COVER STORY
January 2025
Physician Comp is Skyrocketing. Are Doctors Worth Their Price Tag?
As physician salaries soar amid a worsening shortage, healthcare executives are grappling with whether these costs are sustainable or if alternative care team models can ease the financial strain.
COVER STORY
January 2025
Physician Comp is Skyrocketing. Are Doctors Worth Their Price Tag?
As physician salaries soar amid a worsening shortage, healthcare executives are grappling with whether these costs are sustainable or if alternative care team models can ease the financial strain.
TAKEAWAYS
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The average compensation for doctors is only increasing.
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With alternatives to employing physicians gaining steam, healthcare leaders are wondering if physicians are worth the cost.
The escalating costs of employing physicians have become a financial fault line in healthcare. As doctor salaries climb ever higher—driven by an unrelenting physician shortage and skyrocketing demand—healthcare executives are facing a critical dilemma: Are these massive expenditures truly sustainable?
While these high salaries reflect the critical role physicians play in patient care, they also raise difficult questions about sustainability and the viability of other solutions. Could advanced practice providers (APPs), technology-driven efficiencies, or new team-based care models help offset the escalating costs?
This story explores the financial and operational dilemmas at the heart of modern healthcare, and the tough decisions leaders must make to balance quality care with fiscal responsibility.
So how did we get here?
According to Doximity's 2024 Physician Compensation Report, the average physician salary surged nearly 6% in 2023. Neurosurgeons now command an average annual paycheck of $763,908, with thoracic and orthopedic surgeons following closely behind.
Yet these soaring salaries are only one side of the story.
Behind the pay hikes lies a growing crisis. The U.S. physician shortage—projected by the Association of American Medical Colleges to reach up to 86,000 by 2036—is straining healthcare organizations to the breaking point. Nearly 9 out of 10 physicians report feeling the pressure in their practices, with 74% describing the shortage as “moderate” to “severe.”
“One reason why physicians are so expensive to employ is there is a shortage of physicians,” says Richard Gundling, senior vice president of professional practice at the Healthcare Financial Management Association. “The physician shortage is a matter of supply and demand, which is pushing compensation up.”
Kyle Wilcox, MHA
vice president of finance, MercyOne Medical Group
Training costs are another reason why physician compensation is high, according to Connie Savor Price, MD, MBA, CMO at Denver Health.
“Physicians are expensive to employ partly because of the investment in training that goes into creating a physician,” Price says. “There are many years of training that results in both heavy student loan debt as well as a lot of deferred income. There is a need to have a certain level of income at the end of training to attract people to go into the field.”
“Physicians are getting too expensive for the healthcare system. But if hospitals put the right care, at the right place, at the right time, physicians are not too expensive.”
—Kyle Wilcox, MHA, vice president of finance at MercyOne Medical Group in Iowa.
As a general proposition, the cost of employing physicians can be problematic, according to Kyle Wilcox, MHA, vice president of finance at MercyOne Medical Group in Iowa.
“Physicians are getting too expensive for the healthcare system,” Wilcox says. “But if hospitals put the right care, at the right place, at the right time, physicians are not too expensive.”
As demand outpaces supply, healthcare systems are caught in a vicious cycle of escalating costs and shrinking margins. But is doubling down on physician salaries the only solution?
The stakes couldn’t be higher, and the questions couldn’t be more urgent. For healthcare leaders, the choice isn’t just about dollars and cents—it’s about survival.
Top Ten Median Salary by Specialty
SOURCE: Physicians Thrive
Are physicians worth the cost?
Despite the high cost of employing physicians, they are definitely worth the investment, according to Wilcox, Price, and the physician-in-chief of Northwell Health.
“Physicians are 100% worth the cost,” Wilcox says. “In general, no one else can take care of patients the way they can or save someone's life who needs a life-saving surgery.”
There are few alternatives to employing physicians, Price explains.
“There are emerging roles for non-physician healthcare professionals and other provider types such as advanced practice providers,” Price says. “These other professionals have allowed physicians to expand their reach, which makes the physicians more cost-effective and efficient. However, employing non-physician healthcare professionals requires physician oversight or consultation. Given what they can do, I do not think physicians are too expensive.”
6%
The average physician salary increase in 2023.
Source: Doximity's 2024 Physician Compensation Report
If physicians are aligned with health systems and hospitals in terms of productivity and patient outcome expectations, they are cost-effective to employ, according to David Battinelli, MD, physician-in-chief of Northwell Health and dean of the Donald and Barbara Zucker School of Medicine at Hofstra/Northwell.
“If you get the amount of work out of a physician as was negotiated in the employment arrangement, most of us believe they are worth the cost because of the alignment that is secured,” Battinelli says.
Can APPs replace physicians?
APPs, such as nurse practitioners and physician assistants, which are also known as advanced care practitioners, are less costly to employ but serve better as supplemental labor for physicians rather than replacements, Price and Battinelli say.
Compared to physicians, annual compensation is lower for nurse practitioners and physician assistants, according to the U.S. Bureau of Labor Statistics.
"It remains to be seen whether APPs can be a cost-effective alternative to employing physicians," Price says. "There is some emerging data questioning whether a provider who has had less experience than a physician might increase costs by the tendency to order more tests and more procedures. Whereas, a well-trained physician could save money in their clinical skills such as not requiring as much of a diagnostic workup or additional consultations.”
