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2 California Hospitals Directly Employ Physicians

News  |  By Doug Desjardins  
   March 27, 2017

More critical access facilities are expected to take advantage of the state's new exemption to the ban on corporate medicine.

This story originally appeared in California Healthfax.

Two critical access hospitals in California have hired physicians under a new law that exempts the smallest and most remote hospitals from the state's ban on corporate medicine.

Mayers Memorial Hospital in Fall River Mills and Healdsburg District Hospital hired physicians in January under provisions of Assembly Bill 2024, which allows certain hospitals to hire physicians under a seven-year pilot program that began in January.

"We become much stronger in our ability to attract physicians who want to work in a different environment than what larger hospitals offer," said Nancy Schmid, CEO of Healdsburg District Hospital.

CA's Critical Access Hospitals Get Green Light to Employ Physicians

At least half of the state's 34 critical access hospitals plan to take advantage of the new law, said Peggy Wheeler, vice president of Rural Health and Governance for the California Hospital Association (CHA).

"I conducted an informal poll of [critical access] hospitals about a week ago and it appears about half of them plan to hire a physician this year," said Wheeler.

"This is something critical access hospitals have been requesting for a long time and it's good to see that they're going to take advantage of [the waiver]."

AB 2024 exempts 34 critical access hospitals from the state's corporate medicine ban.

A Steady Paycheck
Small, rural hospitals often have a difficult time recruiting physicians and AB 2024 allows hospitals to offer physicians a guaranteed salary and benefits that wouldn't be available to them as independent contractors, according to Wood.

"Most young physicians would prefer to be employed by a hospital rather than go into private practice," he said.

"It is a daunting task for young physicians, who are often tens of thousands of dollars in debt, to move to a small town and try to build a practice from the ground up."

A 2015 survey conducted by research firm Merritt Hawkins found that 92% of first-year medical residents would prefer to work directly for a hospital rather than practice as an independent contractor.

Number of Hospital-Employed Physicians Up 50% Since 2012

The state's ban on corporate medicine was created more than century ago in response to mining companies hiring their own physicians, and concerns over whether the physicians worked in the best interests of patients or their employers.

In the past decade, several bills that would have allowed rural hospitals to directly employ physicians failed, Wheeler said. AB 2024 succeeded because it limited the waiver to critical access hospitals, rather than all 67 rural hospitals in the state.

Medicare Disadvantage
Physicians in small communities are also at a disadvantage because their patient population is comprised largely of Medicaid and Medicare patients, which provide lower reimbursement rates than commercial health plans.

"They're at a real disadvantage because so many people in rural communities are covered under government health plans, and that makes it harder for them to make a living," said Wheeler.

California is one of only five states that don't not allow hospitals to hire and employ physicians, she said.

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