Fifty Percent Increase in Share of Physicians Owned By Hospitals in Three Years

Confident DoctorsA new survey by the Physicians Advocacy Institute and Avalere Health, a consulting firm, shows a significant increase in the number of physicians leaving independent practice and joining hospital-based health systems:

  • From July 2012 to July 2015, the percent of hospital-employed physicians increased by almost 50 percent, with increases in each six-month period measured over these three years.
  • In 2012, one in four physicians was employed by a hospital.
  • By 2015, 38 percent of physicians were employed by hospitals.

Good or bad? Well, color me skeptical. This acquisition spree is driven by new payment models which seek to reward providers for “accountable” care (which I suppose is better than unaccountable care.) So far, the results of payment reform in Medicare have been trivial.

And the change does not appear to be solving an eminently solvable problem, “surprise” medical bills. These occur when a patient undergoes surgery in a hospital in his insurer’s network, but is then surprised by an expensive bill from an out-of-network anesthesiologist, pathologist, or other specialist who attended him in the hospital.

This situation would not persist in any property functioning market. However, new research from the Brookings Institution suggests this problem is getting worse. Obviously, it should be diminishing if hospital ownership of physicians is growing and making care more “accountable.”

Comments (8)

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  1. Barry Carol says:

    The state of CA recently passed legislation that deals with surprise medical bills in the following way: To take the patient out of the billing dispute, the legislation requires the out of network provider to accept the greater of 125% of the Medicare allowed amount or the average contract reimbursement rate paid by the patient’s insurer to in network providers. That sounds reasonable to me.

    As for the trend toward more doctors leaving independent practice to work for hospitals, I suspect a lot of it has to do with increasingly burdensome regulatory requirements including the need to invest in expensive electronic record systems, the desire to get away from the hassles of running a business including hiring and firing staff and renting or buying office space, and the desire for more regular hours and better work-life balance, especially among female physicians who make up almost half of medical school enrollment these days. The ability of large hospital systems to negotiate higher insurance reimbursement rates than individual doctors can is also a factor. The downside is less independence which is an important issue for most doctors.

    • Ron Greiner says:

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  2. John Fembup says:

    Hospital systems are not the only ones buying medical practices.

    I recently learned that my primary care physician’s medical group was recently acquired by Optum Health – a United Healthcare company.

    • John Fembup says:

      Wait a while . . . the Optum Health deal is not exactly as my physician thought.

      Optum Health has acquired the backend admin support for ProHealth Physicians, and only in Connecticut at this time. ProHealth Physicians still owns the medical practice.

      Note also that Optum most recently purchased MedExpress and is described as having acquired other “medical properties” over the past two years:

      • John Fembup says:

        More info: the Optum moves reflect a strategy United actually announced back in January –

        The Optum CEO said at that time “We currently operate over 160 neighborhood care centers, with the goal of operating several multiples of that number five years from now”

        So the purchase in Connecticut is not nearly the end of this activity for Optum.

      • Barry Carol says:

        Back in 2008, United Health acquired Sierra Health Services, a large medical provider group, in Las Vegas, NV.

        MedExpress is now up to 180 locations in 16 states. I went to the one near me last March and thought the experience was fine. That particular location was previously a Lone Star Steakhouse that was vacant for several years.

        United is also a big player in behavioral health.

        If they weren’t pleasing enough customers enough of the time, this business model wouldn’t be working but it is. Third quarter earnings reported this morning were a blowout with the stock up over nine points. They must be doing something right.

      • Your physician does not fully understand the ownership of his practice? I am actually not surprised to hear it.