Hospitals Gobble Up More Doctors

The race among hospitals to hire local physicians is heating up, even though the consequences for the cost and quality of health care are still unclear.

Photo by Keith Williamson via Flickr

The trend isn’t new, but hospitals in metropolitan areas across the country are quickening their pace, “driven largely by hospitals’ quest to increase market share and revenue,” according a study released today by the Center for Studying Health System Change,  a nonprofit think tank in Washington D.C.

Hospitals argue that employing more physicians helps them improve the quality of care they deliver through better coordination of care, and even lowering costs by avoiding repeat tests and procedures. It’s also part of their efforts to prepare for expected Medicare payment reforms initiated as part of the health overhaul, including accountable care organizations and bundled-payment models.

But the trend could also increase costs, the study finds.  Hospitals usually offer their doctors productivity-based compensation, which can mean more testing and procedures. Physicians interviewed as part of the study “noted that employed physicians face pressure from hospitals to order more expensive testing alternatives.”

The rates for procedures performed in hospital settings can also be higher. Hospitals tend to have more clout with insurers, particularly those that employ large groups of doctors and are able to negotiate higher payment rates. In addition, hospitals can charge facility fees even for outpatient services and locations. That can result in higher costs both for insurers and for patients, who may end up with higher deductible and coinsurance costs. Medicare also pays a substantially higher rate for visits to offices that are part of a hospital, even if they’re not located on a hospital campus.

In addition, coordinating care is difficult, even within a single hospital system, and “does not occur automatically once physicians become employees,” the study reports

On the other hand, the study adds that one potential benefit of physician-hospital alignment is that it may allow better access for low-income patients to employed specialists who would might not otherwise accept Medicaid.

In 2009, half of new doctors were hired by hospitals, according to the Medical Group Management Association, a professional organization for physician practices. And a 2009 report by the American Medical Association found that one in six doctors works for a hospital.