Practitioner income as a function of Freakonomics

According to headlines this year more than one in three GPs in Australia report feeling somewhat or very dissatisfied with their income. Two things determine health practitioner income:

  1. What is a (funder / government / insurer) willing to pay?
  2. What is a (patient / customer / client) willing to contribute?

What is beyond doubt is that when it comes to their pet’s healthcare the Australian public is very willing to pay. In fact Australians would alter their spending habits rather than compromise their pet’s quality of life.

Of the 2,500 Australians, aged between 18 and 65 that were surveyed in the 2015 Financial Health Barometer, only 14 per cent of pet owners would reduce spending on their pets if their income dropped Remarkably, almost half (48 per cent) of respondents would take steps to minimise their power usage. We’d be more likely to reduce spending on essentials (47 per cent), switch to using cheaper products (35 per cent) or look for additional work (16 per cent) rather than curb spending on our furry friends. Hayley Williams.

Similarly spending on beauty treatments is remarkable:

The online survey of close to 1300 Australian women was conducted by Galaxy Research and commissioned by at-home hair removal brand Veet.
And, while 10 per cent of the women surveyed spent $5000 on average and and almost 60 hours in the beauty salon annually, 40 per cent admitted to putting their beauty regimens ahead of sleeping, shopping and their social life, with 4 per cent of those women also choosing a salon visit over their sex lives.

In contrast national statistics document that a significant proportion of Australians are reticent to seek healthcare because of the perceived cost. It was not surprising that a proposed $7 co-payment proposal for general practitioner visits in Australia was dumped before it was enacted.  It is evident that some doctors get paid far more than others. Secondly some parts of the country attract more doctors but as a general rule where there is a scarcity, by dint of geography or specialisation, it is more likely that doctors will earn more.

What people are willing to pay for health care is a function of economics, or perhaps “Freaknonomics” (study of economics based on the principle of incentives.) From this perspective “incentives matter.” Consumers try to maximize total satisfaction, while providers try to maximize profits. Whenever there are a lot of people willing and able to perform a job, that job doesn’t pay well. In a capitalist society, intense competition will drive prices down. When a technological advance occurs, it results in a shift of the supply curve to the right. All other things equal, this will lower the equilibrium price of a good, which then increases demand. Both producers and consumers need to be fully informed regarding their consumption or production decisions for a market to be efficient.

So how might this apply to primary care? 

  1. There are more doctors per head of population than ever before- in other words more people willing and able to perform the job- especially in primary care.
  2. There is a global trend in developed economies for “alternative providers” for primary care services- including vaccination, cancer screening and treatment of ‘minor’ illnesses.
  3. Technology offers new ways to ‘consult’ a practitioner other than by having practitioner and patient in the same room.
  4. Because of the internet doctors no longer hold the monopoly on information.

So doctors’ incomes in primary care experience downward pressure because suppliers of the services are increasing. We might therefore consider what people would consider paying for a consultation at a doctors’ clinic. Research published in 2008 (Annals of Fam Med) offers one perspective:

  • Overall, patients were willing to pay the most for a thorough physical examination ($40.87).
  • The next most valued attributes of care were seeing a physician who knew them well ($12.18),
  • Seeing a physician with a friendly manner ($8.50),
  • Having a reduction in waiting time of 1 day ($7.22), and
  • Having flexibility of appointment times ($6.71).
  • Patients placed similar value on the different aspects of patient-centered care ($12.06–$14.82).

It seems that two sectors (Pets and Beauty) appear to have no difficulty with their income. What might they have to offer by way of advice?

  1. The art of creating added value starts with the ability to see your business through the eyes of your customers.
  2. Although the debate over whether the customer is always right (or not!) continues, lack of customer satisfaction is a sure-fire way to keep people from coming back.
  3. Implement marketing models into your strategy.
  4. Most importantly, memorable customer experience models aim to deliver unexpected intangible value that cannot be packaged or sold. This includes personalized service, attention to detail, and showing a sense of urgency to address concerns as they arise.
  5. Whether it’s a free guide, a printable PDF, or a company branded calendar, free resources are a great way to create added value and showcase your brand’s ability to offer ‘a little something extra’ to customers.

In the case of healthcare the ‘customer’ is not just the patient but also the pay master. These ideas may need to be translated for this sector. In many cases it probably already has been. However for others there is something to learn from how successful businesses add value that translate into better rewards.

Picture by Pexels

3 thoughts on “Practitioner income as a function of Freakonomics”

  1. Great article and brilliant thoughts Moyez!

    If the medicare freeze has taught GP’s anything, its that we need to move past our reliance on medicare and push forward with providing massive value to our patients, that they will happily pay for and spread the word.

    Each practice I believe is uniquely able to serve their patients, be it hip professionals, young mums, older pensioners or well to-do boomers, the opportunities are endless. We just need to start thinking like you said to design “memorable customer experience models”.

  2. I believe you are right Jonathan. Playing politics over Medicare rebates will never succeed in over turning the pay freeze in the long term. The ‘customer’ doesn’t perceive the value. We have to reinvent ourselves as a profession and reframe what we offer but especially as you say consider patient experience in the redesign.

  3. “…..create added value and showcase your brand’s ability to offer ‘a little something extra’ to customers….”
    this is so true ….have I met the patient’s expectations during the consult ?

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