PHYSICIAN PAY: MANAGED CARE LEADS TO LOWER SALARIES

      "Reflecting the growing impact of managed care on the U.S.
 health care system," a study conducted by the American Medical
 Association (AMA) found that the income for the average physician
 "fell 4% in 1994 to $186,000."  According to the study's
 researchers, the findings mark the first time since the AMA began
 conducting the survey in 1982 that "a broad decline in inflation-
 adjusted doctor income" is attributable to the growth of managed
 care.  Carol Simon, lead author of the report said, "This is
 pretty compelling evidence that managed care is having a
 significant impact on the physician marketplace.  Physicians are
 under increased financial pressures."  The study, published in
 the Fall issue of HEALTH AFFAIRS, was based on the AMA's annual
 Socioeconomic Monitoring System survey of more than 4,000
 physicians (Winslow, WALL STREET JOURNAL, 9/3).  Simon and
 Patricia Born, the study's other author, noted that the findings
 represent a "remarkable turnaround because physicians have
 enjoyed strong earnings growth over the past decade."  The study
 also found that physicians practicing in states with the highest
 penetration of managed care, including California and
 Massachusetts, reported larger declines in their incomes than did
 those in markets with less managed care (HEALTH AFFAIRS release,
 9/2).  
       OUT OF POCKET:  According to the study, only general
 practitioners and family practice physicians, the lowest-paid
 doctors, reported modest gains in income.  Doctors on the
 opposite end of the scale reported the greatest drop in income,
 nearly six percent.  However, "the overall effect was felt almost
 across the board" (JOURNAL, 9/3).  The study found that primary
 care physicians earned $129,353 in 1994, down 1.7% from $131,532
 in 1993.  However, general and family practice physicians
 reported a two percent increase in their income levels.  The
 study found that hospital-based physicians, including
 anesthesiologists, radiologists, and pathologists, reported
 average salaries of $214,634, a 4.6% decrease from the year
 before.  Physicians in subspecialties in internal medicine,
 pediatrics and surgery, such as cardiologists and orthopedists,
 earned $243,828 in 1994, down 5.1% from $256,868 in 1993.  And
 physicians in other specialties, including general surgery,
 psychiatry and obstetrics/gynecology, reported a 5.3% decrease in
 pay, or an average income of $179,072 (Simon/Born, HEALTH
 AFFAIRS, Fall 1996 issue). 
      CAUSE AND EFFECT:  According to Simon, the finding that
 incomes among primary care doctors fell "was unexpected." 
 However, she said that "[o]ne possible explanation is that
 pediatricians more than other doctors have accepted" capitation
 fees "to provide all necessary care for their patients" (JOURNAL,
 9/3).  AP/Tucson ARIZONA DAILY STAR reports that other factors
 leading to the decline in physician payments include the decrease
 in Medicare and Medicaid reimbursements "and a trend toward more
 doctors working in group practices, where they work fewer hours
 but make less money" (Meckler, 9/3).  
      QUESTIONS:  AMA President Daniel Johnson said that the study
 "raises questions about barriers to needed specialists."  He
 said, "These statistics suggest there may indeed be cause for
 concern about patient access to specialized services.  Of course,
 physicians must live in the real world marketplace, but if that
 marketplace includes unreasonable barriers to specialty care, the
 true loser may be the patient."  However, Susan Pisano,
 spokesperson for the American Association of Health Plans,
 responded, "As the authors of the study note, there are many,
 many factors at work as the health care system changes to promote
 both quality and affordability" (Rich, WASHINGTON POST, 9/3).    
      HOSPITALS:  The growth rate for hospital costs has slowed
 since 1990, according to a separate study also released in HEALTH
 AFFAIRS.  The study found that while hospital costs have
 fluctuated since 1983 -- the year that Medicare implemented the
 prospective payment system (PPS) -- "the trend has been turned
 downward" since 1993.  And "in 1994, costs decreased by 1.3
 percent over their 1993 levels."  According to the study, one
 indication that hospitals have improved their bottom line is that
 PPS margins increased for the third consecutive year in 1994 to
 4.7%.  "In contrast," during the first eight years of PPS, the
 margin fell to a low of negative 2.5%.  According to the study's
 authors, the turnaround "is attributable to the sharp slowdown in
 cost growth."  They predict that if the trend continues, "the
 aggregate PPS inpatient margin will rise to 8.8 percent in 1996." 
 The authors contend that the best measure of hospitals' overall
 financial health "is their total margin."  The total margin for
 hospitals "also rose during the early 1990s and hit 4.8 percent
 in 1994, the highest level since 1986" (HEALTH AFFAIRS release,
 9/2).