If you’re a regular reader of this blog, you know I’ve been talking lately about the moral crisis in healthcare affecting physicians and nurses. (Doctors Facing a Moral Crisis – Parts I-IV). This is being experienced by those healthcare providers who work for large hospitals or corporations. Today, we’re going to talk about the driving influences behind the trend for these healthcare providers to leave private practice and join these institutions.
While the trend in medicine has been a slow but steady increase in the number of physicians employed by hospitals and large corporations, the numbers have increased dramatically in the last few years. In 2019 and 2020, 48,400 additional physicians left independent practice and became employees of hospitals or other corporate entities. Nearly half that growth occurred after the onset of Covid-19, according to HealthcareFinanceNews.com.
The result of this movement of physicians is nearly 70% of U.S. physicians were employed by hospital systems or other corporate entities, such as private equity firms and insurers, leaving just three out of 10 of the nation’s physicians practicing in independent medical practices. This data is from early 2021, and others, such as Becker’s Hospital Review, peg the number in private practice at only 26% as of July, 2022.
Hospitals and other corporate entities acquired 20,900 additional physician practices over the two-year period, resulting in a 25% increase in corporate-owned practices. Meanwhile, 18,600 additional physicians left independent practice to become hospital employees with 11,400 from that shift making the move after the onset of Covid-19. In addition, hospitals acquired 3,200 additional physician practices over the two-year period, resulting in an 8% increase in hospital-owned practices.
Corporate entities acquired 17,700 additional physician practices over the two-year period, resulting in a 32% increase in corporate-owned practices, and 29,800 additional physicians left independent practice and became employees of corporate entities; 11,300 of those did so after the onset of Covid-19.
Why is this happening?
The private practice of medicine is getting tougher. When I started my career in private practice in 1984, there were no real hurdles to opening your own practice. Sure, I needed to learn the business of medicine, which is not taught in medical school, but I was young and eager to make a name for myself and I wanted to make my own decisions. I understood there would be some lean years until I established my reputation in the community, but I was sure to make more money than I had as a resident physician and I was willing to work hard and wait for better paydays ahead.
Managed care medicine was just beginning in 1984 and there were no real barriers to being on every healthcare plan that was offered in my community. People still had the freedom to go to any doctor they chose by reputation or word-of-mouth from their friends and neighbors. A young doctor in a fast-growing community like Orlando still had a good chance to grow his practice.
All that has changed today. First of all, most recent residency graduates aren’t looking to start their own practice. Today’s generation of new doctors want guaranteed salaries, fewer working hours and more weekends free, good benefits, and someone else to run the business of medicine. They are less interested in building their own business or reputation; they just want to practice medicine for a predictable number of hours a week and then have plenty of free time for themselves away from medicine.
Second, the growth of managed-care medicine has made all doctors dependent on the insurance contracts they need to stay in business. You can be a great doctor, but no one will be able to come to you if you’re not on their healthcare plan. The best contracts are snapped up by the most sophisticated medical practices with their own business managers who are experienced in negotiating these contracts. Young doctors starting out on their own are ill-prepared to negotiate contracts and even less equipped with the leverage needed to get these contracts. In short, they are left out in the cold, accepting the worst contracts available. For this reason, most new graduates gravitate to large private practices or succumb to hospital or corporate entities.
All this got worse when Covid-19 hit the medical profession. Most private physician practices suffered devastating financial losses as elective surgeries were cancelled, patients avoided crowded doctors’ waiting rooms, and generally avoided hospitals except for treatment of Covid-19. I personally was working part-time to help a friend expand his growing hand surgery practice until the pandemic hit and he had to lay off many of his employees including me as the practice suffered 50% or greater losses in revenues.
In response to this added economic uncertainty, many physicians have left private practice seeking the economic stability of being hospital or corporate entity employees. Unfortunately for many, this has led to the moral crisis my recent series discussed, which is plaguing our healthcare system and its providers. In my last post, I recommended more physicians return to the private practice of medicine, but this will not be easy.
The best course will be for physicians to form more large private groups, giving them the business tools for success, while preserving their freedom to make their own medical decisions. The quality of healthcare in the future depends on it.
