Physician income declines when hospitals acquire practices, study shows
Those employed by health systems had about 49% lower Medicare billing, worked more hours per week and were in practice for fewer years.
Photo: Juanmonino/Getty Images
Hospital acquisition of independent physician practices is linked to a small drop in physician compensation, with a 0.8% drop in average income, according to new findings published in Health Affairs. This suggests hospitals may not benefit financially when hospitals buy their practices.
From 2014 to 2018, hospital ownership of physician practices increased a full 89%, and the data from this time period began to uncover differences in compensation among various specialties. Nonsurgical specialists, for example, saw their average income dip more than $9,650 annually, or 2.4%, while surgical specialists saw their incomes rise a modest 2.1%, or about $10,700 on average.
Primary care physicians also saw an increase, though at 1.2% ($3,179) it was much more modest.
Deeper dives into the numbers uncovered more detrimental effects to physician compensation than just average annual income, however. Compared to independently practicing physicians, for instance, those employed by health systems had about 49% lower annual Medicare billing, worked an average of about three more hours per week and were in practice for fewer years.
Yet many physicians are also seeing incentives to integrate with larger hospitals or health systems, such as overcoming concerns about losing referral privileges and seeking help with implementing complicated electronic health records.
Income can also be steadier when operating under a larger hospital-owned umbrella as compared to owning their own practices, and larger systems also tend to have billing and regulatory compliance services, which could potentially allow clinicians more time to treat patients, the report found.
WHAT'S THE IMPACT?
Independent physicians are becoming increasingly rare, with just 30% of U.S physicians practicing medicine independently as the year began, according to a June analysis from Avalere for the Physicians Advocacy Institute.
The remaining 70% are employed either by hospital systems or other corporate entities, such as private equity firms and health insurers. The catalyst for this trend is that hospital systems and corporations have been driving consolidation in healthcare by aggressively acquiring physician practices over the past couple of years, particularly during the last half of 2020, in the depths of the COVID-19 pandemic.
Hospitals and corporate entities – primarily insurance companies, but also venture capital and private equity firms – now own nearly half of U.S. physician practices, the findings showed. During the two-year period, these entities acquired 20,900 additional physician practices.
About 48,400 additional physicians left independent practice and became employees of hospitals or other corporations in that timeframe, and 22,700 did so after the onset of the coronavirus – representing a 12% increase in employment.
Insurers and private equity outfits drove the sharpest increases in acquisitions and employment during 2019 and 2020, at a rate of 32%. The COVID-19 pandemic, meanwhile, accelerated corporate ownership of physician practices and physician employment by health systems and other organizations in the last half of 2020. Corporate entities acquired 17,700 additional physician practices during that time – a 32% increase in corporate-owned practices.
Hospitals acquired 3,200 additional physician practices over the two-year period, resulting in an 8% increase in hospital-owned practices.
Overall, there's a steady trend toward increased employment and hospital ownership of practices in every region of the nation, with some differences in the types of acquisitions driving regional consolidation.
THE LARGER TREND
An annual Merrit Hawkins report that tracks physician recruiting trends found that in 2020 COVID-19 had significantly altered the job market for physicians, leading to the temporary reduction of both starting salaries and practice options for doctors.
The soft job market for physicians is a result of the devastating economic impact that COVID-19 has had on the healthcare industry. The American Hospital Association reported that hospitals and health systems lost $200 billion in the first quarter of 2020. The Medical Group Management Association indicates that physician-practice revenue has declined by an average of 55%.
Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com
