What Alberta doctors bill is not what they earn

August 10, 2020

EDMONTON – Alberta’s physicians don’t have any issues with a public conversation about what they earn for what they do. They do have questions about the motives behind Health Minister Tyler Shandro’s plan to release a “Sunshine List” for physician compensation. The Alberta Medical Association, which represents the province’s doctors, says it appears the Minister intends, at least in the first phase, to release physician names along with their annual billings to the health care system for the services they provide to patients (raw or gross billing data). Gross billing amounts are an extreme misrepresentation of what physicians actually earn. 

In preparation for the Government’s expected action, today the AMA released a document called Context Matters: The Facts About Physician Compensation in Alberta to help facilitate an honest and informed public discussion. 

Dr. Christine Molnar, President of the AMA, says many physicians feel the push for a Sunshine List at this time is more about intimidation than it is about transparency. “Most of the physicians I’ve spoken to tell me they have no problem whatsoever with patients knowing what they make, but they have a real issue with Albertans thinking that what they bill is what they take home. That simply isn’t the case. It appears, though, that government plans to release gross billing data,” said Dr. Molnar. 

The AMA points out that most of the province’s medical practices operate as small businesses, and have significant overhead costs associated with them. These costs include things like medical staff, rent and utilities, equipment, property and business taxes, insurance, record keeping and professional support services such as billing, payroll and accounting. Like any small business, these costs need to be covered before physicians actually pay themselves. Also, like other small business owners, most physicians don’t have pensions, health and disability insurance, maternity leave, sick leave or continuing education benefits, all of which are costs that doctors pay themselves. 

Understanding the overhead costs associated with running a medical practice as a small business is essential to assessing physician compensation. For most doctors’ offices, these overheads range between 40-50% of their total annual billings. There are some specialties, however, where overheads can be 70% or more. 

The typical family physician in Alberta bills the health care system roughly $340,000 per year for the services they provide to patients, but takes home, before taxes, just over $200,000 in income. This is the case for over one-half (55%) of all FFS physicians in Alberta. 

Specialists tend to bill more, but also tend to carry higher overhead costs associated with their practices. The average specialist in Alberta bills the health care system approximately $515,000 annually, with their actual pre-tax take-home pay just under $310,000. 

Dr. Molnar notes, “Taking into account the costs of running their businesses, what Alberta doctors earn is comparable to most other provinces in Canada. Other jurisdictions such as BC, Nova Scotia and Ontario have recently increased their funding for physicians, but that’s not something we’re looking for in Alberta. In fact, in an effort to help address Alberta’s difficult fiscal challenges, physicians here are looking to reduce their earnings over the next three years provided the Government is actually willing to work with us to implement this.” 

There are some specialties such as radiology, dermatology and ophthalmology that have very high overhead costs. In some cases, 70% or more of billings go to cover the costs of running their practices. In these instances, estimating physician “take-home pay” can be challenging as they tend to be specialties with a small number of practitioners, and overhead costs can fluctuate significantly from practice to practice. 

Dr. Robert Davies, President of the AMA Section of Diagnostic Imaging, notes that community radiology clinics owned by physicians have enormous up-front, staffing and capital costs which account for roughly 70% of annual billings. There are over 125 of these community clinics, with more than 600 installations of high-tech medical equipment representing investment of approximately $400 Million into the public health care system, in just this one area. “A typical radiology clinic in the community employs 15 – 20 people and costs $3 Million or more to build and equip with high-tech medical imaging equipment and IT systems. All of this must be deducted from the doctor’s gross billings to Alberta Health, not to mention the rent, medical supplies, personal protective equipment for staff and patients, special licensing costs, and so on,” said Dr. Davies. 

It is also important to remember that medical doctors incur large debt financing their education and medical training, which typically lasts eight years, plus two to eight more years of post graduate training. This debt must be serviced when they are in practice. 

Although they are not overly optimistic about being heard, the AMA will be consulting with Alberta Health about the release of a Physician Sunshine List and pointing out the need to contextualize gross billing data for an honest public discussion about physician compensation. “Do I think Alberta Health will take any steps to ensure the information they release is an accurate measure of what physicians earn?” asked Dr. Molnar rhetorically. “No, I think they’re going to provide a list of names with raw billings attached. That’s why we are proactively setting the record straight.” 

Dr. Molnar also said that AMA will be raising some concerns about protecting the privacy and security of some physicians and their families in certain circumstances. “Many of our members have extended families in other, more dangerous, parts of the world or do charity work in these places through programs such as Doctors Without Borders. In these cases, attaching a name to billings could actually pose a real security threat, and there needs to be a mechanism to address this. In any case, it’s not necessary to identify individuals in order to be transparent about payments.” 

Producing a physician sunshine list in 2020 (based upon 2019 billings or earlier) adds an additional complication in the form of COVID-19 that will significantly distort the information presented to the public. Gross billings of prior years in no way reflect the current situation for medical practices. Like many small business owners, physicians have experienced a dramatic 50 - 80% drop in revenue during the crisis that will take some time to recover. While business revenues remain well below pre-COVID levels, medical practices are weathering a drastic increase in overhead costs associated with personal protective equipment for doctors, staff and patients, enhanced cleaning and safety protocols that are particularly critical for their clinical businesses. 

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Background Information

  • View a copy of Context Matters: The Facts About Physician Compensation in Alberta
  • The vast majority of Alberta’s physicians are compensated using a Fee-for-Service (FFS) model, where they bill the public healthcare system according to a schedule of fees associated with specific care provided to patients. Other payment models such as Alternative Relationship Plans (ARPs) or Academic Alternative Relationship Plans (AARPs) are not included in this analysis.

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