Supply and Demand

One of the basic concepts of a free market is supply and demand.  The scarcer the supply of a good or service, the higher the price.  We see this all the time in our daily lives.  Have you ever needed to call an electrician or plumber at midnight for an emergency?  You’re at their mercy.

Although physicians like to think they’re special, the truth is we’re not.  At the end of the day we provide a commoditized service to paying consumers.  The American healthcare system is far from a free market, but we are still subject to the laws of supply and demand.

Today we’re going to look at some nerdy fun statistics and see how this plays out across the country.

Physician Workforce by State

The distribution of doctors across the country is far from symmetric.  I took the AAMC 2017 State Physician Workforce Data to see just how much this varies from state to state. The results were surprising.  There is more than a two-fold difference between the state with the highest concentration of doctors vs. the lowest.

Top 5 States (Physicians per 100,000 residents)

  • 1.  Massachusetts 443.5
  • 2.  Maryland 377.8
  • 3.  New York 365.1
  • 4.  Vermont 357.5
  • 5.  Rhode Island 356.9

Bottom 5 (Physicians per 100,000 residents)

  • 46.  Arkansas 203.7
  • 47.  Nevada 200.1
  • 48.  Wyoming  199
  • 49.  Idaho  192.6
  • 50.  Mississippi 186.1

Physicians per 100k chart

If you were to map all the physicians across the country, it would look something like this:

Physicians per capita
Physicians are like the pilgrims. They settled in Plymouth Rock and never ventured far.

Looking at this map you would have to assume that oceans were very hazardous for your health.  Clearly the people living on the coasts need more doctors.

Income by State

I next looked at Doximity average physician salary data to see what the average physician earns in all 50 states.  Obviously there is a wide range of salaries amongst the different specialties, but this data gives you an overall picture of how your zip code impacts your paycheck.

Top 5

  • 1.  Alaska  $330,000
  • 2.  South Dakota $305,250
  • 3.  Iowa $304,750
  • 4.  Nebraska $295,000
  • 5.  Nevada $282,750

Bottom 5

  • 46.  Maine $235,500
  • 47.  Maryland $233,000
  • 48.  Michigan $228,750
  • 49.  Delaware $218,000
  • 50.  West Virginia $204,750
annual salary by state map
Apparently the ocean is also hazardous to your income.

As you would expect, as the concentration of physicians goes up the average salary goes down.

Concentration vs salary graph

Fun facts:

  • 5 of the 10 states with the most physicians are in the bottom 10 for physician salary.
  • Of the 25 states with the most physicians, 17 are in the bottom 25 for average salary.
  • Of the 25 states with the least physicians, 16 are in the top 25 for average salary.
  • There is no state in the top 10 for physician concentration that is in the top 10 for salary.
  • There is no state in the bottom 10 for physician concentration that is in the bottom 10 for salary.
  • It pays to be cold.  Only 2 states are in the top half for physician concentration and in the top 10 for physician salaries.  Minnesota has the 14th highest concentration of docs and the 6th highest average salary.  Alaska has the 22nd highest concentration of docs and the highest average salary.
  • Only 2 states that touch the Atlantic Ocean are in the top half for salary.

How Much Are Extra Physicians Worth?

Once I knew how many physicians there were and how much they earned, I was curious how much each state paid to add doctors.  How much does each state pay per physician for 100,000 citizens?

I divided the average physician salary by the number of physicians per 100,000 residents and mapped it out:

Cost per physician map
New England physicians are on clearance sale.

Top 5

  • 1.  Iowa $1441
  • 2.  Nevada $1413
  • 3.  Mississippi $1387
  • 4.  Wyoming $1378
  • 5.  Utah $1348

Bottom 5

  • 46.  Vermont $692
  • 47.  Rhode Island $675
  • 48.  New York $662
  • 49.  Maryland $617
  • 50.  Massachusetts $537

There is clearly a wide range of costs here.  New England states can get doctors cheap.  Massachusetts pays less than half what Iowa does on a per physician/100k residents basis.

Life Expectancy by State

Where you live can impact more than your paycheck.  It can also impact your life expectancy.  One study in JAMA found a 5.2 year span amongst all 50 states.  I imagine Hawaiians live the longest because the beach is good for the soul.  Utahns live a long time because they don’t drink or smoke and they spend all their time outdoors.  Minnesotans live long because drunken ice fishing is an excellent source of omega 3’s.

