U.S. Markets close in 3 hrs 14 mins

The Job Market for Doctors Is Booming. Here's What It Means for You

Shawn Tully
The Job Market for Doctors Is Booming. Here's What It Means for You

Of all the job categories in America, the market for doctors is booming. Newly-minted doctors are choosing from multiple job offers, getting paid more sumptuously than ever, and can practice pretty much wherever they want. At the same time, the way they practice is shifting radically, as more and more physicians choose salaried positions with hospital chains and group practices encompassing thousands of MDs.

But the new corporate model is so hamstrung by the trickle of newly-minted doctors entering practice each year that it can’t come close to meeting the needs of an America whose senior ranks will swell by 46% over the next two decades. The magic of the market is circumventing that roadblock by creating loads of fresh capacity in the form of walk-in clinics, dialysis centers, and other neighborhood venues, staffed by increasing ranks of nurse practitioners, that can provide the care and wellness for patients with chronic conditions who’d otherwise wait weeks to see a primary care doctor, or don’t even have one.

A new study by Merritt Hawkins, America’s largest physician search firm, points to seven trends that are reshaping the how healthcare is delivered. “2019 Survey: Final-Year Medical Residents,” polled doctors months from finishing their residencies and entering the job market. Here’s what they found–and what it means for you.

New doctors get loads of offers

Merritt Hawkins found that two-thirds of the final-year residents received 51 or more solicitations from recruiters, hospitals, medical groups and others, and that 45% were presented 100 or more job opportunities.

Pay expectations are great; actual pay is greater

How much did the residents expect their first jobs to pay, based on their conversations with potential employers? A lot. Eight-one percent expected to start at over $201,000, and 21% said they were looking at $326,000 or more. It was the specialists, including surgeons, who anticipated the richest packages, with more than half anticipating comp above $325,000. By contrast, only 24% of primary care residents, a category consisting of internists, pediatricians and family doctors, reckoned they’d make over $250,000. Based on Merritt Hawkins’ surveys of actual first year pay, both groups may be underestimating their initial pay. On average, Merritt Hawkins found, the three primary care groups earn an average of $250,000, while beginning pay is $386,000 in urology, $405,000 for otolaryngology, and $533,000 for orthopedic surgery.

New doctors want to work in cities

It’s a famous failing of our medical system that rural communities struggle to recruit physicians. The survey provides cold comfort for America’s small towns. It found that where they work is the residents’ biggest single concern, and that 83% want to practice in cities with over 100,000 people; 60% of the primary care doctors are seeking destinations of 250,000 or more. Given that tremendous demand, new doctors can go where they want, and it’s seldom the heartland where the need is greatest. The wealth of choices also leads to lots of turnover. Merritt Hawkins finds that one in eight primary care practitioners changes jobs each year, and that the number is probably far higher for those in the first or second year out of residency.

They want to be employers

A big reason that doctors change jobs so readily is the “corporatization” of healthcare. Small “Marcus Welby, M.D.”-style practices have mostly disappeared, and the market is now dominated by big group practices, many of them owned by hospitals. A notable example is Baylor, Scott & White in Dallas, combining a hospital chain and group network of 7,800 physicians. Eighty-three percent of the residents aspired to work for a hospital or group practice, compared with 61% in 2008, with all of the increase coming from preference to join a hospital. Only 9% sought to open an independent practice, versus one-quarter a decade ago.

Doctors are big revenue producers for hospitals. In another study, “2019 Physician Inpatient/Outpatient Revenue Survey,” Merritt Hawkins found that primary care doctors generated $2.1 million a year on average for their hospital-employers, and specialists did even better at $2.46 million, with cardiac and orthopedic surgeons contributing well over $3 million. On average, the revenue per doctor jumped 52% since 2016. That’s because costs per admission are rising, and since hospitals are merging, doctors on average work for bigger and bigger organizations, so they generate increasing income by referring patients to the chains that own their practices, and ordering tests at hospital-run labs.

The doc drought will get worse

The Merritt Hawkins report contains a succinct summary of the factors explaining the penury of physicians, and a study from the Association of American Medical Colleges (“The Complexities of Supply and Demand: Projections from 2017 to 2032”), offers a detailed analysis. All the doctors who enter the job market each year must all pass through a narrow opening, the number of positions offered by U.S. residency programs. Those programs are funded chiefly by federal grants from Medicare and Medicaid. In 1997, Congress froze that that funding at $14.5 billion a year, and it’s that cap that’s nearly frozen annual additions to the doctor supply. Hospitals and other programs now offer 32,194 residency positions. That’s up 15% from 2006 due to funding from states and private providers, but over those 12 years, medical spending has jumped 63% to $3.5 trillion.

The AAMC forecasts that today’s shortfall of 20,000 physicians will expand to a deficit of as many as 121,000 by 2032. By that year, the U.S. would likely have around 850,000 patient-care physicians––and need 14% more. For years, this writer has remarked that the official predictions have underestimated future shortages, and therefore, it’s highly possible that the future scenario could be far worse. For example, the AAMC observes that if the current trends toward early retirement continue, the doctor supply would barely rise at all over the next 13 years.

It’s often wrongly stated that the U.S. has a shortage of primary care doctors, and too many specialists. Not so. The AAMC study predicts that the specialist shortfall will be even worse than lack of primary care practitioners in the future. The reason is obvious: A rapidly aging, and longer-surviving, population that needs cardiac surgery, angioplasties, prostate operations and hip replacements.

The doctor will see you later

The chronic doctor shortage is placing a predictable burden on patients: long wait times. In a 2017 study (“Survey of Physician Appointment Wait Times”), Merritt Hawkins examined the problem in fifteen major metros and fifteen mid-sized markets. In the big cities, the average time to see a doctor rose 30% in just three years, from 15 to 21 days, and in the smaller cities, the waiting period expanded 33% to 32 days. It takes 109 days to see a family doctor in Boston, and in Portland, the interlude has grown 8 to 39 days since 2009. In Albany, If you sign up in May for an appointment with a family doctor, you’ll be examined in September. Seeing an orthopedic surgeon takes 43 days in L.A. and 42 days in Atlanta.

Retail clinics are filling the void

It’s obvious that if America is to avoid rationing and price controls, its medical universe will need a lot more capacity. And capitalist ingenuity is now starting to fill the void. Retail clinics are sprouting in drugstores and as free-standing outlets in neighborhood malls. Although the scope of work they’re allowed to perform varies from state to state, nurse practitioners and physician assistants now provide much of the basic care once furnished only by those overbooked doctors. AAMC predicts that the ranks of the NPs and PAs. will swell from 400,000 today to 800,000 by 2032, growing from half the number of today’s patient care doctors to an almost equal size.

The leading pioneer is CVS Health, which has 1100 MinuteClinics in its drugstores from coast-to-coast, and plans a big network of outlets called HealthHUBs that specialize in managing patients with such chronic conditions as diabetes and asthma.

It’s a widespread misperception that healthcare isn’t really a market, and defies the laws of supply and demand. Quite the contrary, it obeys them completely, and that’s the problem. Demand is artificially inflated by subsidies that leave consumers spending just 20 cents for every dollar they consume from take-home pay and savings, and supply that’s artificially restrained by such practices as the vice grip on new physicians. Those practices have left a giant void––and created a retail revolution aiming to fill it.

More must-read stories from Fortune:

—Warren Buffett’s best stock picks over the past year

Subscribe to the new Fortune 500 Daily audio briefing

“Staggered” boards are paying off for stock investors

—CVS Wants Your Drugstore to be Your Doctor

Don’t miss the daily Term Sheet, Fortune‘s newsletter on deals and dealmakers.