Hospital-Physician Consolidation Growth Trends Moderate

After spiking from 2012 to 2015, the increase in hospital-employed physicians and hospital-owned physician practices eased from 2016 to early 2018.

Rapid growth in hospital-employed physicians and hospital-owned physician practices has leveled off, but an organization that has followed the trend since 2012 says the consolidation activity is still momentous.

"The trend from July 2016 to January 2018 remains significant. Even though the trend is starting to taper, it's amazing that we had an additional 14,000 physicians who shifted into employed situations and an additional 8,000 physician practices that were acquired," says Kelly Kenney, JD, CEO of Austin, Texas-based Physicians Advocacy Institute.

In 2016, PAI published a report that showed meteoric growth in hospital-employed physicians and hospital-owned physician practices. From July 2012 to July 2015, the number of hospital-employed physicians increased 49%. The number of hospital-owned physician practices increased by 31,000, which amounted to an 86% hike.

A new PAI report published this month features several key data points.

• From July 2016 to January 2018, the number of hospital-employed physicians increased 6%
   
• From July 2016 to January 2018, the number of hospital-owned physician practices increased 5%
   
• In January 2018, hospitals employed more than 168,000 physicians
   
• In January 2018, hospitals owned about 80,000 physician practices
   
• From July 2016 to January 2018, the western portion of the country had the hottest consolidation markets, with the number of hospital-employed physicians increasing 6.6% and the number of hospital-owned physician practices increasing 8.1%

Whether this consolidation activity is approaching its ceiling depends on the financial strength of hospitals, Kenney says. "A lot of this is driven by incentives for hospitals because they are in the driver's seat."

Commercial payers could determine whether hospitals continue their physician acquisition spree, she says.

"Hospitals lose money on Medicare, but they have remained profitable overall. They lose money on Medicare, but they make up for that with a payer mix that is heavily commercial, so we need to watch the commercial side and see whether they screw down on hospitals."

Consequences for physicians

The ongoing consolidation has important implications for both hospital-employed physicians and physicians who remain in private practice, Kenney says.

"Physicians who are working in employed settings have shed themselves of administrative and regulatory burdens. They don't have to worry about a lot of the things they had to worry about in private practice. However, some of the concerns they are having relate to having clinical autonomy and feeling like they can practice medicine based on their best medical judgment."

PAI is advocating for hospitals to have empowered medical staffs, she says.

"Physicians should be leading healthcare innovation from a clinical perspective in employed settings. Some employed physicians have reported feeling pressured to meet patient quotas and maximize the revenues they can generate for hospitals. That is a reality, but we want to make sure we don't damage the patient-physician relationship."

Physicians who remain in private practice face a different set of challenges, Kenney says.

"In smaller settings, physicians have trouble keeping abreast of the new evolving rules. There are a whole plethora of Medicare-related rules and reporting requirements. They also have commercial contracts, and they have to navigate the rules for each of those payers, including prior authorization rules that can be difficult and expensive for private practices to manage."