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hysicians-to-be, practicing physicians, and many of their patients take great interest in how much money doctors make. Physician compensation surveys can offer some eye-popping numbers — orthopedic surgeons make more than $450,000 a year! — but they are often highly misleading. A key shortcoming is that surveys neglect what’s called opportunity cost, which is the amount of money lost from choosing the next best alternative.

Given the extensive and expensive nature of training, medicine has a high opportunity cost: Future doctors must endure four years of medical school, three to six years of residency, and sometimes an extra year or two of fellowship before earning “physician salaries.” That’s valuable time that could’ve been used to climb the career ladder elsewhere, cashing checks instead of paying debt (the average medical student graduates with over $190,000 of debt).

That got me wondering: To what degree is medical school a wise investment? And how does opportunity cost affect the relative earnings of each specialty? Specialties like cardiology that require six years of post-graduate training significantly delay earnings compared to specialties with shorter residency programs.

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First, here’s some baseline data, which comes from Medscape’s highly anticipated and attention-grabbing annual physician compensation report.

Natalia Bronshtein/STAT Sources: Medscape Physician Compensation Report 2017

To answer my questions, I used a metric called net present value (NPV) to measure physician salaries. My formula considers medical school tuition, length of residency, and the opportunity cost of medical education. It essentially sums up the benefits and deducts the costs (including the opportunity cost) at each of three stages of a medical career: medical school, residency, and full-time practice. Accounting for interest rates (a dollar today is worth more than a dollar tomorrow), it calculates how much an entire career in medicine is worth to a 22-year-old college graduate, assuming he or she retires at age 65.

Doctor salary formula

Instead of going to medical school, say a college graduate with a bachelor’s degree gets a job. The average graduate earns approximately $50,000 per year. I considered this to be the yearly opportunity cost (in the formula above). Combined with the cost of medical tuition and fees ($55,500 a year for the average private medical school), this represents the total annual cost during medical school. To keep things simple, I excluded the cost of debt from the equation, an uncommon but conservative estimate. For residency, I assumed an average stipend of $51,000 per year, while for post-residency I used the average salaries reported by Medscape. Assuming an interest rate of 5 percent (r = 5), I ranked each medical specialty by net present value.

The estimated value of medical specialties compared to other occupations

Choose an occupation from the menu then hover over a specialty to see the earnings gap.

If you choose a career in
your lifetime earnings would be $1.5M less
than if you specialized in Endocrinology.
Natalia Bronshtein/STAT Sources: Medscape Physician Compensation Report 2017, Recruiting Trends report 2016-2017, Collegiate Employment Research Institute, Michigan State University, Time, Association of American Medical Colleges, Time

As a whole, the results confirmed that medicine remains a strong investment compared to working the average job straight out of college. But an interesting pattern emerged: Specialties with longer residencies dropped several spots in their ranking compared to the Medscape salary list. For instance, cardiology is considered among the top three highest-paid specialties, but it fell several spots in this analysis, as did gastroenterology, endocrinology, and others.

That got me thinking: What if a college graduate had a better second option than the “average” job? Someone with the work ethic and ability to be accepted to medical school might could have ended up in a higher-earning career like investment banking. The average starting salary for investment bankers, with bonus, is $114,000 and rises to $163,000 for third-year analysts. Assuming absolutely no more growth in salary for the rest of a career in banking, a highly conservative estimate, I recalculated the net present value for each medical specialty:

Natalia Bronshtein/STAT Sources: Medscape Physician Compensation Report 2017, Time, Association of American Medical Colleges, Time, Forbes

Now, instead of a multimillion-dollar return on investment, the majority of medical specialties become worth several hundred thousand dollars or less. Even more surprising, more than half a dozen specialties have negative net present values, meaning that from a solely economic perspective they are poor investments.

Unfortunately, these specialties represent some of the most common types of physicians, like internists and pediatricians. These primary care physicians are vital for the healthy functioning of our health care system. Relatively low financial incentives like what my analysis shows could be a reason why there’s a shortage of primary care physicians. Projections for the United States show we’ll be short some 20,000 primary care doctors by 2020. Loan forgiveness programs for these physicians have recently come under fire by lawmakers and, if eliminated, would contribute even more to the low return on investment.

Here are my two key takeaways from this thought experiment:

  • The analysis justifies the importance of loan forgiveness programs and other incentives for primary care specialties, which are among the most poorly compensated medical specialties, even considering the relatively short duration of their training programs.
  • While medicine is a financially stable career and a strong investment, other high-earning career options are just as good if not better investments.

The second takeaway gets to a more fundamental point about why compensation should not be the only reason why graduates decide on a career in medicine. Salaries are misleading, and even considering a more thorough approach like net present value still neglects many unique hardships of medicine that can’t be quantified — high stress, long hours, and dealing with death, to name a few. These analyses also can’t quantify the intangible benefits, like the intellectual beauty of medicine, the satisfaction of easing pain, and the thrill of saving a life.

At the end of the day, the decision to become a doctor should align more with the heart than the pocketbook. As the late neurosurgeon Paul Kalanithi eloquently stated in his memoir: “People often ask if [neurosurgery] is a calling, and my answer is always yes. You can’t see it as a job, because if it’s a job, it’s one of the worst jobs there is.”

Zach Nayer is a medical student at George Washington University School of Medicine and Health Sciences, and a contributor at the Huffington Post. He earned his undergraduate degree in health care economics and policy from the University of Virginia.

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  • Did you take into account the ability to invest and growth of investments and retirement accounts at both stages? The new worker at 21 yo and the doctor starting at 32.

  • Interesting article however the investment banking comparison really is off-base. As you noted you make an extremely conservative estimate that salary doesn’t increase beyond year 3, but that underplays the degree of mis-measurement. It’s similar to assuming a 3rd year medical student’s compensation won’t increase. Associates ( around the age when med students are in residency) make ~300-400k. VPs may make 500-1M+ when MDs finally are attendings. So really banking starts out making more money (+150 instead of -80k), then as associates they still make more money (250-400 vs 50k), and finally as VPs they make even more money (500-1M++ vs 250-350k). An orthopedic surgeon equivalent in the finance world is making 3M+, coincidentally also with an MD, for managing director.

    Tech salaries are often under-reported as base, neglecting the significant stock component of their compensation.

    You make a good point about the impact of a longer residency on lifetime compensation. Something which is extremely easy to underestimate.

    Medicine is a great field, and as you note an okay financial decision if you’re not going into primary care.

  • Hi Ed,

    Excellent article and analysis. One thing I must point out is that US doctors are most likely the highest paid in the world. Perhaps a similar analysis would be interesting covering several countries?

    I am of the opinion that the US healthcare cost and drug cost (both highest globally) are in some manner linked to the doctors compensation?!

  • I’am Radiologist, engaged in XRais , MRI and CT, 65 years old. I work near 12 hs a day from 5 days a week . I have a Chief position in 2 very busy, but good hospitals in Brazil. I’m near Burn out, but can’t stop working .

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