's all that about? Yeah. So in addition to the revenue that's being paid to the, you know, the party and the part B then beyond that medical centers are also getting significant amounts of revenue from the government.

And so, for example, there is a state free care pool that's going to come in for all the work that you do as a hospital taking care of free care patients. There is this Medicaid Supplemental Fund, or the MSF, which is significant which is also distributed amongst medical centers across the United States.

In the year 2021 49 billion were dispersed to medical centers across the United States as part of the MSF. So a significant amount of funding is coming into the medical center. It doesn't necessarily come down to the level of the individual surgeon. So Justin, we're going to talk a little bit more here shortly about surgeon compensation in general.

But before we do that, can you talk a little bit about, you

know, and I know we've covered this in some of the other podcasts, but fee for service, value based care, all of these things, quality, give us an overview there. Yeah. I mean, so everything that we've been talking about so far is Really being paid for the volume of work that you're performing.

So you're incentivized if that's the way that you're your revenue structure is set up to do more, but at the end of the day, this is going to evolve over time. And there's no question. The future of U. S. Health care is really in value based care. And so what that means is that we're really talking about an alternative way of compensation beyond quantity of care, and it really breaks down into three key components of cost efficiency, care quality, and patient satisfaction.

And what's going to happen is that those are going to be tracked more importantly than the amount of work that you do, but The efficiency and the cost savings in the care of the quality of care that you're

providing. And that's how we're going to be reimbursed in the future. And we're already starting to see that in some of these bundled care programs.

And so, for example, at UMass Memorial, we are participating in the major GI bundle program, which means that we are paid a certain amount of money. for a three month period of time taking care of a patient. It's up to us to manage that patient, prepare the patient appropriately, make sure they get through their operations safely and minimize the cost.

Otherwise there's a risk of of actually losing money on the care of that patient. In for our listeners out there again, if you listen to one of the other ones, with matt donnelly mark Olinsky in this particular series, we'll go a lot more into detail on that particular one Okay, let's transition now and in what our listeners really want to know is surgeon compensation kind of doctor's salaries Walk me through a little bit about this whole thing.

How, how do you know what you're worth? Let's dig into that question. Oh my

gosh, that is like the million dollar question. No pun intended. So, it's really hard to figure out what benchmark accurate benchmark data as it comes to physician's salary. It's tough to ask your friends, you know, how much they make.

And a lot of people aren't willing to share. There are benchmark organizations out there that we'll talk about that. actually don't do a great job of giving us good benchmarks. There was an American Society of Colorectal Surgery survey back in 2018 that tried to help, and I wouldn't say that it helped us all that much, but we can talk through that as well.

You can punch into, you know, Google and you can use Doximity and Medscape and other, you know, online resources to try and better understand, but to be perfectly honest with you, we don't have good data. And and unfortunately, I think it's hurting us. I think that by not having good quality data. I think it's limiting our negotiation ability as we're trying to improve

overall salaries for physicians.

Well, let's give us an average, but let's just say, is there a range or a place that you can kind of go to, to kind of cut to the chase and tell us, you know, I'm sure you can go to Forbes or another one of these, you know, things that are out there and say, what's the average salary or Google will tell me right away of what the average salary is.

And sometimes those numbers seem pretty far off. Yeah, I mean, you can, you could, you can get on the Internet right now and you could or ask chat GPT, you know, salaries. But the problem is, is that the benchmarking data is that is inaccurate. So I'm gonna, I'm gonna walk you through the, like, the, an example.

So there are. Salary benchmarking organizations out there. So the three biggest ones are the MGMA, or the Medical Group Management Association, the AMGA, the American Medical Group Association, and the AAMC, the Association of American Medical Colleges. And the issue is that there are a lot of variables that

affect the validity of their reported salaries.

And so whether a doctor is academic or in private practice, where they practice geographically what specialty they're in and what the associated sample size is. And ultimately, these are all surveys. The survey response rates. So I'm going to give you example of the M. G. M. A. So if you talk to most doctors or most possible administrators, they will tell you that the most reliable benchmarking organization is the M.

G. M. A. And most compensation models are based on M. G. M. A. Data. So what a lot of people don't realize is that the M. G. M. A. Data comes from a survey that is sent out across the United States. And if you look through their booklet, and you look into the details, like if you were reading, you know, a research paper, and you look into the methods section, well, you'll realize that they mailed out just over 6, 000 surveys to determine physician outcomes.

Compensation, and they had a

response rate of 10%. Okay, so there were 624 responses for the M. G. M. A. Survey. And if you were an academic surgeon, and you wanted to get a sense for what median salary is for a colon and rectal surgeon, well, you'll look and you'll find that there are only 79 court surgeons represented in academics out of the 1400 that practice the United States.

You say, okay, well if you're a general surgeon and you're interested in academic numbers, well there are 242 responses out of 18, 000 general surgeons in the United States. That's amazing. Are those numbers real? You got to be kidding me. No, this is looking into the details of these surveys. And so, you know, the response rates are low.

The sample sizes are low. And then what it does is it generates revenue that's really generates data that's unreliable. So with a sample size of 242 surgeons, which represents 27 departments across the

United States, right? This is we're talking about general surgery right now. The mean salary is 407, 000.

The median salary is 386,000 with a standard deviation of 160,000. Right? So if you know you're one of the editors of DCR, if I sent you a pay a survey paper with a 10% response rate and a standard deviation of a hundred, $160,000, are you gonna publish that ? I'm not so sure about that. It seems like it's a pretty wide standard deviation for me.

