I believe that health care providers aren’t paid anything close to what they are worth to society. I don’t mean this in the sappy emotional sense in which the “value of any human’s life is infinite,” or any other subjective standard. I am talking about real world, measurable economic impacts. Using the entrepreneurs’ 10% reward as a guide, health care providers create astronomical value for which they are paid a small token.
In 2016, self-made billionaire Naveen Jain asked and answered: “If you want to make $1 billion, all you have to do is solve a $10 billion problem.” That 10% reward for an entrepreneur’s creation is a useful rule of thumb: Jeff Bezos is worth $100 billion because he created a $1 trillion solution to retail sales.
I applied this scale to a hand surgeon using a real-world patient — me — and was surprised by the results.
In 2017, I fell off a ladder and sustained a comminuted intra-articular distal radius fracture in my dominant arm — OK, I broke my right wrist. Without a functioning right wrist, my career as a pediatric orthopedic surgeon was over. No more slinging mallets, turning screwdrivers, operating drills, and the like. The result of a permanently nonfunctioning right wrist would be instant retirement.
I got lucky. One of my partners, an incredibly skilled hand surgeon, stopped his Saturday afternoon bike ride, met me at the hospital, and spent three hours putting everything back where it belonged with a plate and 11 screws. I healed in about five weeks and actually didn’t miss a day of work, even though I couldn’t operate until my cast was off.
Let’s look at the total compounded cost to society if my injury hadn’t been treated or was mistreated. Each year, the work I do generates about $1.5 million in revenue for my practice. Ignoring the effects of inflation and assuming that I work at my current pace for another 15 years, the total earnings for my practice until retirement at age 65 would be $22.5 million. With an untreated wrist fracture, my fall would have given me a $22.5 million problem. But my hand surgeon completely solved it.
Had he been paid at the entrepreneurial scale of 10% of the value he created, he should have been paid $2.25 million to fix my wrist. Instead, after coding and processing the surgery, his bill was about $2,250, which would have generated a payment to him of about $1,000, or 0.0044% of the value of his work. How is that for being underpaid?
But it actually goes further, because that’s just the value of my work to my practice. What if I take into consideration the value of my work to society?
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I fix clubfeet, hip dysplasia, and other problems. I help turn potentially disabled infants and children into healthy, productive adults with entire careers of productivity ahead of them. On average, they can expect to earn nearly $1.9 million each over a 40-year work life. Then there’s a disability cost associated with not fixing these problems: Assume a cost to society of $20,000 per year for 75 years, and that’s another $1.5 million. So for each patient I treat in infancy with an otherwise totally disabling condition, I save society more than $3 million. Multiply that by the 1,000 or so patients I operate on each year, and multiply that by 15 years, and my future work has a total economic impact of $45 billion.
According to the entrepreneurial pay scale, my hand surgeon should have been paid $4.5 billion. But he was paid only $1,000, meaning his work was undervalued by a factor of 99.999978%.
I know there are limitations to this argument, including the difference between calculated and actual market value; assigning all of the value to the surgeon while ignoring the contribution of other entities, like the anesthesiologist, the hospital, and the implant maker, to name just a few; and not including other medical specialties. I recognize and at least partially concede all of these points, but have ignored them for brevity and simplicity. I look forward to seeing these points discussed in the comments.
Of course, there’s another way to look at the issue. Maybe the entrepreneurial pay scale is what’s completely out of whack, and my hand surgeon’s payment for fixing my wrist is the right way to look at things. Through that lens, Jeff Bezos would be worth $22,222 for creating Amazon, not $100 billion.
It is hard to imagine that Amazon would exist if that were the limit of the reward for creating it. Instead, it seems to me that health care is highly undervalued. While popular media focus on advancements in industrial capability when assigning credit for economic growth, it is important to remember that per capita gross domestic product in the U.S. grew from $8,342 to an inflation adjusted $52,591 between 1916 to 2016. During the same period, Americans’ average lifespan increased from 54.2 years to 79.1 years. A 46% increase in lifespan attributed to improved health care certainly deserves a large share of the credit for a 530% increase in per capita productivity — maybe even enough to justify the current health care cost of nearly 18% of gross domestic product — about $3.5 trillion per year.
My fall off a ladder had a profound influence on my understanding of value in health care. There is simply no doubt that I (and society) made out like a bandit in the exchange of goods and services between my hand surgeon and me. I try to make things up to him whenever we are out by buying him a drink and letting him know how much I appreciate what he did for me and for the thousands of kids I treat. His other patients, and society at large, should also show their gratitude. But they largely don’t.
