Aug 18, 2011

More Physicians Now Employed - Are Texas-Style Protections Needed Elsewhere?

“In a quest to gain market share, hospital employment of physicians has accelerated in recent years to shore up referral bases and capture admissions,” so says the Center for Studying Health System Change in its latest issue brief: "Rising Hospital Employment of Physicians: Better Quality, Higher Costs?" The center based its document on interviews with physicians, hospital leaders, and health policy experts in 10 cities (none in Texas).

Given all the attention the Texas Legislature paid this year to providing protections for employed physicians, I was curious to see how the issue brief examined the question of physicians’ clinical autonomy. Some excerpts:
While the potential of hospital-employed physicians to improve quality and efficiency through better clinical integration across care settings has received much attention, from the hospital perspective, physician employment typically is one of many strategies to gain market share by increasing admissions, diagnostic testing and outpatient services. (Emphasis added.)

While initial hospital moves to employ physicians generally focused on hiring specialists to build targeted service lines, such as cardiac or cancer care, hospitals increasingly are hiring primary care physicians to capture referrals for their employed specialists. “There is a mad grab to hire primary care physicians,” according to a Greenville market observer, capturing the sentiment of many respondents across the markets.

Physicians’ reasons for seeking employment, not just by hospitals but also by other organizations, include stagnant reimbursement rates in the face of rising costs of private practice and a desire for a better work-life balance. Hospitals are hiring both primary care and specialist physicians. Primary care physicians (PCPs) in particular face challenges in remaining in independent practice because flat reimbursement rates and growing overhead costs are more of a challenge for their practices, which typically cannot generate significant revenue through procedures and ancillary services. And, even among some specialists, there is a notable change in attitude toward employment because of reimbursement issues.
Hospitals filed dozens of bills in the 2011 Texas Legislature to employ physicians without protecting independent medical judgment. TMA adamantly opposed these bills because corporations — not physicians — would be in charge of critical patient-care decisions.

TMA worked to transform these bills into ones that protect patients and their physicians’ ability to make medical decisions free from interference by a hospital administrator or corporate officer. At the same, we were able to preserve Texas’ ban on the corporate practice of medicine with several carefully controlled expansions for physician employment. These included strong protections for clinical autonomy and independent medical judgment. Texas is the first state in country to take this critical step.

The new laws protect physicians – and their patients – in three types of employment situations:
  • In rural hospitals hospitals – generally the smallest hospitals in the smallest communities which traditionally have difficulty in attracting physicians, particularly when payment rates are stagnant.
  • In large, urban health care districts - county tax-supported facilities with a statutory mission of providing indigent care; generally these are teaching hospitals.
  • In nonprofit health care corporations, commonly referred to in Texas as 501(a) corporations - most of which have been formed by urban/suburban hospitals and hospital systems and all of which are required to have a physician board of directors.
Our bottom line is this: Employment WITHOUT protections is the corporate practice of medicine. Employment WITH protections is part of the practice of medicine, and that’s what we stand for.

Because of Texas’ longstanding ban on the corporate practice of medicine, far fewer physicians here are employed, as compared to the rest of the country. I thought it would be insightful, however, to compare the Center for Studying Health System Change’s data with some groundbreaking research the Texas Medical Association conducted on the issue last year.

The center's look at employed physicians in other parts of the country found this:
For physicians just beginning practice, hospital employment also is attractive because of the perceived financial security and work-life balance. Data on medical residents’ first choice for employment support this—in 2003, 4 percent said they would be “most open” to hospital employment, but by 2008, the proportion had jumped to about 22 percent.
TMA's survey found a continuing decline in the number of new physicians who start practice as an owner of a solo or group practice since the early 1980s. But, we reported, that has not resulted in a commensurate increase in the number of physicians who are currently employed, because the majority of physicians do not stay permanently in those employment situations.


Employed or contracted physicians are primarily employed by another physician or a physician group practice. Few respondents are employed by a hospital or a hospital-owned non-profit health center, less than 6%.
When physicians start medical practice, they choose their practice setting with primary interest in clinical autonomy and geographic location.  The majority of physicians report the following were “very” important factors in their decision to enter their starting practice environment:
  • Personal control of clinical decisions (74%),
  • Geographic location, including proximity to home and family (61%),
  • Opportunities for practice growth (58%),
  • And personal control of practice decisions (54%).
While the youngest physicians report increasing importance of work-life balance and guaranteed income, neither of those factors is given greater importance than personal control of clinical decisions. 

Physician report the most desirable practice type for most new physicians is employment in an established physician practice with a subsequent option to buy in to ownership according to 47% of respondents. Employment by a hospital was rated as least desirable by 46% of respondents, followed closely by solo practice at 41%.

A final excerpt from the Center for Studying Health System Change’s report:
In essence, physician employment is attractive to both hospitals and physicians under volume-driven fee for service, and the growing employment trend does not guarantee improved clinical integration will occur. The recent acceleration in hospital employment of physicians runs the risk of raising costs and not improving quality of care unless broader payment reform reduces incentives to increase volume and creates incentives for providers to change care delivery to achieve real efficiencies and higher quality.

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