Why many doctors are leaving private practice

Like members of many other professions, medical doctors periodically take part in surveys that keep track of how they carry out their work. Recent surveys have uncovered an interesting trend: more and more doctors no longer operate a “private practice.” Instead, these doctors have chosen to enter into employment arrangements with hospitals and health systems. By 2018, the percentage of practicing physicians who owned their practices dropped for the first time below that of practicing physicians who were employed (45.9% to 47.4%) (“Employed physicians now exceed those who own their practices,” American Medical Association, May 10, 2019)

The pandemic has only exacerbated this trend. “In 2021, 73.9% of physicians were hospital- or corporate-employed, up from 69.3% at the start of 2021, 64.5% at the start of 2020, and 62.2% at the start of 2019, according to the nonprofit Physicians Advocacy Institute (PAI) and consulting firm Avalere.” (“Docs Flocked to Join Hospitals and Other Employers in Pandemic Era,” Med Page Today, April 21, 2022) Why is this occurring? Will it affect your health care?

For one thing, there are advantages to larger size. In recent decades many independent small-city banks have been acquired by bigger banks because large banks can provide a greater range of services to their customers. Hospitals also have the kind of technological, administrative, and financial infrastructure that is simply out-of-reach for a small medical practice. Doctors may well decide that they can take advantage of that infrastructure to do the kind of management activities that threaten to interfere with the direct care of patients.

For an example, both the HITECH Act of 2009 (which provided both incentives and penalties for physicians to adopt electronic records) and the value-based-payment schemes created when the Affordable Care Act was implemented markedly increased documentation requirements. In essence, doctors’ payments are now based on measures of the quality of patient care, rather than the quantity of patients seen, necessitating significantly more documentation from physicians. Because hospitals have people trained to comply with these requirements, many doctors overwhelmed by the excess paperwork chose hospital employment. (Harvard Business Review, “Do Most Hospitals Benefit from Directly Employing Physicians?” May 29 2118.)

There are also financial reasons. For some common procedures, hospitals are able to pay physicians more than they are allowed to earn from delivering those same procedures in their own private practice. This higher payment occurs because Medicare rules allow the hospital to charge an extra “Part B technical fee” when those services are offered in a HOPD (Hospital’s Outpatient Department) setting. So the physician receives more income from performing in an HOPD than she would for doing the same procedure in her own office.

It is also true that larger health care delivery entities, such as hospitals, have greater ability to negotiate higher payments from insurance companies. Once more, smaller entities, such as small private practices, get paid less for the same services. (“Merger hastens end of independent doctor,” The Providence Journal, Feb. 4, 2022.)

Does this trend from private practice to employment at hospitals or other large healthcare entities affect the quality of our healthcare? Perhaps not much. Regardless of where they are employed, most doctors are committed to providing the best possible healthcare for their patients.

But there are some dangers. If the way Medicare reimburses doctors will lead doctors and patients to use the more expensive services at HOPDs for procedures rather than having them done in the doctor’s office (sometimes for thousands of dollars less), either Medicare or the patient or both will have to spend more money to sustain the American medical system.

More concerning, as related by some recently retired doctors, is the possibility that hospital administrators may intrude on the way physicians practice. Physicians in private practice already resent the time spent appealing to insurance companies to make the case that a patient needs a particular test or requires a particular medication. Will hospital administrators raise the same kind of time-demanding challenges to doctors under their employ? Will physicians employed by a hospital be strongly encouraged to recommend that patients get their lab tests at that hospital rather than at a less expensive laboratory? Will they be pressured to treat more patients in the same amount of time? Be discouraged to treat the uninsured? As one doctor recently put it, “When physicians become employees, they must obey corporate executives with regard to the treatments they prescribe and what they are allowed to communicate to patients.” (Merger Hastens End of Independent Doctor,” cited above)

When most of us think about our health care, we think first about our “personal” doctor, the one we call when we run a fever or develop intestinal pain. Anything that threatens to undermine the quality of our access to that personal doctor is worthy of our attention.

Baird Tipson formerly served as provost at Gettysburg College and as president of Washington College. He is a member of Democracy for America’s Healthcare Task Force.

This post originally appeared in the Gettysburg Times.