Why Do Physicians Make Less Money than They Earn? (A Perspective of an Anesthesiologist)
Editor’s Note: Dr. Sunny Vig is an anesthesiologist who blogs at youbethree.com. She has a lot of great insights into best practices for business. While her specific clinical experience is primarily in anesthesiology, her insights on business are broadly applicable to the medical profession more generally. Physicians make less money than they earn, and it’s a LOT less than the American public thinks we make. She offers some great insight into this issue. I appreciate her contribution to The Scope of Practice!
A big problem in medicine is that many people don’t understand their compensation structure. More commonly, they don’t understand the nuances in billing and payments. You don’t need a dual degree to understand your paycheck, however. You just need a general understanding of the factors involved so that you can keep track of what’s going on.
This article will outline the general billing and payment set up within anesthesiology, specifically.
How and what you get paid in anesthesiology varies between private practice and academics. However, one thing is constant: what you bill is not the same as what you’ll get paid. Physicians make less money than they earn.
Some definitions to get us started:
Billing
Billing refers to what we are requesting from insurance companies. This is where CPT codes come in.
The kind of case, length of case and complexity of management will justify your code and reasonably say “we earned more money for this case.”
Payments
This is what you actually get from insurance companies. Be forewarned, physicians make less money or at least receive less money than they bill.
Payments to a practice or to a hospital are also different than what you as an individual physician may ultimately see in your paychecks.
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Yes. It’s super confusing; I don’t even get it half the time. I just hope that the people dealing with all of this are smart enough to do their jobs right.
However, I do understand the basics of billing and payments, and I think I can do well enough with that. Keep in mind that each practice, (private practice or academic medicine) may have different nuances that can change how your paycheck ultimately looks.
What I’m going to get into is a broad overall look at the process. You can use this as a foundation so you can ask the appropriate questions during your job hunt, at your current practice, or do your own research into this if you choose.
Anesthesiology Billing
To bill for a case, Relative Value Units (RVUs) are used. From an anesthesiology perspective, each case earns RVUs, divided up into startup (base) units, time units and modifiers.
Base Units
Also called startup units, this is the number of units assigned to a case and determined by the Centers for Medicaid and Medicare (CMS). Basically, based on CPT codes, you get a predetermined number of units for starting that case.
Time Units
Each 15 minutes of the case is equal to 1 time unit. If you finish a case in the middle of a time unit, it gets rounded up to the nearest 10th.
For instance, a procedure that’s 49 minutes = 49/15 = 3.26 or 3.3 time units.
When you’re documenting your cases, be aware that anesthesiology time starts when the patient is in the room and time ends once you’ve dropped the patient in recovery and have transferred care to the recovery room team. So, don’t close your charts until you’ve completed the transfer of care! Those extra minutes count.
Modifiers
Modifiers are anything that affects our anesthetic or makes patient care more complex. Examples of modifiers are below:
1. Patient’s ASA Classification.
This can be pretty subjective between physicians, and you’ll see a lot of disagreement. However, certain patient characteristics automatically fall into certain ASA classifications. This system is not an end-all but meant to help with risk stratification.
The higher the ASA status, the higher risk the patient is for complications and the more complex his/her anesthetic care may become. Be sure to know some of those nuances as it can give you more units for the case. 
Often, physicians make less money than they earn simply because they didn’t document things properly! Don’t be the reason you don’t make as much money as you earn!
| ASA status | Number of Value Units Assigned |
| ASA 1 – Normal Healthy person | 0 |
| ASA 2 – Mild systemic disease | 0 |
| ASA 3 – Severe systemic disease (well managed) | 1 |
| ASA 4- Severe systemic disease that’s a constant threat to life | 2 |
| ASA 5 – Moribund, not to survive w/o surgery | 3 |
| ASA 6 – Brain dead (procedures for organ harvest/donation) | 0 |
2. Qualifying Circumstances
These also make patient care more complex and therefore are considered when billing for a case.
| Qualifying circumstances | Value units |
| Extreme age, under 1 year & over 70 | 1 |
| Utilization of total body hypothermia | 5 |
| Utilization of controlled hypotension | 5 |
| Emergencies | 2 |
To Summarize Billing
Base units + Time units + Modifier units = Total units per case.
Now, how do you know how much you get paid?
Payment Calculations
There is a conversion factor (CF) that is used when calculating the actual dollar amount you can bill for a case.
The conversion factor is determined by CMS. This factor changes annually and is specific to where the anesthesiology practice is.
As an example, per CMS, in 2019, the conversion factor in San Diego is at $22.50 (national rate average is $22.76)
So if a case generates 100 units, multiply that by the conversion factor and you have $2250 for the case that you can bill to insurance for anesthesiology services. Remember, hospital bills and surgeon costs are separate.
What You Get Paid
So, now you know how insurance companies determine how much the case costs. However, you won’t get all of that $2250, to use the example above.
So, why do physicians make less money than they earn? For starters, that money you’re billing goes to your department/hospital/practice (different landing point depending on how your practice is set up).
How YOU get paid is slightly different. The number of RVUs you have are still yours, but the dollar amount per unit will differ.
