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The Goodman Institute Health Blog

Hospital Employment of Physicians is a Pain for both Doctors and Patients

Posted on May 5, 2023 by Devon Herrick

When I was young physicians were an independent bunch. Most were self-employed males, who were either sole proprietors or in small group practices. In the past 20 or so years it has become increasingly common for doctors to work for someone else. According to Merritt-Hawkins nearly three-fourths (74%) of physicians now work for hospitals, health care systems or corporate entities. Of physicians accepting new work assignments today, 90% are accepting positions as employees rather than owners or partners.

Why does this matter? Because the physician’s pen is the most expensive medical device today. Of the nearly $4 trillion in health care expenditures annually, virtually 100% of it was ordered by a physician. There is a reason hospitals, health care systems and corporations want to employ doctors rather than merely coexist with independent physicians. The reason is because employers wield control over what physicians order and how they practice medicine. If my doctor is independent, he or she can talk freely about my needs and options. If they are employed by a hospital, their employer’s preferences come into play.

Health problems often resolve on their own. Rather than wait and see if a medical problem resolves like getting over the flu, my physician’s employer may have a policy that certain parameters require ordering diagnostic testing. The last physician I saw told me he was 90% certain my condition was no cause for concern. He told me to be 100% certain there were other tests, including an MRI scan. He gave me the option of deciding how much I was willing to pay for greater certainty. I can imagine situations where his employer would try to make that decision for me.

When physicians become employees they have to deal with issues that many employees are well aware of. A physician on Twitter mentioned that when she finished her residency, she was told negotiating a salary was not something doctors do. She applied for an academic job and was told her salary was $125,000, which was rather low in retrospect. Numerous other physicians chimed in and recounted their own experiences. Most were told they could not negotiate their salary. Some tried anyway and succeeded, while others failed. Some had offers pulled when they tried to negotiate their salary.

An attorney on Twitter advised physicians that once a salary is agreed on physicians should take their employment contract and have an attorney read it. Most do not and contracts sometimes contain stipulations physicians did not realize they were agreeing to. For example, it’s not uncommon for physicians’ employment contracts to have noncompete clauses. One physician went to work for a hospital, which pressured her to work evenings and weekends to see more patients. She didn’t want to work 60+ hours a week but if she quit her job she couldn’t work within 50 miles of the hospital for a period of three years. Her contract had a noncompete clause. She ended up moving her whole family to another state.

One physician claimed he was advised to use a contract lawyer and the $800 cost was well worth it. Others suggested if you can’t get more money there are numerous other issues to negotiate, including continuing education, vacation time, working hours and so on.  Finally, a physician reported:

My hospital actively tells us we shouldn’t have a contract lawyer (bad advice), we can’t negotiate our contract (a lie) and everyone’s starting salary in the dept is the same (a lie) !!!!!

Think about this: if hospitals, health care systems, corporations and private equity employers negotiate that aggressively with physicians’ compensation, just imagine how rigid their demands are about how their employees practice medicine in ways that directly impact employers’ revenue. Over the years I’ve read where physicians have complained they faced quotas to fill beds, order tests and meet revenue targets. As if pressure isn’t bad enough, some employers design compensation systems that reward physicians for the revenue they produce. Do you really want your doctor working on commission? That may be a great idea if you employ salesmen selling widgets. It’s not so great for a patient presenting at the emergency room with chest pains they don’t realize are caused by indigestion. The following is an example from a local hospital in a town where I lived years ago. Not only were physicians pressured with quotas, the software the hospital used would make them justify deviating from the revenue-enhancing way physicians were supposed to practice.

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For many years, our health care blog was the only free enterprise health policy blog on the internet. Then, when the NCPA closed its doors, the health blog stopped as well.

During this five-year hiatus no one else has come forward to claim the space. So, my colleagues and I have decided to restart the blog in connection with the Goodman Institute. We invite you and others to use this forum to share your views.

John C. Goodman,

Visit www.goodmaninstitute.org

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