Hospital employment of physicians continues to rise rapidly around the country, but the trend could drive up costs at least in the short term, according to a report released this month.
Physicians who are employed by hospitals are often paid based on their productivity, which offers them an incentive to increase the volume of services. And in some cases, physicians are under pressure from their hospitals to order more expensive tests, according to the report.
The researchers from the Center for Studying Health System Change based their analysis on interviews with nearly 550 physicians, hospital executives, health plan officials, and others, in 12 nationally representative metropolitan communities (Findings From HSC 2011 August [Issue Brief No. 13]).
The communities are Boston; Cleveland; Greenville, S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.; Miami; northern New Jersey, Orange County, Calif.; Phoenix; Seattle; and Syracuse, N.Y.
In one area, at least two cardiologists said they declined job offers from a local hospital because they believed the pressure to drive up volume would be stronger there than in their independent cardiology practice, according to the report.
“The acceleration in hospital employment of physicians risks raising costs and not improving quality of care unless payment reforms shift provider incentives away from volume toward higher quality and efficiency,” said Dr. Ann S. O'Malley, who is a senior health researcher at the Center for Studying Health System Change and a coauthor of the study.
The trend toward hospitals' employing more physicians can also drive up costs for the health system because hospitals are able to charge hospital facility fees for office visits and procedures, even when those services are administered in a physician's office. That means that Medicare – and in some cases private insurers – are paying significantly more for the same services simply because the physician is employed by the hospital.
Employment of physicians by hospitals does have the potential to improve quality through better integration of care and communication between physicians. The problem, the researchers noted, is that integration and communication can be slow to improve just because the physicians get their paychecks from the hospital.
Interview respondents from the 12 communities said that the hospital employment model is generally helpful in coordinating care for a single diagnosis, such as heart failure. But integration across all of a patient's medical needs requires more time and effort, they told the researchers.
The research was funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform.