Rising hospital employment of physicians: better quality, higher costs?

Abstract

In a quest to gain market share, hospital employment of physicians has accelerated in recent years to shore up referral bases and capture admissions, according to the Center for Studying Health System Change's (HSC) 2010 site visits to 12 nationally representative metropolitan communities. Stagnant reimbursement rates, coupled with the rising costs of private practice, and a desire for a better work-life balance have contributed to physician interest in hospital employment. While greater physician alignment with hospitals may improve quality through better clinical integration and care coordination, hospital employment of physicians does not guarantee clinical integration. The trend of hospital-employed physicians also may increase costs through higher hospital and physician commercial insurance payment rates and hospital pressure on employed physicians to order more expensive care. To date, hospitals' primary motivation for employing physicians has been to gain market share, typically through lucrative service-line strategies encouraged by a fee-for-service payment system that rewards volume. More recently, hospitals view physician employment as a way to prepare for payment reforms that shift from fee for service to methods that make providers more accountable for the cost and quality of patient care.