Friday, February 14, 2014

Doctors' turn to employment could lower future costs

Today’s Managing Health  Care Costs Number

is 64%

Elisabeth Rosenthal has an article in today’s New York Times about the movement of physicians into salaried positions, largely as employees of hospitals.   One recruiting firm said that their positions that were hospital employees went up from 11% (2004) to 64% (2013). 

The move has been impressive – in 2010 the President of the American College of Cardiology said that half the invasive cardiologists had sold their practices to hospitals in the previous year.     I reviewed many of the reasons for this transition in early 2012.  

The short term economic implication of physicians moving into salaried positions at hospitals is that aggregate costs will go up –since these physicians will now refer to ancillary diagnostic testing that is housed at the hospital. This often leads to much higher facility charges – see here for an especially egregious example from the Boston metro area.

I’m more hopeful that the move of physicians into largely salaried positions associated with integrated delivery networks will eventually lead to lower aggregate costs.   Reasons for my optimism:

·      Communities of physicians will be on a single EMR. This will allow better coordination and delivery of real-time decision support which will lead to less waste.  Physicians in private practice were less likely to make this investment
·      Physician self-referral leads to overutilization and mis-utilization.  Physicians are less likely to order MRIs when they don’t themselves profit from each incremental study, and the Stark laws prevent hospitals from compensating their employed physicians based on referrals.
·      Salaried physicians tend to have lower productivity – and lower productivity should mean lower utilization and ultimately lower costs – although this could lead to some long waits and apparent shortages along the way.

·       Large delivery systems have the numbers to make accountable care organizations or capitation feasible – and paying for value rather than for volume will lead to lower aggregate costs (unless the population payment is simply too large).  


Nathan Punwani said...

Riiiiiiiight, physician employment by hospitals leads to lower health care costs [sarcasm]

Jeff Levin-Scherz said...

I think that hospital employment leads to higher short term costs through facility fees and increased contractual leverage. It can lead to lower future costs though

Nathan Punwani said...

In the long run, we are all dead anyway. Most of these health systems base physician "salaries" on the number of RVUs they churn. Simply killing private practice fails to address the problem of high unit prices and risks making it worse.