3 Factors Driving the Growth of Physician Employment

3 Factors Driving the Growth of Physician Employment


It has been estimated that as many as 60% of the new doctors reaching the end of residency search for employee positions rather than opening independent practices or working as locums. If those estimates are true, they are surprising given the fact that just 30 years ago employed doctors were in the minority. In an era when more private practices are being bought up by hospitals and medical groups, private practice owners are gradually becoming an endangered species.

So what is driving the growth of physician employment at this point? Why do so many doctors prefer permanent placement employment over private practice or locum work? There are a number of factors in play here, but three, in particular, stand out to recruiters at Salt Lake City-based Vista Staffing:

  1. the increased cost of doing business;
  2. changes related to healthcare reform; and
  3. the ongoing physician shortage.

  • 1. Costs of Doing Business

Private practice physicians are small business owners regardless of their areas of specialty. As such, the fees they charge have to cover not only their personal income but also all the costs of doing business. Those costs include insurance, payroll, office space, equipment, and an extensive list of additional things that constitute overhead.

Unfortunately, the cost of doing business only goes up from year-to-year. If doctors cannot raise their rates commensurate with the increase in the annual costs, their business ventures become money-losing propositions. Understandably, doctors are reluctant to take a reduction in their own pay just to keep a private practice going. Thus, private practice owners struggling to stay afloat are more willing to sell out while new doctors are more willing to accept employment rather than try opening a private practice.

  • 2. Healthcare Reform Changes

Healthcare reform brought with it both good and bad. From the physician’s standpoint, healthcare reform has been good in that it encourages more people to go see their doctors by giving them access to affordable health insurance. On the other hand, the government is reducing reimbursement rates for both Medicare and Medicaid in order to keep their own costs down. Given the rate of Medicaid expansion under healthcare reform, doctors are finding themselves with more Medicaid patients whose care does not generate the kinds of revenues they need for a healthy business.

Another thing to consider is the government mandate to improve the quality of care in order to continue receiving maximum reimbursement. The quality of care mandate is accompanied by a new philosophy of patient-focused healthcare that relies on medical teams rather than individual doctors. Physician employment just makes the team concept easier to implement.

  • 3. Ongoing Physician Shortage

Lastly, the ongoing physician shortage continues to play heavily into the growth of physician employment. Here’s why: the persistent shortage allows new doctors to essentially write their own tickets for employment. Doctors can do very well for themselves as employees of hospitals or group practices without having to take the risks of running a small business. From a financial standpoint, that kind of security is hard to resist.

As long as the physician shortage remains as acute as it currently is, applying for permanent placement physician employment will continue to be at the top the list for new doctors. It will also be an inviting proposition to private practice owners looking to try something new.

Will physician employment continue to grow for the foreseeable future? No one knows for sure, but current conditions make the proposition very likely. Physician employment will probably continue to grow until the three issues listed here are properly addressed.


Categories: Health

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