More physicians, especially young doctors, are turning to hospitals for employment rather than running their own practice, spurred by the rise of value-based payments and population health.
The trend can have the effect of raising costs, however, and there are signs it may be slowing.
A recent report from Avalere conducted for the Physician Advocacy Institute found a 100% increase in hospital-owned physician practices, as well as a 63% increase in the total number of physicians employed by hospitals between July 2012 and July 2016. There were 72,000 physician practices employed by hospitals in July 2016.
PAI CEO Robert Seligson said payment policies favor large systems and the current payer environment “stacks the deck against independent physicians” through “administrative and regulatory burdens.”
Patrick Padgett, executive vice president of the Kentucky Medical Association (KMA), has seen the trend in his state over the past decade. Most employment is through hospitals and hospital systems in Kentucky, especially in rural areas. He’s seen a similar trend of more physician-led practices employing doctors, such as multi-specialty practices, Padgett told Healthcare Dive.
Times have changed so much in Kentucky that the KMA stopped providing an annual seminar to new doctors on starting your own practice. Now, because nearly every new doctor is employed, the seminar focuses on employment contracting and personal finance education.
What’s causing more hospital-employed physicians?
Multiple factors are driving the trend. Payment policies are a major factor.
Population health and value-based care models are driving “more coordinated, integrated and consumer-centric healthcare delivery systems,” Katie Gilfillan, director of Healthcare Financial Management Association’s finance policy, physician and clinical practice, told Healthcare Dive.
As payers move to risk-based payments, reimbursements that reward value, quality and lowering costs are replacing fee-for-service payments.
However, hospitals have limited influence on costs and patient outcomes once the person leaves the facility. So, instead, hospitals are looking to scoop up physician practices as a way to stay connected to those patients when they’re not in the hospital.
Caroline Pearson, senior vice president at Avalere, told Healthcare Dive that this gives hospitals a better chance to manage care and reduce costs.
Another factor is connected to market share and payer negotiation leverage.
Physician groups are feeling the economic pressures of rising costs to deliver care, Gilfillan said. Smaller practices are increasingly looking to hospitals and larger physician-led practices, which they feel can influence care and share the burden of risk more than going it alone. Being part of a larger system can make former small practices more competitive with the ability to negotiate better rates.
Being part of an integrated system also reduces risk. Plus, it can lessen regulatory burdens put on medical practices, such as prior authorizations.