Factors Associated with the Distribution of Physician Income: A Quantile Regression Approach

Grant Description: How do various factors, such as sociodemographic factors, institutional structures, management strategies, compensation mechanisms, and market characteristics affect physicians’ incomes?  Researchers at the University of North Carolina at Chapel Hill evaluated each of the five spheres of influence referenced above, with respect to physician income percentiles, in order to assess whether these five groups of factors (each defined by a variety of variables) have different effects on average income than on incomes of very high or low income groups of physicians.  Measures of individual physician characteristics, income, and practice organization were taken from the CTS Physician Survey.  In addition, the study utilized data from the  Area Resource File, the InterStudy County Surveyor and the Physician Worklife Survey.  The objective of this study was to determine how the study variables affect physician income distribution, with the goal of identifying those factors that contribute to income disparities among physicians.  

Policy Summary: Quantile regression analysis has been used extensively in the field of labor economics but is less familiar to health services researchers. To our knowledge, this project used this methodology for the first time to examine physician income distribution, and to assess how managed care market penetration has affected income distribution within the US physician workforce. This methodology, when applied it to a national physician sample--the CTS physician survey--enables a more fine-grained analysis of issues by going beyond a 'mean' or 'typical' level of inquiry normally found in physician income studies. It also sets the stage for future empirical examinations of how health policies and market changes over the last decade have actually affected the incomes of different types of physicians, and how future changes might have measurable effects on physician income distribution. Physicians' incomes are generally high, but can vary substantially due to many different factors some of which are subject to change through health policy initiatives and market reforms. It is likely that different segments of the physician workforce might have quite divergent perspectives depending on how such policy changes might affect their incomes. This study, using data from the mid-1990s, found that at all levels of income, the effects of managed care penetration are demonstrable but are more pronounced at higher levels of physician income. Further, physicians whose dominant patient revenue source is Medicaid have incomes 5 to 10 percent lower than their peers who accept fewer Medicaid patients. Gender disparities in physician income were found to persist at all income levels. Income distribution information can assist policy formulation by projecting how proposed regulatory and/or market-based policy initiatives will affect physicians' incomes and, consequently, influence the career choices and political and advocacy behavior of different segments of the medical workforce. Knowing these parameters can inform policy initiatives developing workforce policies aimed at reducing inappropriate income disparities between segments of the physician workforce (e.g., gender gaps), improving the geographic distribution of physicians (e.g., incentives for rural and inner city practice, Medicaid payment levels), and influencing the relative proportion of specialists and generalists in the overall physician workforce (e.g., promoting more efficient use of resources). These findings are pertinent for policymakers attempting to more fully understand and respond to the systematic changes produced by the explosive growth in managed care. More recent data has suggested a backlash of managed care, so the same approach can be applied to newer waves of the CTS Physician Survey data to examine how physicians' income was affected by the ups and downs of managed care. Data on local variations across health care markets that affect how much income is received by physicians and which types of physicians will receive more or less income can help policy analysts in assessing the political and economic feasibility of alternative policies intended to encourage a more rational allocation of health care resources.