How Employing Physicians Messes with the Market, Your Health and Your Doctor

I don’t mind being wrong, but I love being right. Five years ago, in this monthly column, I said we should beware vertically integrated employed physicians. A vertically integrated employed physician will charge higher fees for services, order more diagnostic tests and make more specialist referrals than your typical independent physician.

Vertically integrated employed physicians leverage their market power to artificially inflate their prices and upsell patients other services they may not need. It’s exactly what businesses in all other industries do. We shouldn’t be surprised that it happens in healthcare. But it does routinely.

Two new reports back up my warning.

The first is a report released last week by Trilliant Health, the Brentwood, Tenn.-based healthcare market research and consulting firm. Crunching data from its own National Provider Directory, national all-payer claims database and national health plan price transparency dataset, Trilliant researchers figured out:

• 59.4% of all practicing physicians are employed by hospitals or health systems.
• Physician employment varies by region. (It was the highest in the Midwest at 67.2% and the lowest in the South at 52.4%.)
• Physician employment varies by state. (It was the highest in North Dakota at 83.0% and the lowest in Nevada at 31.3%.)
• Physician employment varies by medical specialty. (It was the highest for hematology and oncology at 78.8% and the lowest for podiatry at 26.9%.)
• 58% of primary care physicians are employed by hospitals or health systems.

And when the researchers did a deep dive into one market, the core-based statistical area in and around Chicago, employed physicians’ evaluation and management (E/M) rate was an average of more than 60% higher than the E/M rate charged by independent physicians. That’s for your basic office visit. In dollars, it was $239 compared with $147 this year, according to the report.

“A patient who sees an employed physician for an identical visit can face higher out-of-pocket cost than a patient who sees an independent physician,” Trilliant researchers said.

Further: “Employment can direct subsequent imaging, laboratory and procedural volume toward system-owned facilities, where the same services are frequently reimbursed at higher hospital outpatient rates.”

What Trilliant said. Employment equals market leverage equals higher charges and greater utilization.

All those economic benefits, though, come at a non-economic price, according to the second report.

The second report is from the Physicians Advocacy Institute (PAI), which advocates for the independence of doctors to practice as they see fit. The report is entitled Corporate Ownership’s Impact on Physicians’ Practice Experience. It’s based on a survey of 1,003 employed doctors.

Here are some of the results, which the PAI released in July:

• 75% said they “frequently” or “occasionally” feel pressure from hospitals and health systems to prioritize patient volume over optimal care.
• 59% said they “very frequently,” “frequently” or “occasionally” feel pressure from hospitals and health systems to keep patients within their network over optimal care.
• 73% said their patients are “very frequently,” “frequently” or “occasionally” unable to get timely appointments for care within their network.
• 40% said they have “no” or “minimal” input into practice management decisions.
• 83% said they experience “occasional,” “regular” or “persistent” symptoms of burnout.

Consumers pay the price in terms of quality and service, and physicians pay the price in terms of practice autonomy and work experience. With respect to John Fogerty, working for the man every night and day is a bitch. Whatever happened to corporate practice of medicine laws?

If we want to build better healthcare, we need to reconsider the vertically integrated employed physician business model. It benefits owners, not customers. Maybe that’s the point.