Top 5

  • 1.  Hawaii 78.5
  • 2.  Utah 77.9
  • 3.  Minnesota 77.8
  • 4.  North Dakota 77.7
  • 5.  Iowa 77.3

Bottom 5

  • 46.  Georgia 73.8
  • 47.  Alabama 73.7
  • 48.  South Carolina 73.7
  • 49.  Louisiana 73.3
  • 50.  Mississippi 73.1

Life expectancy by state

Return on Investment

I’ve got a curious mind. I started wondering which states were getting their money’s worth.  How much does each state pay a physician per year of life of its citizens?

Top 5

  • 1.  Mississippi  $18.98
  • 2.  Nevada $18.98
  • 3.  Iowa  $18.65
  • 4.  Wyoming $18.06
  • 5.  Arkansas $17.57

Bottom 5

  • 46.  Vermont $9.03
  • 47.  New York $8.86
  • 48.  Rhode Island $8.81
  • 49.  Maryland $8.24
  • 50.  Massachusetts $7.00

Cost per year of life map

Graph - physician concentration vs cost of life

Final Thoughts

Supply and demand is alive and well in medicine. Although there are a few outliers, the states with the most docs pay the least and the states with the fewest docs pay the most.

What surprised me the most is how well supply and demand applies to life expectancy.  The states with the fewest doctors are spending the most money for each year of it’s citizens’ lives.

I don’t know about you, but I’d like to live in Hawaii with the earning power of an Alaskan.  I’ll need the extra cash knowing I have to make it last an extra 5 years.

What do you think? Do you see supply and demand playing a role in your medical practice? Have you ever considered moving to a high demand area to boost your income? Share your thoughts and comments below.

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15 comments

  1. I definitely love these color maps which give a ton of visual data quickly. You definitely have to pay a premium to live in the coastal states plus states like California further make you pay a “sunshine tax” with a progressive state income tax that takes out even more of your dollars.

    I too would love to wake up every day in Hawaii, but it really does put an extra H to HCOL (HHCOL)

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  2. I have never considered a move to make more money because earning more has never been the priority. I am looking at a move to a VHCOL area to make less money (and have more fun).

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    1. Earning more has never been a priority? I’ll take “Things Side Hustle Scrubs has never said” for 500, Alex.

      I live in one of the worst states for physician reimbursement (although my group seems to be an outlier). I would never move from all my friends and family just to chase a few bucks. There are too many ways in 2018 to make doctor $ from home to justify uprooting your family.

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  3. It’s good to see I’ve inspired other mappers! This is great stuff! Yes, supply and demand is indeed alive and well according to your analysis What’s up with Massachusetts though? That’s a hell of a lot of doctors!

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    1. You are the wind beneath my maps’ wings.

      My theory on Massachusetts is that Harvard grads have too much debt to afford moving vans. Just 213 more loan payments and they’re packing up the U-Haul and heading west.

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  4. Indeed the forces of economics are alive and well! My theme is there’s more to this than just physician salary. As a doc in Mass I can shed some light:

    1. We have the 4th highest per capital income of any state and are top 10 for median income and household income.
    2. We are no longer Tax-a-chusetts. We are 18th for tax burden.
    3. Yes, we are physician supply heavy, but we also have a ton of hospitals. In addition, we have the highest percentage of insured patients of any state and we still have shortages and wait times!
    4. It’s not skiing in Utah or sailing/surfing in California, but we have four seasons of sports, mountains, beach, oceans, close access to the rest of New England, pro sports and every other amenity conceivable vis a vis culture.
    5. CONsistently ranked as the best public schools in America.

    I used to practice in Maine. I made more, the taxes were worse and physician spouses had a notoriously hard time finding decent employment. The medical culture was also vastly different than it is in Boston.

    I did my residency in NH and fellowship in NYC. I will attest NY was awful vis a vis cost of living and taxes and NH was amazing.

    The lack of state income taxes there was truly amazing; however, that’s an option in very few states.

    Bottom line, there’s a reason every doctor in the US hasn’t flocked to Mississippi or Alaska: there’s way more to this than just physician income and cost of living. It’s great to have a huge salary with low taxes in South Dakota or Alaska, but there are only so many folks who can successfully live in the places and most people end up being close to family and make it work.

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    1. I couldn’t agree more that there is more to the decision than salary, taxes and cost of living. I live in the Mid-Atlantic (one of the lowest paying regions). I love living at the beach and all our friends and family are within a 2 hour driving radius. There is no amount of money that could make me move.

      For those docs out there who aren’t tied to a particular region, there is money to be made in high demand areas.

      One indirect effect of practicing in a wealthy state like MA is that you are surrounded by a lot more “Joneses” you may feel pressured to keep up with. I wonder if being relatively more wealthy than your neighbors in Mississippi or Alaska cuts down on the pressure to live above your means.

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