Bleak Physician Recruitment News for Smaller Markets, Independent Practices

Troubling yet predictable findings emerge from the 2010 Review of Physician Recruiting Incentives, the annual survey from physician recruiters Merritt Hawkins/AMN Healthcare, which reflects the market realities of the past year for healthcare in a down economy.

The survey also provides clues for the near term. It's based on 2,812 permanent physician and certified registered nurse anesthetist searches in 48 states which the Irving, TX-based recruiters conducted from April 1, 2009, through March 31, 2010.

First, recruiting was down in 2009-10 for the first time in the 17-year history of the survey, even though there is nothing to suggest that demand has abated.

"This is quite possibly our most accurate survey ever because the decisions that were made from the client base were 'had to,' and not 'want to' decisions," says Merritt Hawkins Senior Vice President Travis Singleton. "We have a bottleneck. The needs didn't go away. In fact, they compounded. But our clients said there was an almost complete stop, wait, and hold. In that respect, the survey is the truest representation of what these different clients had to do to survive."

Among the contributing factors, Singleton says, were the overall poor economy, a corresponding lack of capital, the uncertainty of healthcare reform, falling medical utilization and reimbursements, and an unwillingness of many physician-candidates to relocate in a challenging economic climate.

Second, hospitals, health systems, and medical groups in more-populated areas were doing the bulk of the hiring. In 2008-09, hospitals, physician groups, and other healthcare entities in communities with less than 25,000 people conducted 39% of the Merritt Hawkins searches, and communities with 100,000 or more people conducted 26% of the searches. That's a flip-flop from 2008-09, when smaller communities conducted 39% of the searches, and larger communities conducted 26% of the searches.

"You can tie that to financial woes," Singleton says. "The smaller groups and hospitals were on the front line. When you saw capital dry up, when you saw the pressures of having to put guarantees out to recruit physicians becoming tougher, the ones that flat out couldn't do it were the communities with 25,000 or less. I'm not saying it was easier for the larger systems, but the larger metro and health system-oriented clients had the wherewithal and resources to recruit."

Third, even though recruiting is down, the overall demand for primary care physicians remains strong. Family practice, internists, and hospitalists were among the top five most sought-after specialties.

Family practice and internal medicine are going to continue to rise "as the geriatric patient base demands it, with our chronic and high-risk patients that we are dumping on the system," Singleton says. "Hospitalists have been our Steady Eddie and that will remain the same because it's become an accepted practice of both quality and expense savings."

Interestingly—and tellingly—psychiatrists and emergency physicians were among the top five medical specialties sought in 2009-10.

"The economy is down and you can tie emotional and mental health with economic times," Singleton says. "Certainly, when it is combined with people's jobs, it has been the most undiagnosed and unclear of all modalities out there."

Singleton says the rising demand for psychiatrists also may reflect the growing understanding in the healthcare community that mental health is underserved and the push for mental healthcare parity. "There has been such a need for psychiatry for so long. These patients have been shuffled through the primary care system, and to be quite frank, that isn't the best way to diagnose and treat these patients," he says. "As that has been getting more publicity over the last two or three years, you are seeing the need go up."

Unfortunately, psychiatrists represent the oldest demographic among healthcare specialists, and not enough younger physicians are coming into the field. "Those who want to come into the field only want to do outpatient, and the need right now is inpatient," Singleton says.

Fourth, despite the demand, primary care compensation remains the lowest among medical specialties. Family physicians' compensation averaged $175,000. Orthopedic surgeons were tops, averaging $519,000.

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"Under the current structure, primary care salaries are about what they can be," Singleton says. "They are going to go up a little more, but there is just no room. Without massive reform, you aren't going to see a huge difference."

"The more telling stat in this survey is the lows. We always focus on the average, but when you look at the lows, family practice compensation jumped up $20,000 (from $120,000 in 2008-09 to $140,000 in 2009-10) in one year. That is massive considering the total compensation. That tells us it is so competitive out there. There are no more oases. There are no destination cities. Everyone is somewhat on a level playing field, and that is scarier than the average going up."

Fifth, the numbers of physicians abandoning private practice for hospital employment has swelled from a trickle to a stream to a tsunami. "We are seeing it on a scale like never before," Singleton says, adding that the desire for employment is now coming from both physicians and hospitals.

"In the past it's been one side pushing an agenda—the hospital wanting market share," he says. "This time it's the hospitals realizing that to control costs and outcomes as best they can—but also in an effort to control their lifeblood, the physician—you have to have flexibility. And in today's market, there is no flexibility without employment."

As compensation becomes more competitive, Singleton says more hospitals will be even more incentivized to take up the employment model or something similar, especially as accountable care organizations come to the fore.

Synergy of care and bundling are examples of those things pushing down this funnel of employment. "Those larger organizations that have experience in that field are one step ahead," he says. "Some of these other smaller clients that know this is the outcome have never done it before. They are not equipped to employ physicians. If anything, the numbers of employed physicians will shoot up next year because that segment is now forced to join the game."

On the physician side, Singleton says it's a wonder that any private practices are left, especially in light of the ongoing uncertainty over healthcare reform and Medicare reimbursements.

"Think about the year that they just went through," Singleton says. "Imagine coming to work. The rules of the game could change on you at any moment. There is such a lack of stability and a lack of guarantees in their world right now. Anything that can give them both of those areas they are going to do. Employment does just that."