The dollar amount is determined not by an outside entity, but by your own department/institution/location. So, say the department earns $1 million per year and generates 250,000 units. That gives you an average cost per unit of $4.00.
Now the department will look to see how many individual RVUs you’ve generated over a given period. Say you have a personal RVU count of 10,000 that needs to be paid out. You’ll get
10,000 x $4.00 = $40,000 (pre-tax of course)
At my institution, the RVU payout is $3.84 at last count. This value can change as the dynamics and caseload in a department change or if the payer mix changes. In fact, it should change to reflect the actual revenues and cash flows of the department.
Reimbursements and Coverage
Keep in mind that how much you are able to bill can vary depending on the coverage of a case. In academic medicine, you can be an attending working alone, covering CRNAs (up to four rooms) or residents (up to two rooms), or some combination.
This is where it gets tricky.
If you’re working alone, you get all the units you bill. If you’re working with CRNAs or residents, then the case becomes “medically-directed.” In that case, you qualify for 50% of the reimbursement, assuming that you meet certain requirements (source):
- Performs a pre-anesthetic exam and evaluation
- Prescribes the anesthesia plan
- Personally participates in the most demanding procedures in the anesthesia plan, including, if applicable, induction and emergency procedures
- Ensures that any procedures in the anesthesia plan that he or she does not perform are performed by a qualified individual
- Monitors the course of anesthesia administration at frequent intervals
- Remains physically present and available for immediate diagnosis and treatment of emergencies
- Provides indicated post-anesthesia care.
The anesthesia record documentation should reflect all of the above as well. 
“Medical supervision” happens when a physician is covering more than four cases or combination of procedures. In these cases, the number of units you can bill for is drastically less. Here, you only get 3 base units per procedure, and an extra time unit if you document that you were present for induction.
When you start combining coverage with both CRNAs and residents, or student CRNAs then it gets even more confusing. In those situations, there are restrictions on how many rooms you can mix up that way. As a general rule of thumb though, many institutions don’t combine CRNA and resident coverage under one attending unless it’s absolutely necessary or they are short on staff. This helps to keep billing straightforward.
How Much Do You Need to Care About Billing and Payments?
I think that as physicians, we need to have a general idea of where our money is coming from. Physicians make less money than they should, but you should at least know enough about your billing to get the most that you can.
It’s better to know so that you can catch a problem or ensure that you document appropriately and get the most out of your work and time. Of course, the emphasis of this is greater in private practice as compared to academic medicine, but it pays to know how things are done (literally).
We spend too many years in training, lose too much sleep, and deal with too many workplace issues to not receive just compensation. In the era of electronic medical records (EMR), yes, they’re annoying. But, unless something is checked off, it hasn’t been done.
If the difference in you earning a few units or not is whether or not you’ve checked off a box, then you need to pay attention and do it.
So, embrace the suck of EMR and understand that you can make a difference in your own pay. I’d also argue that by knowing how things are done, you can pay better attention to these details during your job hunt. You can ask questions pertaining to billing and coding and understand the differences and identify red flags!
Your Final Paychecks Depend on Where You Are
This explanation is an example of how RVUs are handled. Depending on where you work, you may have other factors contributing to your salary.
In private practice, which is primarily all productivity-based, these RVUs really matter. In academics they may or may not factor in. Some institutions do not pay their physicians for their RVUs. Rather, their pay may be generated by the number of days worked, call shifts, working after hours, or working in a room solo.
If an academic institution does pay out RVUs, there will likely also be other incentives in addition to it. The case load in academic institutions is different than in private practice. The patients are sicker and so you get those modifiers, but the cases are also longer.
When it comes down to it, cases that are the most lucrative are the shorter ones. The startup, or base units, add up a lot faster than time units and modifiers.
Plus, as I mentioned, with the mix in coverage, the ability for a hospital to bill may be substantially less simply due to staffing issues. Thus, in academics, if you are paid for RVUs you are also likely paid other incentives as well in order to help your salary.
Final Thoughts
Many people choose anesthesiology because of the higher pay, so that it’s easier to pay off student loans and still make a comfortable living. However, getting paid in medicine is complex. Physicians make less money than they can for a variety of factors, and that shouldn’t happen to you!
Anesthesiology is particularly complicated because of the intricacies and nuances that differ between jobs and institutions. Being aware of at least the basics can help you be more aware of your own actions, pay attention to details during documentation and improve your understanding of where your paycheck is coming from.
Hopefully, with this information you will be able to go forward with your own questions and research and come out better prepared for work!
Meet the author
Sanjana Vig is an anesthesiologist living and practicing in Southern California. She has a lifestyle blog at youbethree.com where she aims to empower others. Her blog reflects this mission through stories on life (finances, dating, relationships, and dealing with adversity), career (job advice, navigating the workforce), and travel (budgeting, solo experiences, tips, and tricks to being safe and having fun!). She can be contacted at contact@youbethree.com.
Further Reading
- Listen to the latest podcast episode.
- Coding and Billing Basics
- How Do You Get Paid in Anesthesiology?: Private Practice vs Academic Medicine
Return to The Specialist Series
Return to Anesthesiology
Please leave a comment below! Do physicians make less money than they should? What are some ways that we can ensure just compensation for our work?
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