Physician Employment: It Will Work This Time

Zusman, Edie E

doi: 10.1227/01.neu.0000393593.23390.e1
Science Times

Hospital and health system employment of primary care physicians as a response to capitation in the 1980s and 1990s turned out to be an experiment fraught with flaws. Today, facing a new set of challenges, physicians—this time including specialists—are again accepting employment in record numbers.

Neurosurgery may benefit from this new model of integration, but will not be immune from its potential pitfalls. Seeking the security and simplicity of hospital employment, neurosurgeons must still be careful not to enter into employee relationships or adopt behaviors that hamper productivity, creativity, innovation, and true physician leadership.

In “Physician Employment: How It Can Work This Time,” writer Susan Birk recounts the lessons learned from the hospital perspective about physician employment in the past. This article published in Healthcare Executive,1 clearly describes strategies for successful employment of physicians now and in the future.

Health systems have learned from the errors made in the earlier wave of physician employment—relative overpayment for medical practices, excessive compensation structures and poorly aligned organizations cost hospitals, which resulted in the dissolution of many physician employment relationships, Birk explains.

Today's integration of physicians into health systems and hospitals is driven by other factors, according to Birk, including changes in the Medicare reimbursement fee schedule, cuts in ancillary services reimbursements, higher practice costs, physician fatigue from the bureaucracy of self-employment and the need for job security.

For neurosurgeons and other specialists, an additional barrier to self-employment is the significant cost and time burden of establishing and operating the electronic health record system on top of high malpractice insurance costs, the complexities of billing, coding as well as HIPAA compliance—with the risk of criminalization when errors occur.

Health reform, which has created a mandate for all providers to improve both the quality and efficiency of health care, is also driving more integration of physicians and hospitals. The July 2008, Managed Care Magazine 2 quotes Medical Group Management Association (MGMA) leadership: “The big trend right now is of a fundamental restructuring of how physicians function in the health-care system.”

Even the Wall Street Journal 3 recently acknowledged the surge in physician employment, citing a large MGMA survey, which found that “the share of responding practices that were hospital-owned in 2009 hit 55 percent, up from 50 percent in 2008 and around 30 percent five years earlier.”

Hospitals cite financial advantages to integration. An article in Healthcare Financial Management 4 cites employment as a way to increase access and reduce competition from other hospitals and physicians. One hospital industry survey, for example, estimated average inpatient and outpatient revenue at upwards of $2 million for internists and general surgeons, $2.7 million for invasive cardiologists and still more for neurosurgeons. Hospitals also can save money by hiring physicians on staff, which in time may eliminate the need to pay high emergency department call fees, as they often do for specialists.

And while integration poses some threat to health plans because of increased hospital-physician bargaining power, many like the fact that consolidations mean fewer contracts to manage and the possibility of more coordinated patient care, according to Lola Butcher, in the article in Managed Care Magazine.2

Physicians, for their part, recognize the benefits when doctors and hospitals are more closely aligned in caring for patients, as they are at Kaiser Permanente and other capitated systems. Traditionally there has been a great opportunity to work together to keep patients healthy with an emphasis on preventive care. The electronic health record can be useful in providing a comprehensive health history that can be shared across the care spectrum, potentially reducing duplication and unnecessary tests. Integration also allows better utilization of best practices and process improvements.

What is not known is how physicians can secure or maintain financial stability as employees who may over time be pressured to accept less pay for more work.

Beyond issues of compensation, physicians are concerned about loss of autonomy and the potential plateau effect it may have on innovation and progress for specialties like neurosurgery.

Organizational behavior researchers have shown that salary, surprisingly, is not the most important factor in job satisfaction, for physicians or any professional.5 Several of the top US neurosurgery programs don't pay the top salaries to their starting faculty, and don't have to—they offer great opportunities for building an academic portfolio and developing professional relationships. Community physicians, for their part, have enjoyed a tradition of being local leaders, and provide care for the underinsured for the greater good of the community.

The challenge then, and the mandate, is to infuse those core values into the new relationships between physicians and hospitals. Successful physician integration requires creation of a culture in which both physicians and hospital staff have a sense of common purpose—not just an economic relationship, explains J. Patrick Dyson, a healthcare executive quoted by Birk.

Successful integration requires opportunities for self-management of physicians, explains Nathan S. Kaufman, of Kaufman Strategic Advisors, LLC in the Birk article. “The physicians have to know that they are having input and being heard,” he says. “This does not happen without physician leadership that shares a common strategic vision with the organization, can communicate that vision to the medical staff and helps them make the broader cultural transition from complete independence and risk.”

These new models of integration are not without risk. Birk lists many common pitfalls, including a decrease in productivity and a growth in expenses as physicians lose incentive to control costs. For neurosurgeons, employment relationships should be carefully designed to avoid the potential to stifle innovation and clinical program development, which are key to the long-term success of the profession—and in the best interests of patients.

With the current economic and political pressures, it is unlikely that physician employment will fall out of favor as it did in decades past. For specialists, including neurosurgeons, this means it is essential that we enter this new model of integration not solely as employees but as leaders and advisors—where our own values are congruent with the health system in which we work.

Edie E. Zusman

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1. Birk, S. Physician Employment: How It Can Work This Time. Healthcare Executive. 2010; July/August: 8-17.
2. Butcher, L. Many Changes in Store as Physicians Become Employees. Managed Care Magazine. 2008; July.
3. Mathews, AW. When the Doctor Has a Boss: More Physicians Are Going to Work for Hospitals Rather Than Hanging a Shingle. Wall Street Journal. 2010; November 8.
4. Kennedy D, Clay C, Kolb Collier D. Financial Implications of Moving to a Physician Employment Model. Healthcare Financial Management. 2009; April:74-80.
5. Herzberg F. One More Time: How Do You Motivate Employees? Harvard Business Review. 2003; January/February:53-62.
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