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Hospitals nearing 'saturation' on doc hiring

May 31, 2011

Indianapolis may be reaching a saturation point for hospitals employing physicians, according to the latest report from the Center for Studying Health System Change.

The not-for-profit group, based in Washington, D.C., published its latest insights on May 26, gleaned from 12 markets around the country, including Indianapolis. The report noted that that hospital employment of physicians is rising in all of those markets, but started sooner and has proceeded further in Indianapolis, Cleveland and Greenville, S.C.

“Hospitals see physician employment and tighter alignment not only as a way to capture more specialty and hospital referrals in a fee-for-service payment system, but also as central to building the clinical and financial integration needed to succeed under potential new payment models, such as accountable care organizations (ACOs), that involve risk-sharing and reward quality and efficiency,” center staff members wrote.

Over the last three years, all major hospitals in Indianapolis have been active hiring physicians. There was a mad dash for cardiologists, including St. Vincent Health’s 2010 purchase of The Care Group and Community Health Network’s acquisition of most of the cardiology practices working at its Indiana Heart Center hospital.

Community now employs more than 550 physicians. And both Indiana University Health and Franciscan Alliance noted in their 2010 financial reports a substantial increase in salary and benefit expenses due to physician hiring.

Many hospitals in the 12 markets have reported that physicians are initiating discussions about employment or close affiliation arrangements.

“Physicians in most markets—faced with financial pressures, difficulties recruiting younger physicians who often prefer employment in larger organizations, and growing uncertainty about the future under health reform—were more actively seeking the stability and security of employment in larger physician-owned or hospital-owned groups,” the report said.

Physicians who had developed their own surgery centers or imaging centers have been selling these facilities to hospitals or entering joint ventures with hospitals. A big reason is that physician-owned facilities are no longer allowed to grow under provisions in the health reform law, called the Patient Protection and Affordable Care Act.

In late 2009, the OrthoIndy physician practice sold a minority stake in its Indiana Orthopaedic Hospital to the St. Vincent Health hospital system.

“Hospitals were using an array of strategies to gain the loyalty of physicians choosing to remain independent, including providing physicians with administrative and health plan contracting support and offering financial and administrative support for electronic health records implementation,” the center reported.

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