By Christopher Guadagnino, Ph.D.

Published July 1997

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The growing trend of physicians becoming situated in employed settings would seem to cut at the core of what it means to be a physician in the U.S.

The traditional image of the physician in this country seems to center on engagement between an independent medical professional and his or her patient, applying professional judgment in the application of medical science to the particular circumstances presented, with only the patient’s interests at play.

As employment becomes a more dominant setting for physicians, the dissonance between the image and the reality becomes irreparable.

What, then, will become the dominant image for what it means to be a physician in our society, both for the physician him or herself, and for society at large?

One vision, perhaps, is the nine-to-five physician working fewer hours, less engaged in the physician-patient relationship, deprofessionalized and with a more fragmented association with other physicians.

A second vision is the employed professional akin to the academician who exercises professional judgment collaboratively, is still accountable for his or her independent decisions and who works closely with other physicians and allied health care professionals in settings that require group decision making and peer monitoring—all of which benefit patients.

Growing Trend

Physicians who choose to become employees rather than owning all or part of their practice now represent nearly half of all postresident patient care physicians in the country.

Between 1983 and 1995, the proportion of employee physicians rose from 24 percent to over 45 percent, according to data from the AMA’s Socioeconomic Monitoring System. The proportion of self-employed physicians fell during that period as well: down 14 percent for self-employed solo practices and down 7 percent for self-employed group practices. These trends have accelerated in the past few years, as the largest increase in the proportion of employee physicians occurred in the last few years studied.

Any impact on medical care resulting from the increasing trend of the physician employee will likely continue long into the future, as a particularly high proportion of young physicians are making that choice. Among physicians in practice from zero to five years, about 64 percent were employees in 1994, according to the AMA report. Young physicians who began their medical careers as employees have traditionally moved on to self-employment after building up their practices, but that pattern appears to have become less prevalent, as evidenced by the large increases since 1983 in the proportion of employees across all experience categories, the AMA report notes.

In Philadelphia, physician employment began in the academic setting, and the dominant mode of physician employment now is the group practice within one of four large competing hospital networks: Allegheny, University of Pennsylvania, Jefferson-Main Line and Temple, according to Alan L. Hillman, M.D., M.B.A., director of the Center for Health Policy, Leonard Davis Institute of Health Economics (LDI). Physician practices have been bought out by one of these entities or physicians have entered into a joint venture arrangement just short of outright ownership, says Hillman. Each of the four networks has its own style or strategy of physician employment, ranging from Penn’s full ownership model to Jefferson’s looser MSO partnership models, Hillman adds.

Clinical Care Associates, a subsidiary of the University of Pennsylvania, for example, employs about 250 doctors, and hopes to grow to 300-400 by acquiring established physician practices, according to Robert Field, Ph.D., M.P.H., J.D., director of its physician recruitment and network development, and senior fellow of LDI. Of the current physicians, about 40-50 came nearly or straight from residency, says Field.

The region’s competing hospital systems have been paying top dollar for physician practices in order to build their networks of physicians and protect their referral base, notes Mark Pauly, Ph.D., Bendheim Professor of Health Care Systems and Insurance & Risk Management at University of Pennsylvania’s Wharton School. Many physicians have welcomed the opportunity to sell, in part because of the attractive terms offered to them, but perhaps also because they feared being frozen out of solidifying networks as managed care matures, adds Pauly.

The region is also populated with management service organizations (MSOs) which have various degrees of control over physician practices. MSO contracts may involve the sale of a practice’s hard assets and transferal of business decision making to the management company, leaving the practice of medicine to the physicians. Since ownership of the practice is shared to some degree, some may regard an MSO arrangement as a form of employment; but most would categorize it as a contractual relationship with an intermediary, short of genuine employment.

Insurance company employment of physicians is less common in southeastern Pennsylvania than elsewhere in the country, Hillman believes. U.S. Healthcare had an employment model for physicians, he says, but since merging with Aetna, has taken on more of Aetna’s style of focusing on being an insurer than on owning physician practices.

Competing Visions of Professional Identity

There is dispute over how physician employment alters the vision of what it means to be a physician.

A pessimistic view is that paying physicians a salary induces many of them to be less productive than independent practitioners who can set their own hours and productivity goals, according to Pauly. In that event, compensation structures need to be put in place to avoid a "civil service" mentality in which physicians punch time clocks, says Field.

On average, hospitals are incurring annual losses of $97,000 per physician whose practice they acquired, according to a survey of 17 hospitals by Coopers & Lybrand reported recently in the Wall Street Journal. High selling costs—averaging $100,000 per physician—and declines in productivity were cited as causes. The Philadelphia area was cited as one of the costliest practice-acquisition markets, with practices selling for as much as 150 percent of gross annual revenue.

Replacing the ability to determine one’s own schedule and work habits with externally imposed constraints, the argument continues, may even replace internal motivation to treat patients with the need for unpalatable employer controls in the form of directives, rules and threats to counteract lower productivity, Pauly notes.

