Embracing Employment: How to Drive Mutual Gain, Not Mutual Destruction

Traditionally, the forces incenting and driving hospitals and physicians have been somewhat at odds, and realistically, many still are today.  Nonetheless, the dynamics within the healthcare industry are compelling physicians and health systems to work more closely and the number of those that are aligning is growing.

‍Employment is the fullest form of integration and the dominant alignment structure, and it continues to rise in prevalence. Although seen infrequently before the early 1990s, since that time hospitals have employed many physicians, starting largely with those in primary care. During the 1990s, hospitals employed physicians for various reasons, but in many instances the model did not work because their reasons were flawed. Those motivations included defense against competition, building employment models to protect against a perceived impending shift in reimbursement to risk-based payments, and the belief that fully-integrated delivery systems would be necessary to negotiate with payers and control the delivery of care.  Also, hospitals were not ready for employment; they did not have the management infrastructure, expertise, and sophistication necessary to complete such initiatives with any level of proficiency.

Finally, hospitals employed their physicians and guaranteed considerably more compensation than was often justified. Further, the hospitals did not consistently establish appropriate incentives to motivate high levels of productivity and drive quality. Today, things have changed. Health systems are much savvier toward employment, including new forms of W-2 relationships that provide additional flexibility for physicians. At the same time, some physicians are becoming increasingly interested in employment as they deal with succession planning, increasing technology requirements and a desire for a different balance in work/life obligations.

Common reasons for employment today include shortages of specialties, difficulty recruiting and retaining physicians (especially in more rural areas) and increased interest from physicians. Hospitals appreciate that physicians are the single greatest component for their success, and they are better understanding the need to approach employment with a view of mutual benefit and economic justification. Contemporary employment models provide physicians with enhanced financial security amongst other lifestyle, regulatory, and tangible benefits.Employment of physicians by health systems will continue to exist and expand in the future, with potential benefits for hospitals, physicians, and patients. If you are interested in pursuing employment, or interested in achieving maximal value from your employed physician base, please contact Coker Group today.