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Physician Private Practice Declines; the Last Barrier to Emergence of "Big Medicine"

Posted May 10 2010 12:00am

We are witnessing the emergence of what a recent article in the New York Times called Big Medicine (see: More Doctors Giving Up Private Practices ). Simply put, it consists of the following triad: (1) Big Pharma , (2) Big Payers (i.e., the U.S. government and large insurance companies); and (3) Big Providers (i.e., large consolidated regional health systems). These latter health systems are proving to be tough negotiators regarding their reimbursement from the big health insurance companies (see: Health Systems Use Their Regional Dominance to Muscle Insurance Companies ). The last remaining barrier to the full-blown emergence of Big Medicine has been physicians in private practice, but that model may soon be a rarity. Below is an excerpt from the article:

...[An] increasing share of young physicians, burdened by medical school debts and seeking regular hours, are deciding against opening private practices. Instead, they are accepting salaries at hospitals and health systems. And a growing number of older doctors — facing rising costs and fearing they will not be able to recruit junior partners — are selling their practices and moving into salaried jobs, too. As recently as 2005, more than two-thirds of medical practices were physician-owned — a share that had been relatively constant for many years....But within three years, that share dropped below 50 percent, and analysts say the slide has continued....And for all the vaunted efficiencies of health care organizations, there are signs that the trend toward them is actually a big factor in the rising cost of private health insurance. In much of the country, health systems are known by another name: monopolies. With these systems, private insurers often have little negotiating power in setting rates — and the Congressional health care legislation makes little provision for altering this dynamic. If anything, the legislation contains provisions — including efforts to combine payments for certain kinds of medical care — that may further speed the decline of the private-practice doctor and the growth of Big Medicine. The trend away from small private practices is driven by growing concerns over medical errors and changes in government payments to doctors. But an even bigger push may be coming from electronic health records. The computerized systems are expensive and time-consuming for doctors, and their substantial benefits to patient safety, quality of care and system efficiency accrue almost entirely to large organizations, not small ones. The economic stimulus plan Congress passed early last year included $20 billion to spur the introduction of electronic health records.

Salaried hospital physicians are also known as hospitalists and can be categorized by the type of services they provide. Examples are intensivists, proceduralists, and laborists. I personally favor the trend toward hospitalists because the highly specialized nature of their work and focus on inpatient care leads to a higher quality of services. These are all very hard-working professionals. The major difference between a surgicalist of today and a surgeon in private practice of, say, a decade ago is that the former may work half the number of hours per week for half the income. For most, this is a fair trade for a more balanced life. However, continuity-of-care becomes much more important with multiple physician hand-offs in the care of a single patient each day.

It's ironic that the article cited above make reference to the capital costs and time-consuming nature of electronic medical records (EMRS) as one of the factors driving physicians into salaried hospital positions. Healthcare is probably the only service industry that requires its most highly skilled and expensive personnel, physicians, to sit at a terminal and laboriously document their work on-line. If you want to observe a company that values the productivity of its skilled personnel and understands IT, watch your UPS driver when he drops off a package at your front door. Now that more physicians are salaried employees of hospitals, the C-suite execs may be forced to consider whether their time is being used productively.

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