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The Keckley Report

Hospital Employment of Physicians: The Realities Today, Challenges Tomorrow

By February 19, 2018March 1st, 2023One Comment

Last year, for the first time, less than 50% of physicians (47.1%) had an ownership stake in their own practices—6% fewer than in 2012. Per the American Medical Association, almost a third, 32.8%, were employed by hospitals, and in some specialties, like emergency medicine, primary care and others, it’s the majority.

The AMA’s data show two other notable trends: younger physicians are less likely to be owners and the size of medical practices continues to increase: 57.8% practice in a group of 10 or fewer, down from 61% in 2012, and the percentage in practices of 50 more clinicians has increased from 12.2% to 13.8% in the same period.

To industry watchers, these data are no surprise. Nor is physician survey data reflecting growing physician discontent about the health system, especially among seasoned clinicians who’ve practiced for more than a decade.  

In the past month, I’ve participated in 3 planning sessions with coalitions of independent medical groups of orthopedists, oncologists and ophthalmologists seeking to remain self-employed while remaining competitive. As I matriculate through Starbucks, airports, restaurants and the gym, I hear a similar refrain from my physician friends: they want to maintain their independence and see hospital employment as a slippery slope to be avoided. And in meetings with hospital system leaders and boards, there’s growing recognition that hospital employment of physicians is a burgeoning challenge in their organizations. These are the realities:

1.       Most physicians believe that maintaining their independence is essential to protecting their profession. They think employment by a hospital means erosion of their clinical autonomy and loss of income. They trust hospitals more than insurers and drug companies, but think hospital overhead is excessive, administrators are overpaid and physician input is marginalized.

2.       Most think the future for the profession is threatened by the corporatization of the industry. Profiteering and cherry-picking by investor-backed interests are barbarians at their gates.

3.       And most think hospitals are complicit in the profession’s loss of autonomy and government regulations counter-productive to the bests interests of their patients and their roles as their advocates.  

These views are widely held, especially by clinicians that are not employed by hospitals.

Looking back, the employment of physicians by hospitals is trend 20 years in the making. Hospitals operated at arms-length with a voluntary medical staff they credentialed to provide services in their facilities. Contracts for certain professional services—emergency medicine, pathology, radiology, rehabilitation, anesthesiology and others—involved exclusive relationships with local clinicians to provide services necessary to patient safety and access. Medical directors were appointed by hospital administration to maintain quality, credential the medical staff, coordinate quality reviews and adjudicate disciplinary matters when problems arose. And the medical staff elected one of its own to serve as Chief of Staff to be their voice in the board room and C suite. That was yesterday.

Today, hospitals operate in a new normal: insurers, Medicare and Medicaid pay less, dictate more and are hell-bent to replace fee for service payments with alternative payments requiring hospitals and physicians to share financial risk in integrated models. The locus of patient care has shifted from inpatient to outpatient and is heading to virtual and digital accompanied by capital and operating attention. Population health, quality measurement, healthcare consumerism, evidence-based medicine, utilization review, economic credentialing and accountable care imposed unwelcome change to the practice of medicine. Hospitals consolidated and the specter of Amazon, Optum and CVS-Aetna as national competitors looms large.

Along the way, for many physicians, hospital employment was a compromise whereby they’re able to protect their financial and emotional security. For hospitals, employing these physicians was a response: few set out to become physician superintendents and landlords, and all who did have found it challenging. And, making matters more difficult, physicians are notoriously strong-minded even on issues about which they’re not well-informed. Thus, medical educators now emphasize self-awareness and emotional intelligence as core attributes for future medical professionals who’ll likely practice in a congregate setting.

The AMA data indicate hospital employment of physicians may have leveled off. They indicate the majority of physicians are now practicing in large single specialty groups, multi-specialty groups, or as a hospital employee. Uncertainty about the fate of alternative payment models and certainty about reimbursement cuts by Medicare and Medicaid and cost pressures by employers and consumers are constants for hospitals and physicians, regardless of their practice settings.

For hospitals, employment of physicians is not a necessity, but working effectively with an organized group of clinicians imperative. For the foreseeable future, healthcare regulators will place primary accountability for clinical decisions and patient outcomes on physician judgement, augmented by information technologies and clinical decision support. Payers associate their treatment recommendations with the lion’s share of health costs and the majority of unnecessary care. Drug and device manufacturers see them as conduits to patients and profits. And patients view them as their trusted advocates.

Most hospital boards focus on clinical program enhancements, facility improvements, competitive strategies and reimbursement pressures. They’re important, but the healthiness, effectiveness and efficiency of the hospital’s medical group is more important. Investments in physician leadership, trust-building and a shared vision for the future are urgently needed.

Physician employment by hospitals is not the issue: it’s how physicians, hospitals and their business partners respond collectively to market forces and compete by assuming accountability for costs and outcomes.


P.S. This week, we lost 17 souls in a school shooting at Marjory Stoneman Douglas High in South Florida. Per the Washington Post, since the April 20,1999 Columbine High School massacre that left 12 students and a teacher dead and 21 wounded, there have been 170 school shooting incidents exposing 150,000 kids to gun violence and death.  Two hospitals, Broward Health North Hospital and Broward Health Medical Center, handled the trauma, including 14 wounded many of whom were admitted with multiple gunshot wounds. By next week, the story will be forgotten. The heroics of first responders, doctors, nurses and administrators in Parkland will be old news. Calls for stricter gun controls that could limit access and increased investment in mental health might linger, but in all likelihood, little will be done. That is, unless and until community leaders, employers and citizens demand an end to talk and start to action. I work in DC where issues are framed as Blue or Red. Political brinksmanship is the parlor game most play, but this is no game. The President’s proposed $4.4 trillion FY19 budget makes appropriate investments in treatment and prevention of the opioid epidemic: might similar attention be given school safety and senseless loss of life? Parkland, Florida was named Florida’s safest city in 2016. Today, it’s better known for this carnage.

One Comment

  • Rob Tholemeier says:

    Employed physicians is part of the trend in healthcare to optimize around maximizing revenue at all costs. I’ve seen this before in other industries. When, or should I say if, hospitals start to do the right thing and look at bottom-line financials instead of top-line nearly exclusively, we will see spinoffs and outsourcing, and partnerships. Not only for physicians but all sorts of other clinical services.

    Any hospital not partnering with an experienced, professional urgent care provider is missing the boat, in my view.