Is Hospital Employment of Physicians Peaking or Pausing?

July 20, 2015

One year's worth of data does not establish a trend. However, a new report from the physician recruitment firm Merritt Hawkins suggests a drop-off in hospitals hiring physicians.

Of the 3120 searches for physicians, nurse practitioners (NPs), and physician assistants (PAs) the firm handled between April 2014 and March 2015, 51% were on behalf of hospital and hospital-owned medical groups, a big drop from 64% for the previous 2 years. It was the first decline since 2003-2004, when hospitals accounted for 11% of the company's searches, according to the report, released on July 15.

One reason for the decrease, said Merritt Hawkins, is the accelerating pace of hospital closures, especially in rural areas. Budget sequestration and reductions in federal Disproportionate Share (DSH) payments have taken a financial toll, along with the failure of many states to expand their Medicaid programs, designed to offset the DSH cuts.

Merritt Hawkins also conducted fewer searches on behalf of hospitals because of competition with other healthcare organizations that stepped up their recruitment efforts. These include independent group practices, federally qualified health centers, academic medical centers, urgent-care centers, and solo practices, which accounted for 4% of searches in 2014-2015 compared with less than 1% the year before.

"It's more of a diversified market," said Travis Singleton, senior vice president of Merritt Hawkins.

Singleton, however, doesn't think hospital demand for physicians has peaked. More likely, it has paused, he told Medscape Medical News. "I won't be surprised if it goes back up," Singleton said.

The reason? The recent Supreme Court decision to uphold premium subsidies in all states under the Affordable Care Act (ACA) has removed the last major barrier to implementing the controversial reform law, Singleton said. Consequently, the healthcare industry will continue to shift from independent providers reimbursed for volume to integrated providers reimbursed for value. In other words, hospital-physician togetherness.

"We will see more and more hospitals get more into the game," said Singleton. "The course is set."

One healthcare trend has remained constant — the disappearing act of the self-employed physician. Of all the positions that various healthcare organizations asked Merritt Hawkins to fill, 95% were for an employed physician, NP, or PA, up from roughly 90% the year before, according to the Merritt Hawkins report.

"Still a Fee-for-Service World"

The ACA lays out a vision of value trumping volume in the delivery and reimbursement of healthcare. The Merritt Hawkins report suggests that this promised land is still a long way off, based on the compensation offered to recruited clinicians.

In 27% of searches, clinicians were offered either straight salaries or income guarantees, compared with 24% the year before. For another 71% of searches, the deal was a salary plus a bonus, which in most cases was based solely on productivity measures such as relative value units and net collections. Only 23% of bonuses incorporated quality measures such as patient satisfaction, down from 24% a year ago and 39% 2 years ago. And these quality measures accounted for only 22% of the extra money on average, an amount not likely to change the behavior of many physicians.

"It's still a fee-for-service world as much as people don't want to hear that," Singleton said.

Organizations in the market for physicians are less inclined to offer a signing bonus, which were part of 73% of searches in 2014-2015 compared with 80% in 2011-2012. However, the amount of the average signing bonus inched up from $23,388 to $26,365 during that period. In another example of belt-tightening, the percentage of searches that included a relocation allowance decreased from 95% in 2011-2012 to 84% in 2014-2015.

More information on the Merritt Hawkins report is available on the company website.

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