In fact, not only was he not paid the $4.5 billion that my math shows he earned, he wasn’t even paid the $1,000: He never turned it in to billing. How’s that for professional courtesy?
Jay Crawford, M.D., is a pediatric orthopedic surgeon and the founder and CEO of a software company that optimizes scheduling for surgical practices and hospitals. He no longer climbs ladders and is grateful for the dedicated work of health care providers, but is particularly grateful for the work of hand surgeons.
Unfortunately, Congress does not give a royal Damn unless they are injured. Shakespeare was right!!!
Someone above said “Unfortunately, we live in a messed up world with no good answers to this problem.”
The Free Market under a Capitalist economic system ALWAYS provides the fairest, most adaptive, and transparent answer to valuation of products or services.
If the government only stuck to its legitimate roles of enforcing tort and contract law, and quit trying to pick ‘winners’ based on political lobbying, none of these problems would even be present to discuss.
What no one understands about being a surgeon or a doctor is that you always live with the threat of a malpractice suit if things don’t go perfectly. There is no other profession that lives under such a cloud so it’s no wonder that there is such a high burnout rate
To all the haters out there, who think physicians make too much money. If you were to break your dominant wrist, and there was no such thing as insurance, what would you pay to have it fixed, so you could go back to your regularly scheduled life after 6-8 weeks?
Take it one further, lets say you are having a massive heart attack, you can do nothing and die, or you could go to an ER, and see a board Certified ER doctor who quickly diagnoses you, stabilizes you, and gets the Cath lab team in including the all important Interventional Cardiologist, who places a stent, restores blood flow to your heart and you not only survive but are discharged a day later, feeling normal.
Whats that worth to you?
FYI: some insurances reimburse the Interventional cardiologist 350$ for that. I personally think a human life is worth a lot more than 350 bucks.
On a side note, I also thinks teachers, police, fire, EMS are also all underpaid for the value they create in life and or to provide a safe environment for all of us.
Unfortunately, we live in a messed up world with no good answers to this problem.
This logic makes no sense to me. Why stop at the surgeon? Why not loop this compensation back to his mentors who taught him the methods which allowed him to do the surgery (after all, if you are attributing your patients’ value back up to him, then your value should go above him as well.) How much should you be compensated? Should you get money not only from the value you bring to your patients, but also from their offspring? No, that is just greedy and assigning monetary value to life in a profession which should be blind to such circumstances. Now, if we want to truly discuss this entrepreneurial pay scale, then consider what the individual physician is valued at. In your case, you bring in $1.5 million in revenue per year, so your pay should be 10% of that, or $150,000 per year.
Totally agree !
Great viewpoint. The income of physicians has diminished to a fraction of what it used to be, while the income of administrators (hospital, insurance, government, etc) has skyrocketed. Despite that, we show up everyday because that is what we planned and trained to do. Robert and Ward are sore because they have no idea how medicine worls.
Well, doctor, are you truly suffering and earning that small fraction of an 1.5 million income you feel entitled to? Lots of highly skilled professionals show up and do what they were trained and what they planned to do. And what about the additional income from medically related investments such as this author’s software company. Then there are all the requisite perks such as MacMansions and fancy cars, not to mention trips to exotic places that are written off as conferences.
Let’s let the MDs self regulate supply and demand. And training. Then it can be almost impossible to get into med school at the same time there’s a doctor shortage. And we’ll also fill up the med school curriculum with left wing psycho babble! eye roll. Lots of very talented people would do the job if given the chance. LeRoy has a good point about dentists though. The government red tape is a huge problem. But hey, MDs, the government red tape people are the same ones who give you your protection racket. Everything has two sides.
Interesting overview ….I am an orthopaedic surgeon also…I’m in agreement with much that you said in the article, but that type of income won’t fly in today’s atmosphere ….too much government regulation…my dentist has no government interference….charges what the “traffic will bear”…forget EMR and EHR’s…terrible system that does not improve patient care…
This only makes sense if you are the only surgeon in the world. Should the last person to prepare your lunch lay claims to this billion dollar bounty for having prevented your starvation? Certainly not. If you or the cook did not operate, someone else would. No one but Jeff Bezos has founded Amazon (or anything comparable), and yet many have met financial ruin attempting to. Cheers to your recovery, but please think deeper, study harder, and spare us this self-serving nonsense.
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