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Physician Concentration

By March 20, 2018Commentary

The number of independently practicing physicians shrinks every year and most are becoming employed by health systems dominated by hospitals.  This has implications both for physician satisfaction with their jobs, and the effect that has on quality of patient care, and on costs, since the health systems generally substantially jack-up the prices for physician services.  The Physician Advocacy Institute has released a brief on these trends.  (PAI Study)   This study was an update of one done last year by the group on the effect of physician practice ownership and doctor employment by hospitals.  The results are a little scary.  Just from July 2015 to July 2016, hospitals acquired 5000 physician practices and 14,000 more doctors were employed by hospitals.  The percentage of all doctors employed by hospitals continues to rise rapidly and this is occurring in all geographic regions of the country.  In the two years ending in July 2016, 40,000 physicians shifted to employment status.  Hospitals now own over 70,000 physician practices, or nearly 30% of all of them.  The reasons doctors do this are fairly obvious.  Shifting administrative and regulatory burdens to someone else and removing volatility in compensations are two primary factors.  But once in the bureaucracy of these large systems, doctors often feel less in control of and less satisfied with their work.    The reasons for hospitals to do this are even more obvious.  They often immediately start billing services as hospital outpatient ones, which typically are reimbursed at a higher rate.  It may cost as much as 20% to 30% more for the same service.   And the hospitals push for referrals from the newly employed doctors to other services owned by the hospital system.  All of which raises costs for payers and patients.  Each practice addition creates more market power for the health systems and allows them to raise prices even further.

Just further evidence of the need to address this now and even undue some of what has happened, but policymakers and regulators are just ignoring it.  Don’t want to upset those contributors.

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