Fewer Than Half Nation’s Physicians Are Now Independent

For the first time, Modern Healthcare reports than less than 50% of the nation’s physicians own their own practices.[1]  According to a study released last week by the American Medical Association, the trend toward an employment model is continuing in healthcare.[2]  However, physicians are not necessarily becoming hospital employees.  While hospital systems were busy acquiring practices between 2012 and 2014, practice acquisition seems to have leveled in 2015.  Rather, the practice structure trend toward larger physician owned practices of 50 or more physicians, with fewer ownership stakes, appears to be increasing.

AMA reports that multi-specialty groups with primary care physicians were more likely to be hospital owned.  While single specialty groups, particularly surgical sub-specialties and radiology, had the highest percentage of independent ownership.  The most common independent practice type remains single specialty groups (42.8%), followed by multi-specialty groups (22.1%) and solo practitioners (16.4%).

Physicians are gravitating toward large practice structures because large practices are arguably better equipped to manage the administrative demands of compliance, population health management, alternative payment systems and shared risk models associated with the restructuring of the healthcare industry.

Forming an employment relationship is a large commitment for both the practice and the individual physician.  Practice owners know how challenging it can be to attract the best talent.  Physician compensation can be as high as 10% of expenses in health systems and practices have to compete with that.  This pricing pressure is increasing at a time when some individual physicians (younger physicians in particular) want more freedom and work-life balance than previous generations.  Therefore, it is key for each party to clearly communicate their expectations to each other during the courting process.

Potential employers should be honest about the culture of their practice, technological sophistication, expectations for partnership and call responsibilities.   Employers also should consider their ability to reassess or terminate a relationship if the physician engages in behavior that threatens their license or credentialing with payers.

Individual physicians should be aware of any non-competes that may limit the ability to practice after terminating a relationship.  Tail insurance is another topic to understand and negotiate before signing an employment contract.  A tail can be very expensive depending on one’s practice area.

When a practice is purchased or merged into a larger practice or health system, the employment agreements tend to be done at the last minute – increasing the chances for both sides that the agreements do not accurately capture what they want out of the relationship.  For both employer and employee, having counsel involved at the beginning of an employment relationship often prevents misunderstandings, disputes and a need for counsel at the end of an employment relationship.

If you or your practice have employment issues, contact the Ezold Law Firm, P.C. to discuss your concerns and goals.  We help our clients with the business of health.

[1] Kacik, A. (2017). For the first time ever, less than half of physicians are independent. Modern HealthCare. Retrieved from http://www.modernhealthcare.com/article/20170531/NEWS/170539971

[2] American Medical Association. (2017). Policy Research Perspectives. Retrieved from https://www.ama-assn.org/sites/default/files/media-browser/public/health-policy/PRP-2016-physician-benchmark-survey.pdf