A more uniformly structured clinical environment will likely prevail with an increasingly employed physician workforce. Procedures and treatments are more likely to be scheduled in advance and performed in batches in order to even out the physician work flow in a group, projects Pauly.

More similar treatment protocols among employed physicians are likely to be required, perhaps decreasing the amount of time a patient needs to remain in the system, according to Pamela Peele, Ph.D., a health economist from the University of Pittsburgh’s Graduate School of Public Health.

In the more pessimistic account, patients suffer when those treatment protocols restrict the physician’s ability to choose from all of the treatment possibilities available to science and to his or her professional training. When the capacity to exercise creative, expert medical judgment is replaced by a mandated set of algorithms, the art of medicine is eclipsed.

Finally, the manner in which physicians associate with one another as professionals is likely to become more fragmented with the rise of physician employment. Employed physicians are less prone to become members of county or state medical societies, preferring specialty-based societies, observes Beaufort Longest, Ph.D., director of the University of Pittsburgh’s Health Policy Institute. Organized medicine’s traditional role has been to bring together, inform and represent independent physicians around common goals and interests, a role that would appear to be less relevant as more physicians become employees, argues Peele. Medical societies would have to rethink their strategies, inasmuch as their traditional mission has been to protect the autonomy of the medical profession, according to Longest.

A second vision of the physician employee rejects such a dour outlook regarding the impact of physician employment on the character of the medical profession. Hillman rejects the pessimistic scenario as "a hunk of bunk promulgated by older generations of physicians who are pretending that the train isn’t out of the station yet."

Marcus Welby, M.D. ran for seven years on television and was canceled in 1977, notes William Kissick, M.D., DrPh., George Seckel Pepper Professor of Public Health and Preventive Medicine at the University of Pennsylvania School of Medicine. He contends that technology, the need for cost effectiveness and for hospital formularies have led to greater structure in the medical profession and necessitate closer involvement by physicians with hospitals and outpatient settings.

Corrosive effects of physician employment on the image of medicine are not inevitable, according to the more hopeful view. Lower productivity by employees, for example, is typically mitigated by a hybrid reimbursement system—salary, capitation and productivity bonuses—says Pauly.

Constraints placed on employed physicians’ work schedules and practice patterns need not subordinate physician input to employer will. The current health care management trend is shifting away from paternalistic control, as employers and CEOs discover that professionals who have clinically specific information and knowledge generally make the best clinical decisions, posits Hillman. Physicians simply must watch out for employment contracts with high withhold sanctions tied to productivity without countervailing quality controls, Hillman warns.

Employment need not be viewed as any more of a forfeiture of medical autonomy than is the case of the independent physician who prescribes only what the insurer will pay for, says Longest. It is the power of the payor that is really at work, he contends.

There is an optimal level of diagnostic workup for a given procedure, contends Mark Roberts, M.D., MPP, member of the University of Pittsburgh’s Center for Research in Health Care. Salaried physicians could be pushed in the right direction and be better for their patients if they were providing too much health care beforehand. Physician employment could be good for society’s image of the medical profession, says Roberts, because doctors too long have felt that they could do anything they wanted and have it paid for.

As for impact on patients, studies have revealed that greater clinical autonomy by physicians has resulted in tremendous variation in practice patterns, Roberts indicates, suggesting that quality of health care improves when variation of treatment decreases. To the extent that employed physician groups rely more heavily on protocol algorithms, health care is likely to see decreases in variation, cost and mortality, Roberts contends. Patients are better off, says Roberts, when there is less of a connection between how much money a physician makes and how he or she treats patients.

Roberts was formerly an employee in a large hospital-owned group in Massachusetts, and says that he had clinical autonomy as long as he didn’t go outside the control limits set by the institution, e.g., average length-of-stay, resource use base, an so on.

Hillman notes that greater exposure to peer review among employed physicians may lead to enhanced clinical quality assurance, something that the medical profession has not produced adequately on its own and should have.

What will ultimately affect the character of medical practice more than employee incentives, says Kissick, is the individual physicians’ professional standards, aspirations and self image. Salaried physicians will engage in more collaborative decision making with nurse practitioners in team settings, and specialists will work more closely with primary care physicians, making more internal referrals to the system, according to Kissick. A physician’s self-image as a professional could be redefined in positive ways by this view.

The relationship between physicians and medical societies could become even more important in the face of increasing physician employment—namely, to help physicians decide which professional norms belong in employment contracts and which employer practices should become norms, according to Hillman.

On the other hand, as employed physicians not in managerial positions are eligible for collective bargaining under federal law, physician unionization becomes more realistic. That movement may supplant medical societies unless organized medicine becomes actively involved in forming physician unions and even taking on their negotiating functions, according to Kissick. Whether that enhances or detracts from the image of the medical profession is an open and timely question, as such efforts have been initiated in recent months around the country and in Philadelphia.