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How Physician Employment Affects Hospitals, Patients

Karen Minich-Pourshadi, for HealthLeaders Media, December 2, 2011

“The reimbursement cuts hurt these [independent] physicians. Plus, there’s strength in numbers and these physicians are looking for some strength when it comes to their [payer] contracting—getting a negotiation position of influence when you’re a one- to two-doctor practice is hard to do,” explains Nantz. The physician trend of seeking employment at hospitals or systems over the past few years, he says, is not entirely unexpected, however. He believes it is an intended result of healthcare reform and reimbursement efforts.

“The opinion is widely held that the actions by the federal and state governments to cut payments are not just about budget deficits and controlling utilization; they were intentionally designed to drive a lot of physicians into an employed mode,” Nantz says. “If you make the number of players in the market smaller, it’s easier for the government to effect change. So it will be put on the large healthcare systems then to work in partnership with doctors to determine what the new standards of care will become.” 

Max Reiboldt, CPA, is president and CEO of Coker Group in Atlanta; he agrees that more than economics are driving this shift in physician employment.

“From the physician’s perspective it is generally of greater financial benefit in the nearer term to be employed ... Hospitals aren’t experiencing as great reimbursement reductions yet, and may not,” he says. Though in the past the reason a hospital sought to employ specialists was to build service lines, such as cardiac or cancer care, Reiboldt says that now more frequently primary care physicians are being added to help capture referrals and to build an accountable care organization.

“Generally, when a hospital has the opportunity to acquire [a practice] they take it because they can increase market share of an ancillary, and essentially in doing so they are taking out a competitor,” says Reiboldt. “But there’s a macro issue at play with the healthcare reform legislation; it’s the introduction of the ACO and the changing reimbursement paradigm.

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6 comments on "How Physician Employment Affects Hospitals, Patients"


DonS (12/8/2011 at 1:22 PM)
A complex issue and while some points are valid I would contend that care integration can be achieved without MD employment. The short term effect is to increase costs for patients as ancillary services previously billed by the MD on a CMS 1500 are now billed by the hospital on a UB92. The reimbursement difference is staggering. And consolidation of the providers wont keep down costs - if what I have heard about Sutter Health in CA is true. Lastly, if employed docs keep all the care within the system walls, is that really best for the patient? What system can be best in everything? I'd like the doc to make the best choice for me without having to worry about his employer.

Paul Sauer, MD (12/3/2011 at 7:45 AM)
Once the doctors are controlled by the hospitals and government, their compensation with fall. The doctors will have no leverage to negotiate salary. Will it become like England where doctors make $60,000 to $70,000 a year?

David Keller MD (12/2/2011 at 8:05 PM)
Missing from the article is the effect employment can have on physician productivity... I've seen clear evidence that employment makes physicians less productive and often less responsive to the needs of their patients. It's not all bad, but there are a number of negatives not discussed in the article.