In the not-so-distant past medical oncology care moved almost exclusively to the ambulatory setting, where medical oncologists came to have the upper hand in cancer economics. The surgeons gladly referred their patients to medical oncologists for postoperative therapy and radiotherapists were grateful for the referrals from them. In addition to the lucrative chemotherapy business, some practices were eligible for the 340b reimbursement advantage, making chemotherapy even more lucrative. Then over the years, many practices installed clinical labs, imaging capability, and even radiation therapy services, which all have high-profit margins.
Two federal actions helped change that environment dramatically: the Medicare Modernization Act by the George W. Bush administration and the Accountable Care Act by the Obama administration. These actions helped create a large movement of private practice doctors to employed positions in hospitals or large multispecialty groups. This has occurred with surprising speed over the past few years.
There are many reasons for oncologists to sell their practices to a hospital or simply join a larger practice.
Here are a few:
- Some oncology practices have been unable to stay afloat financially because of the Medicare Modernization Act, which took some reimbursement from oncologists to provide the funding for Medicare Part D pharmaceutical support. The MMA restricted what they could charge the patients for chemotherapy, which had been the dominant source of income.
- Fear that the Accountable Care Act would have a negative effect on the financial security of their practices and prompted searches for a safe harbor.
- The development of Accountable Care Organizations by hospitals raises concerns that the private practice would be forced into a bundled payment system in which they would have little leverage.
- Some are nearing retirement and want to avoid the hassles of managing the practice and trying to navigate through a still foggy health care environment.
- The government and the private sector began taking very seriously the dramatically greater costs of care in the U.S. compared with countries that often have better health outcomes with half or three-quarters of what we spend. The scramble to find ways to control costs has been furious, and doctors are often blamed for a large part of the problem; thus, their income can become targets for cost cutting.
This movement has been going on long enough to make it possible to assess the wisdom of the moves and the degree of satisfaction after making the moves. Most of the polling is anecdotal rather than systematic so far. In my consulting work I have the opportunity to speak with physicians, mainly oncologists, and I try to find out if they are happy with their moves into employment. So what I list below is not meant to represent the collective national response, but a small sample from around the country.
A majority of private practice oncologists I spoke with (and some non-oncologists, as well) are very wary of being employed by a hospital; others are happy to do so. Some of the reasons they give are:
- I went into private practice because I wanted the freedom to practice as I wish and not have a non-physician administrator tell me how to practice.
- I wanted to have my own business with some physician partners. I have been happy with this arrangement for years and don't want to change.
- I have heard some horror stories of guys selling their practice to a hospital and being bullied to make the RVU targets set by the hospital. Or, they guaranteed their current private practice income for three years but after that they were pressed to see more patients and work much harder.
- I would rather retire than be employed by a hospital. If my practice can't make it financially, I am old enough to just quit.
- I don't want to sell my practice, because I would be required to sign a non-compete clause for two or three years so I won't be able to leave the hospital and make a living in my community if it doesn't work out.
- I sold (or left) my practice to work here at St. Elsewhere because they have great plans for the future that I can participate in and benefit from. Cancer care is a team sport and the closer together we work the better for the patient and the quality of care.
- I am in a practice that takes more time with each patient; even though we are sacrificing some income, we believe it is good for the patients and good for the docs. We learn more about our patients and they appreciate it. I don't think we could do that as employees of a hospital, and that, in our eyes, would degrade the quality of our care.
I have also spoken to many hospital administrators. Of course, they want to employ doctors because participation in an Accountable Care Organization requires bundled payments keyed to the current regional average, so the physicians need to cooperate in shaving costs. If they do so, the ACO group gets more money. Employed doctors, they believe, are easier to work with than those in independent private practice.
I can summarize the attitude of hospital administrators who spoke to me:
- We must be very careful of the terms of employment. In response to the Clinton health plan in the early 1990s there was a rush to secure primary care doctors' referrals to hospitals, so they went on a binge of buying practices. What often happened was that doctors slowed down or, basically, retired in situ, collecting their salaries and coasting along. This was a catastrophe for many health systems, and we are not going to let that happen here.
- We are trying to prepare for ObamaCare and ACOs. To succeed, we need a team effort. We have the capital to buy state-of-the-art equipment and build excellent facilities, and in exchange, we need predictable, long-term physician support and participation. Historically, doctors could hold a gun to our heads by threatening to move their inpatient work to a competitor hospital if they didn't receive privileged treatment. In this new era, we need a reasonable degree of loyalty and commitment from the doctors.
- Doctors can be a pain in the butt. Some believe that we don't know anything, that they should be treated as gods, and that we should be eternally grateful to have them practice in our facility.
- We need the doctors or we cannot function. We can control costs more easily and be more competitive if they are an integral part of the hospital team.
So there you have it—the pros and cons of becoming an employed oncologist and some basic attitudes of doctors and hospitals. We have decades of experience with employed physicians in the academic arena and in organizations like Kaiser-Permanente and Geisinger Health. There are many satisfied oncologists in those systems. They may earn less than some private practices, but seem to do well professionally and personally.
But the cultures of the employer and employee have a profound influence on the likelihood of a successful marriage of the two. Some docs will never be happy in an employed situation, so they shouldn't do it. Some docs work better in a more structured environment and join a Kaiser group because of its culture.
I think the key to success is the degree of trust between the parties. If trust is shaky, it probably won't work. But if there is trust and goodwill, and a willingness to modify some aspects of the practice of oncology by both doctors and hospitals to adapt to ACOs, it can work quite well. Only the two parties can decide that.