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How Physician Employment Affects Hospitals, Patients

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

ACOs are only able to be formed as a result of a large ‘mega-group’ or significant number of physicians clinically integrated with a health system. Through the clinical integration, they need financial integration, and for that to happen it needs to be done through employment or a close-to-employment agreement. So, [the healthcare reform legislation] is driving the consolidation of hospitals and practices.”

Employing a large number of physicians is generally viewed by healthcare leaders as a mark of a hospital’s financial strength, not only for the referrals and income generated but also for the negotiating leverage a large network can use with payers.

“As you look to the future for most standalone entities and look at the level of [financial] support needed to continue to be a standalone, it will be tough [for these entities to survive],” says Jerry Youkey, MD, vice president for medical and academic services at Greenville (SC) Hospital System University Medical Center and dean of University of South Carolina School of Medicine–Greenville.

Nonprofit GHS employs 566 of its 1,200 physicians and is one of the largest hospitals in a market that has been employing physicians for at least two decades.

“Employing physicians is the most significant strategy for any organization these days. You must build an effective primary care and specialty care network,” Nantz says. “You’ve got to have the patients, and therefore you’ve got to have the physicians. And the physician-hospital employed model is the most likely relationship to encourage doctors to lead the charge toward [care] transformation—so we can all survive and thrive in a post-reform environment.”

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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.