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Practice Notes

The future of physician practice: Employed, independent, or something unexpected?

Lea Halim

Will the rapid pace of physician employment soon make private practice a thing of the past? Not according to the American Medical Association (AMA).

Their recent report shows that, as of 2012, 60% of physicians worked in physician-owned practices. Only 23% were in practices that are wholly or partially owned by a hospital, and 5.6% were direct hospital employees. (Another 6.5% worked for non-profit foundations, some of which may be affiliated with hospitals).

Merritt Hawkins, on the other hand, predicted in late 2012 that over 75% of newly hired physicians would be hospital employees by 2014.

Do the reports contradict one another? Not necessarily.



Why the hospital employment trend is difficult to predict

Considered together, the studies suggest different trajectories for two distinct physician populations.

Established physicians

Hospital employment is likely to remain lower among this group. According to the AMA, 81% of physicians who own their own practices are over age 40. A different survey from April 2013 indicates that 60% of physician practice owners are not interested in selling their practices.

Newly practicing physicians

Merritt Hawkins’ study focuses on "newly hired" physicians, most of whom are young and recently graduated from residency programs. Among this group, interest in hospital employment is higher.

The choices of younger physicians are likely to have a long-term impact. However, the physician population is disproportionately older—and becoming more so.

About 42% of the one million doctors in the U.S. are older than 55, up from 35% in 2006 (and only 28% of the AMA's respondents are over 55, so this may be an underestimate). This age distribution is likely to moderate physician interest in hospital employment overall and adds uncertainty to future employment levels.

It is also critical to consider that hospital employment varies significantly by region. National studies and projections may not accurately reflect individual market dynamics.



Whether hospital-employed or independent, larger physician groups assuming center stage

Perhaps a more definite trend is physician aggregation into larger groups. A recent study from Health Affairs found that, among physicians filing Medicare claims, 35.6% worked in groups of more than 50 in 2011, up from 30.9% in 2009.

These larger groups can be both hospital-owned and independent. The AMA report confirms the pattern for physicians in independent practice: 6.5% work in groups of over 50 physicians, compared to 4.6% in 2008.

With physician-owned practices growing larger, physicians will likely have more opportunities to work in such a practice without taking a stake in ownership. Hospitals and physician-owned groups may thus increasingly compete for younger physicians seeking employment opportunities (as well as those still in solo and small practice).



What this means for both types of groups

As a result, both hospital-owned and independent medical groups will need to examine and elevate their value proposition as physician employers. In particular, independent medical groups must attract PCPs, who have lower rates of practice ownership and are most likely to be employed by hospitals.

While cultural fit may drive physician preference, physicians will also consider two financial factors:

  • Hospital-owned groups are often able to offer physicians higher compensation and other support. However, this may not be financially sustainable long-term.

  • Independent physician groups, whose strategy is not tied to supporting inpatient demand, may have more flexibility in meeting health care purchasers' demands for higher care efficiency and value. However, their smaller size and limited capital may pose a challenge to these growth prospects.

Learn More

For further information on trends in physician employment, retirement and succession planning, and more, check out our recent posts in Practice Notes.

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