Forum Session

Been There, Done That, Bought the Practice? Why Hospital Employment of Physicians Is Rising Again
March 25, 2011


Kathryn Linehan


Researchers and market analysts have observed a trend of hospitals directly employing physicians that started several years ago and appears to be accelerating. Payment changes in the Patient Protection and Affordable Care Act of 2010 (PPACA), such as accountable care organizations (ACOs) and bundled payments, are seen by some as driving this trend of provider realignment. The payment changes are intended to create financial incentives to improve care delivery and lower costs. Closer hospital-physician alignment can reduce unnecessary spending and fragmentation associated with fee-for-service payment. Although payment changes in PPACA reform may be the latest contributing factor, the upswing in this activity predates payment reforms in PPACA. Hospitals acquiring physicians is also consistent with contemporary market forces facing hospitals and physicians that reward higher volume. In addition, it creates negotiating clout to facilitate bargaining with private payers. This Forum session focused on hospitals’ motivations for buying physician practices and hiring physicians. It also addressed the potential consequences for the cost and quality of care, in part, by comparing current activity with past attempts at physician-hospital integration.


Richard L. Gundling, FHFMA, CMA, Vice President, Healthcare Financial Practices, Healthcare Financial Management Association; Michael C. Riordan, MA, MS, President and Chief Executive Officer, Greenville Hospital System, University Medical Center (Greenville, South Carolina); Paul B. Ginsburg, PhD, President, Center for Studying Health System Change (HSC)

Slides from the presentations by Mr. Gundling, Mr. Riordan, and Dr. Ginsburg are available for download.

Related Materials

See Robert Kocher and Nikhil R. Sahni, "Hospitals' Race to Employ Physicians — The Logic Behind a Money-Losing Proposition," New England Journal of Medicine, March 30, 2011.

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