Medical Care and The Power of Three: 30, 300, and 300,000

Medical care—the patient’s perception of the healthcare system’s ability to meet their sense of well-being—is in a slump. Despite being the most expensive healthcare system in the world, the I reported in 2024 that only around 30% of Americans were very satisfied with their medical care.

30 percent.

This report is not unique. The Advisory Board recently reported that only 40% of those polled rated American medical care as “somewhat favorable”. In a 2025 Gallup Poll, 47% of doctors were found to have average-to-low/very-low marks when it comes to honesty and ethics. Trust in doctors, once a pillar of professionalism, has dropped 85%. While these negatives have remained steady for the past five years, pollsters believe that they can (and may) become more severe. Notice we as a society seem to treat these findings like the weather. When we wake up, we usually check the conditions outside. We accept the weather. We prepare for the cold, heat, rain or shine. We do not change the weather. We can only prepare for it. The same has been our approach toward our unfavorable opinion of medical care. Navigating healthcare is like navigating the cold. We adjust. We wear a coat. There is nothing we can do about our broken medical care system. We just need to prepare for the aggravation.

Perhaps. But let me introduce three numbers—each starting with the number three—that may change your perspective:

30, 300, and 300,000

Unlike the weather, we believe these numbers are actionable. They are worth knowing—worth examining—worth addressing—and worth changing. Besides being the public’s favorable opinion of medical care, 30% also represents the inflation adjusted reduction in physician reimbursement by third-party payors since 2000—A 30% reduction. Over the same time, large employers, who are required to provide health benefits for their employees, have experienced greater than a 300% increase in health care benefit costs. Lastly, hospitals, who now employ the majority of doctors in America (>80% in South Carolina), subsidize (on average) their employed doctors by more than $300,000 a year.

30% decreased compensation, 300% increased premiums, and $300,000 subsidy

 Are these three numbers related? You bet they are. Are they repairable? We at Integral Leaders in Health believe they can be. Accordingly, it is important to understand the context from which they came.

Once upon a time, independent doctors saw patients and had profitable businesses. Hospitals—both for-profit and nonprofit—depended on doctor referrals and also had profitable businesses. Around the year 2000, in response to the Sustainable Growth Rate (SGR) formula, Congress asked the Centers for Medicare and Medicaid Services (CMS) to slow Medicare Part B spending (payments to doctors), believing that it was on an unsustainable path. For a variety of political and other reasons, Medicare Part A (payments to hospitals) was largely spared from CMS cuts. The result?  Physician practice profitability plummeted. Though hospitals seemingly survived CMS’s direct onslaught, they were suddenly faced with a different financial threat: erosion of their referral source—the doctors on their medical staff who sent patients to the hospital. No doctors, no referrals and no margin. The entire ecosystem was being disrupted.

The solution became obvious. Hospitals must share a portion of their financial margin with the doctors in order to maintain their pipeline of referrals. Given that “fee-splitting” and paying doctors directly for patient referral is unlawful, hospitals began hiring doctors (utilizing a variety of legal “safe harbors”) and paying them “fair market value” based on accepted third-party benchmarks. While this practice cut into hospital margins, it was necessary to preserve the medical ecosystem.

Third-party benchmarks and “fair market value” are tricky business. Benchmarks were initially based on salary surveys of independent doctors at the 25^th, 50^th, 75^th, and 90^th percentile. Obviously, doctors at the higher percentiles saw more patients and were paid more per encounter (higher negotiated third-party payor rates) than doctors at the lower percentiles. “Fair market value”, therefore was based on the historical practice data of the doctor being employed (average patient volume/year multiplied by a fixed rate for service rendered—a rate negotiated with payors in the past). This simple analysis was the basis of how many doctors were lured into employment—the final hook being an understanding that the hospital would go at future financial risk, sheltering the doctor from future CMS reductions.

 Very simple—on paper.

However, in actual practice, things quickly got off-track. Hospitals proved to be very poor “physician private practitioners”. Many hospitals invested little effort in negotiating employed physician fee schedules with payors. Even worse, hospitals often agreed to discount physician contracted rates with payors to achieve higher hospital rates. The result? Almost immediately hospitals were paying their employed doctors more than their contracted reimbursement rate. A typical scenario saw hospitals paying doctors at the 75^th percentile while their negotiated insurance fee schedules reimbursed at the 50^th percentile. Compounding the problem, hospitals often did a poor job in collecting physician receivables (e.g., hospital bad debt write-offs of anything less than $1,000 were applied to physician receivables—dollars that would have been diligently pursued by doctors in independent practice). The compounded result? The doctors being paid at the 75^th percentile were now collecting at less than the 25^th percentile. Lastly, hospitals routinely placed doctors in expensive practice settings not conducive to a net-income private practice model (e,g., like using office nurses being paid the same rate as inpatient hospital nurses—something independent practice cannot afford). The final result? The average subsidy per doctor is over $315,000 (per the Q4 2025 Kaufman Hall Flash Report)—a rate that is increasing 5% per year. “Fair market value” gone amuck?

So, who is picking up the bill for all of this? As it turns out, larger businesses who are required to provide health benefits for their employers are the ones holding the bag. The result in their health spend:

A 300% increase!

Consider these staggering statistics. When we account for the number of employed doctors and the total subsidy being paid nationally, we see $110 billion/year being paid to doctors before the first patient is seen! This, of course, is no fault of the doctors. Indeed, this is “fair market value” to the non-medical economist.  However, common sense would dictate that $110 billion would be best spent if it were tied to some activity that actually improves medical care. Passing the financial burden to businesses (who pass the buck to their customers via the increased cost of goods and services) seems equally as absurd. In round numbers, the bill for physician subsidy accounts for 6%-8% of the commercial premium dollar or 10%-13% of the employer health spending. In South Carolina, where hospital employment of doctors is around 75%, this bill accounts for 17%-19% of the commercial premium dollar.

While physician subsidies alone cannot explain all health spending increases in America, it is interesting how the numbers line up: physician subsidies—currently $110 billion—are rising (5%/ year) at the same rate as the commercial spend for healthcare by companies (5%/year). All while medical care continues to slump. A funny coincidence perhaps? Maybe—except no one is laughing.

Earlier we suggested that actionable fixes were possible. Stay tuned. There is more to come.