Mechanics behind higher compensation in some geo areas?

[HidingSomewhere]

I wonder what are the mechanics behind higher compensation in some areas of the country.

I do not mean a simple "Supply and demand", this might be an easy answer if you look at an employer/employee relationship as the motivation that drives it - but how is that reflected in the overall compensation structure (including billing) and dynamics of practice?

Do insurances really reimburse a physician more say in the Midwest (e.g. North Dakota) compared to California for the same procedure?
Or is it a higher number of cases per year that drives a significantly higher compensation?
Do practices/employers/hospitals "skimp" on investments to be able to pay the physician in those areas a higher salary, or will reduce support through NPs/PAs?

Or are there other fees that act as differentiators? (e.g. differences in facility fee vs surgeon fee)

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[DoctwoB]

There are a lot of reasons. 1 is supply/demand of physicians in an employed setting as you alluded to. A hospital with aspirations to be anything needs a surgeon and may be willing to pay more then their billing would generate in order to offer that service line. Similarly a hospital that needs a surgeon could subsidize an associated private practice in many ways from start up loans to cheap office space to salary guarentees. Next as a physician in a underserved area may have more leverage in negotiating contracts with insurance companies as they have few or no other options to maintain their network in that region. That can mean higher $/RVU. Also if the physician has a higher demand for their services, they can tailor their clinic to be more revenue generating, e.g. higher OR bookings per clinic patient, better payer mix of patients, better mix of high paying procedures, etc. For example such a physician could limit their medicaid patients and see a higher volume of private insurance relative to someone in a competetive area who needs all the referrals they can get. You are also in a much stronger negotiating position when it comes to other revenue streams (e.g. compensation for ER call, surgicenter buy in, etc.)

 

[HidingSomewhere]

... more leverage in negotiating contracts with insurance companies as they have few or no other options to maintain their network in that region. That can mean higher $/RVU...

Thank you for the response.
I knew about some scenarios where a type of specialty physician as an employee would be paid more money than he/she rakes in directly, when the employer (often the hospital or large provider group) would feel that they are losing business in other areas if they cannot cover what the specialty physician can provide.
That part with the insurances I was not sure about, it seemed to me (as a trend) that more insurances seem to use medicare as their gold standard that they base their calculations/formulas on (with a factor). They know they have to better than medicare/medicaid - but they often do not seem to feel they need to be much better.

To what extend do insurances negotiate individually (vs having a pre-prepared set of scenarios they have a standard contract with a set range of conditions for) though?
I know that large "premium" providers (typically tertiary academic centers) charge insurances more and get away with it, but I was wondering if the individual provider in a smaller practice really can have leverage these days.

 

[mw18]

When I first read the title of the thread, I thought you were asking if we should attribute higher pay to mechanics, like, auto mechanics.



Just got off a night shift.