The impact of pay on Navy physician retention in a health care reform environment
Lane, Michael N.
Melody, Brendan T.
Mehay, Stephen L.
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Physicians are the most difficult health care professional group to retain on active duty beyond their first obligated tour. A major problem is the disparity between military and civilian physician income. In fiscal year 1997, the Department of the Navy spent approximately $135 million in specialty pay on the Navy's 4,000 active duty physicians. Health care reform has altered the demand for specialty and primary care physicians, accelerating the movement toward managed care. In this thesis, the authors quantify the role of the pay differential using a multivariate logistic model and conclude that the civilian- military pay differential has a significant influence on the probability that a physician remains in the Navy. Physician personnel and earnings data were gathered from the Defense Manpower Data Center, the American Association of Medical Colleges, and the Hay Group. Results indicate that recent shifts in demand have resulted in a greater sensitivity of retention to pay for primary care physicians. Specialty specific elasticities can be applied to analyze the expected impact of pay on retention of representative pay plans. Increases in pay to the civilian median level would substantially increase retention, but would be costly. This changing military environment in union with health care reform may be cause for the Navy to re-evaluate its physician pay structure and examine options for the amount, attached obligation, and recipients of medical special pays
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