Physician employment by hospitals expected to accelerate

The changing healthcare landscape and the increased need for hospital-physician alignment will lead to an acceleration of physicians leaving private practice in favor of hospital-based employment according to two recent market reports.

While physician employment in hospitals gained only 1 percent in the period from 2000-2007 according to data from the American Medical Association, a new report from Deloitte Consulting  “Physician/hospital alignment: Employment agreements in the reform era” suggest that changes brought about by healthcare reform will dramatically alter that dynamic.

“This statistic is dated and not reflective of current market trends,” the report noted. “Given the speed at which economic factors have influenced the health care industry, we expect future (data) will tell a different story. Insight gained through client experience and other recent studies indicate a more significant increase in hospital employment relationships with physicians.”

[See also: Considering key factors for hospital-physician alignment; Hospitals lure physicians from private practice]

Specifically, Deloitte says employment searches by physicians are skewing toward hospitals and away from group practice settings. In 2009 hospitals comprised 45 percent of the medical setting for searches, compared to just 23 percent in 2006. Likewise group practice search assignments dropped from 40 percent of total searches in 2006 to 29 percent in 2009.

Further, a study by the Society for Healthcare Strategy and Market Development shows that healthcare executives believe that the percentage of physicians on active staff at hospitals is expected to increase from 10 percent to 25 percent by 2013.

These projections are supported by a recent brief by consulting firm Accenture, which shows the number of “truly independent” doctors has been in steady decline for more than a decade.

“Community-based physicians—those previously in private groups—are increasingly selling their practices or seeking employment directly with healthcare systems, and hospitals are aggressively acquiring physicians to remain competitive in the industry,” the brief noted.

Since 2000 independent physicians’ ranks have been declining by 2 percent annually and that rate is expected to accelerate to 5 percent every year by 2013. The trend away from independent practice to employment in hospitals is being driven by a number of factors including:

• Relief from administrative responsibilities
• Greater access to leading-edge healthcare IT tools, facilities and equipment
• A more manageable workweek (typically sought by recent trainees)
• Stability in a business environment made uncertain by developments such as payment reforms.

But some of the employment migration is being spurred by more aggressive approaches being taken by hospitals in anticipation of impeding doctor shortages in order to lock up expertise in areas such as oncology, orthopedics and radiology.

“Over the next 15 years the United States is projected to be short 124,000 to 159,000 physicians,” noted the Deloitte report. “Much of the shortage is focused on specialty care, but as the tide turns towards primary care and preventative medicine with low supply and growing demand, the shortage will be exacerbated.”

The result is that hospitals are needing to revisit a number of employment issues focused on physicians including competitive compensation packages, terms of employment and termination, performance expectations, restrictions in moonlighting, and malpractice insurance, among others.