Monday, November 8, 2010

The Hospital-Doctor Hiring Wave

The wave of the future is coming and there is no holding it back.

Anne Morrow Lindbergh, The Wave of the Future, 1940

I know a wave when I see one. Rarely have I seen a wave so big move so fast as the current hospital hiring of physicians.

• Since 2002, hospital-owned physician practices have more than doubled from 25% to 55%, and physician-owned practices have nearly halved from 70% to under 40%.

• Merritt Hawkins, the largest U.S. recruiting firm, reports its share of its doctor searches for positions with hospitals hit 51% for the 12 months ended in March, up from 45% a year earlier and 19% five years ago.

What’s Fueling The Trend?

Hospitals and physicians need each other as revenues drop for each. The new reform law projects drops in reimbursements for Medicare below Medicaid levels by 2019. Also one of the main struts of the new law envisions rewarding hospitals and doctors for collaborating in accountable care organizations (ACOs) to save Medicare money. There are other factors as well, on both the physician and hospitals sides.


Physicians are seeking refuge from the reform storm and from the hassles of running the business side of practices. These include wrangling with insurers, begging to seek authorization to perform procedures, dunning patients for out-of-pocket costs, pressures to install EMRs, and regulations demanding more documentation and higher data-based performance. Add to this doctors seeking a more balanced life style, growing numbers of women physicians seeking time off for family, lessening economic security for primary care and specialty physicians, heightened desires to spend more time with patients and less time with business details, and more dependence on hospital marketing and hospitals as a funnel for integrating care and a technology hub, and you have all the ingredients that make up an economic and cultural wave.


Hospitals simply have what it takes to prosper in an environment requiring administrative teams, political clout, negotiating leverage, marketing resources, and access to capital. By owning physicians, hospitals can guarantee revenue when they own the referrals and sites where surgeries and other high tech procedures are done. Hospitals, say Paul Mango, a director of consulting at McKinsey & Co, “ want to essentially lock in volume, inpatient and outpatient.” When you own the physicians and they are employees, physicians are obligated to refer and do procedures at the hospital. Hospitals can claim they bring the efficiencies of benefits of integration and data aggregation to the health care table.. Besides, most payers pay higher fees for hospital-owned facilities, including a “facility fee.”

Fear of Hospital Monopolies

Finally, if one owns the referral sources and the production facilities, one has the leverage to negotiate higher fees . This potential monopolistic situation has not escaped the attention of either insurers or government regulators. Regulators may evoke antitrust laws to counter hospital-physician consolidation.


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