The ideal healthcare team is a variety of provider types, including a physician who leads the group, according to Price.
David Battinelli, MD
physician-in-chief of Northwell Health, dean of the Donald and Barbara Zucker School of Medicine at Hofstra/Northwell
“If you get the amount of work out of a physician as was negotiated in the employment arrangement, most of us believe they are worth the cost because of the alignment that is secured.”
—David Battinelli, MD, physician-in-chief of Northwell Health and dean of the Donald and Barbara Zucker School of Medicine at Hofstra/Northwell.
“Having APPs on a care team can help make the care delivery more efficient under the leadership of a physician,” Price says.
If you have an advanced care practitioner such as a nurse practitioner or physician assistant working to the top of their competency in a highly efficient practice aligned with physicians, those models are cost effective, Battinelli explains.
“If you are talking about a completely independent advanced care practitioner, they are not cost effective because those practitioners cannot do enough to provide high-value, cost-effective care,” Battinelli says. “They are over-utilizers with respect to consultations.”
Another factor to consider when it comes to replacing physicians with APPs is that the cost of employing APPs is getting higher, according to Battinelli.
“Some physicians, such as general pediatricians and family medicine doctors, are underpaid, and the gap between a highly paid advanced care practitioner and an underpaid general medical practitioner is closing,” Battinelli says. “For an extra $40,000 to $60,000, I can get more work and value out of a physician than I can get out of an advanced care practitioner.”
Battinelli does not believe APPs can replace physicians.
“I side with the American College of Physicians and others who do not believe advanced care practitioners should be practicing independently,” Battinelli says. “That is not the long-term solution.”
The training gap between physicians and APPs makes APPs a poor substitute for physicians, Battinelli explains.
“Advanced care practitioners do not have the adequate training to provide complex care such as advanced diagnostics and management plans,” Battinelli says.
74%
The amount of surveyed physicians that describe the physician shortage as “moderate” to “severe.”
Source: Doximity's 2024 Physician Compensation Report
“They can do very well in focused areas and work to the top of specific competencies, but four years of medical school and four years of advanced training for physicians is not equivalent to the amount of training that advanced care practitioners get,” he says.
Richard Gundling
senior vice president of professional practice, Healthcare Financial Management Association
Compensating physicians beyond money
Some health systems and hospitals are getting creative in their physician compensation packages by offering perks other than money.
One trend is for health systems to offer physicians advanced leadership training, according to Gundling.
“Physicians do not come out of medical school necessarily prepared for managing groups of people,” Gundling says. “As we expect physicians to lead care teams, we must give them training in management.”
A competitive salary is essential when employing physicians, but there are other incentives that health systems and hospitals can offer, Wilcox explains.
“Paying fairly is step one; then you can talk about work-life balance, engagement, and things physicians are interested in, such as decision-making,” Wilcox says.
Is AI the answer?
Even if physician compensation increases sharply, AI will not replace doctors, Wilcox and Battinelli say.
“AI will replace tasks that physicians have been required to do that do not require their training,” Wilcox says. “For example, documentation can be expedited by AI software through natural language models, where the physician can see a patient, but the AI model is in the background recording the conversation and generating a clinical note.”
AI has made advancements in diagnostics in some fields of medicine, but the technology will always have limits, according to Wilcox.
“In terms of making diagnoses with AI, we are already seeing that in radiology, but I do not see AI replacing doctors and making advanced diagnoses.”
—Kyle Wilcox, MHA, vice president of finance at MercyOne Medical Group in Iowa.
“In terms of making diagnoses with AI, we are already seeing that in radiology, but I do not see AI replacing doctors and making advanced diagnoses,” Wilcox says. “AI can help drive a diagnostic process through decision-making. I can see that happening over the next five years.”
AI will augment rather than replace physicians, Battinelli explains.
“What AI will do is help with the problems,” Battinelli says. “AI will allow us to improve access. It will help us do better telemedicine. It will help us relieve the tremendous amount of administrative burdens on physicians.”
APP Salary Rates for 2023
Multigenerational Workforce
Leveraging the Strengths of Every Age Group
SOURCE: Clinical Advisor survey
The ultimate balancing act
The question of whether physicians are worth their skyrocketing price tags cuts to the heart of healthcare’s biggest challenges. With salaries climbing into the stratosphere and no end in sight to the physician shortage, healthcare leaders are under immense pressure to balance cost with care quality.
Despite the allure of alternatives like APPs or AI, the consensus among experts is clear: Physicians remain indispensable.
Yet, the future doesn’t hinge solely on paying physicians more. It depends on smarter investments—like team-based care models, leadership training, and leveraging AI to reduce administrative burdens—that amplify the value physicians provide. When aligned with organizational goals, physicians prove time and again that they are not just worth their cost—they are essential to delivering high-value, life-saving care.
Connie Savor Price, MD, MBA
CMO, Denver Health
For healthcare executives, the challenge isn’t deciding whether to invest in physicians—it’s ensuring those investments drive the best outcomes for both patients and the bottom line.
In a landscape where every dollar matters, this balancing act will determine who thrives and who struggles to keep the lights on.
Christopher Cheney, Senior Editor, HealthLeaders