So is this, does this change every year, or how, how does this work? They do it on a regular basis. And we track the numbers over time. And and obviously there's significant variability from year, you know, from year to year. And yeah, and so we track it. So Our society, the American Society of Colorectal Surgery, recognizing these issues, did their own physician compensation survey.

It was done in 2018, but published in February of

2020 2020. And again, when you look at the details of it and you really take the time to read through it, they surveyed just over 4,000 A-S-C-R-S contacts and and basically they had a. 20 percent response rate, but only 12 percent of surgeons provided compensation data and only 7 percent of surgeons provided RVU data.

So there's a great report and, you know, and we can look to it for information, but again, it's limited in its applicability because of the fact that, you know, you don't really feel a lot of confident in the data that it presents. What about the AMC? Yeah, I know you mentioned there was three ways, but any idea?

And I know that, again, I know that you're a Colorado surgeon, you've dug in a little bit more in the details in that, but can you give us a little bit more idea about that? Yeah, so the double AMC I don't have the details as it relates to the numbers of Of physicians that are surveyed, but the numbers are also low.

They don't have any information as it relates to productivity, RV production, but

it's really based on geography and clinical title. So they have numbers based on whether you're a division chief or whether you're a department chair in the Northeast, you know, the Southeast and the West. And it'll, again, it'll give you some benchmark numbers but again, relatively limited sample size.

Let's just say I was to try good old Google or the newspaper or anything. What do you find there? Yeah, so the great question there was and I did that and there's a there's probably though I would say the most well done and most powerful study that was published in 2020 by Joshua Gottlieb, and it was basically a, the Center for Economic Studies as part of the U.

S. Census Bureau. And what they did is they actually queried 10 million tax records from 863, 000 physicians over a 13 year time

period. So this isn't survey data, this is actually tax returns to try and get a sense. for total pay or total compensation for physicians. And what they found is that the mean salary was 243, 000.

The median salary was a bit higher at 265, 000. And the mean total income, which means they include investments, the earnings related to owning businesses, Some other activities that a physician may be involved with to generate revenue. And so the mean total income was 345, 000. Now, when you break it down they were actually able to look at physician specialty.

So for example, as a doctor anesthesiologist, are they a neurologist or surgeons? And. You know, surgeons ended up being on the higher end of the scale as expected. And the mean income in the United States during this time period for surgery in general was 521, 000, which is a big difference from the numbers that you know,

we've seen elsewhere particularly as it relates to doctors in general.

So surgeons are definitely paid more. This is probably more accurate of representation. of the reality based on the fact that this is this is all, you know, based on a tax record. How does that compare to maybe some of the other specialties that are out there? I mean, I know a lot of people, again, we've got a lot of trainees out there.

They're like, I don't want to really go into. Or I'm undecided yet and maybe maybe salary does play, you know, we always try to say It's not about the money. It's not about the thing but at certain states, People want to know in any sort of occupation what they're about to make you're absolutely right and You know, I said earlier that we make our decision to go into medicine for reasons outside of business but you know Some people it may influence their decision on a different specialty or what they choose to go into after medical school and so you In papers like this one and elsewhere, you can actually, you know, get in there and you can take a look at the, the variability in in income from, from different specialties.

And so, for

example, through here, you can see that at the top of the list, the top of the food chain in neurosurgeons. And so neurosurgeons, you know, total income can be as high as 920, 000. And on the flip side at the bottom of at the bottom of the pay scale is family practice, which is really a shame right there in the People who we go to when we feel sick, they're the gatekeepers, they're the ones who, you know, really focus in on on disease prevention and and a lot of things we were talking about earlier about value based care and the average total income for a family practice physician is 230, 000.

Yeah, and again, I think it's important to understand that I know many people out there listening to this podcast are like wait a minute I know a neurosurgeon that makes two three million and again what we're talking about here is the average salaries that are there so justin Okay. So again some we don't talk or teach a lot about finances and we're by no means is this episode or this series meant to be a a financial planning type thing, but

You know, for some people out there that don't think about this stuff.

Okay. You feel good. Like, Hey, 900, 000, whatever the thing is, there's more to it though, isn't there? There is. I mean, look at life is extensive, right? And so, you know, there's a lot of things that you can't forget about. So one of which is taxes. So you make 400, 000 and you are in the 35 percent tax bracket, which means you made 400, but you took home two 60, right?

Okay. And and as a surgeon, you're working long hours. It's common to work a 60 hour work week. And if you look into this and you're trying to figure out how much I'm making per hour, and you look into a 60 hour work week where it could 48, you know, weeks a year, you're probably making about 138 per hour before taxes.

And when you take the taxes out, we're making about 90 per hour. And I can tell you, I know a lot of nurses in healthcare who are making the same amount of money. Make 90 an hour, particularly, following the COVID

crisis and with the, you know, the traveling nurse situation. And so when you compare physicians to to a lot of other industries, it's not like we're making significantly more money than elsewhere.

And then beyond that, don't forget that the average student coming out of their training. So remember. Four years undergrad, four years medical school, then residency, most people are coming out with an average student debt of about 250, 000, a quarter of a million dollars that you're going to need to pay back hopefully over a relatively short amount of time so it doesn't continue to you know, burden you, particularly as it relates to the the interest rates.

Well, Justin, this has been incredibly valuable. It's been just eye opening and we're going to come back with a part two of this series where we talk a little bit about maybe some of the other variables that go into this as well as other factors about how do we negotiate and how do we get through that.

So, appreciate you taking the time and for the listeners, take

a part in Justin's second part of this series. Justin on BTK, dominate the day.