If you’re a regular reader of this blog, you know I’ve been talking lately about the moral crisis in healthcare affecting physicians and nurses. (Doctors Facing a Moral Crisis – Parts I-IV). This is being experienced by those healthcare providers who work for large hospitals or corporations. Today, we’re going to talk about the driving influences behind the trend for these healthcare providers to leave private practice and join these institutions.

While the trend in medicine has been a slow but steady increase in the number of physicians employed by hospitals and large corporations, the numbers have increased dramatically in the last few years. In 2019 and 2020, 48,400 additional physicians left independent practice and became employees of hospitals or other corporate entities. Nearly half that growth occurred after the onset of Covid-19, according to HealthcareFinanceNews.com.

The result of this movement of physicians is nearly 70% of U.S. physicians were employed by hospital systems or other corporate entities, such as private equity firms and insurers, leaving just three out of 10 of the nation’s physicians practicing in independent medical practices. This data is from early 2021, and others, such as Becker’s Hospital Review, peg the number in private practice at only 26% as of July, 2022.

Hospitals and other corporate entities acquired 20,900 additional physician practices over the two-year period, resulting in a 25% increase in corporate-owned practices. Meanwhile, 18,600 additional physicians left independent practice to become hospital employees with 11,400 from that shift making the move after the onset of Covid-19. In addition, hospitals acquired 3,200 additional physician practices over the two-year period, resulting in an 8% increase in hospital-owned practices.

Corporate entities acquired 17,700 additional physician practices over the two-year period, resulting in a 32% increase in corporate-owned practices, and 29,800 additional physicians left independent practice and became employees of corporate entities; 11,300 of those did so after the onset of Covid-19.

Why is this happening?

The private practice of medicine is getting tougher. When I started my career in private practice in 1984, there were no real hurdles to opening your own practice. Sure, I needed to learn the business of medicine, which is not taught in medical school, but I was young and eager to make a name for myself and I wanted to make my own decisions. I understood there would be some lean years until I established my reputation in the community, but I was sure to make more money than I had as a resident physician and I was willing to work hard and wait for better paydays ahead.

Managed care medicine was just beginning in 1984 and there were no real barriers to being on every healthcare plan that was offered in my community. People still had the freedom to go to any doctor they chose by reputation or word-of-mouth from their friends and neighbors. A young doctor in a fast-growing community like Orlando still had a good chance to grow his practice.

All that has changed today. First of all, most recent residency graduates aren’t looking to start their own practice. Today’s generation of new doctors want guaranteed salaries, fewer working hours and more weekends free, good benefits, and someone else to run the business of medicine. They are less interested in building their own business or reputation; they just want to practice medicine for a predictable number of hours a week and then have plenty of free time for themselves away from medicine.

Second, the growth of managed-care medicine has made all doctors dependent on the insurance contracts they need to stay in business. You can be a great doctor, but no one will be able to come to you if you’re not on their healthcare plan. The best contracts are snapped up by the most sophisticated medical practices with their own business managers who are experienced in negotiating these contracts. Young doctors starting out on their own are ill-prepared to negotiate contracts and even less equipped with the leverage needed to get these contracts. In short, they are left out in the cold, accepting the worst contracts available. For this reason, most new graduates gravitate to large private practices or succumb to hospital or corporate entities.

All this got worse when Covid-19 hit the medical profession. Most private physician practices suffered devastating financial losses as elective surgeries were cancelled, patients avoided crowded doctors’ waiting rooms, and generally avoided hospitals except for treatment of Covid-19.  I personally was working part-time to help a friend expand his growing hand surgery practice until the pandemic hit and he had to lay off many of his employees including me as the practice suffered 50% or greater losses in revenues.

In response to this added economic uncertainty, many physicians have left private practice seeking the economic stability of being hospital or corporate entity employees. Unfortunately for many, this has led to the moral crisis my recent series discussed, which is plaguing our healthcare system and its providers. In my last post, I recommended more physicians return to the private practice of medicine, but this will not be easy.

The best course will be for physicians to form more large private groups, giving them the business tools for success, while preserving their freedom to make their own medical decisions. The quality of healthcare in the future depends on it.

This is the fourth in a series of posts regarding the moral crisis doctors and nurses are facing in today’s healthcare system. This dilemma is largely experienced by those healthcare providers employed by hospitals and large corporations, who dictate the policies these providers must follow when treating their patients. I strongly encourage you to read the first three parts of this series before reading the fourth. They can all be found on my blog home page on the left side of the screen.

In Part III, I discussed how the corporate world is taking over medicine through large hospital systems and large corporate healthcare providers. Profits are driving the decisions doctors must make or risk losing their jobs. This has created a moral injury when their treatment decisions violate their moral values and medical training. This leads to early retirement, career changes, and even suicides. There is some evidence that these healthcare providers may be experiencing suicide rates approaching the rates of military veterans suffering from PTSD.

This phenomenon is driven by the increasing number of physicians leaving private practice and entering into employment contracts with hospitals and large corporations. Some surveys have estimated only 26% of physicians remain in private practice today. Over 135,300 physicians are now employed by hospitals or large corporations. This is a paradigm shift in the practice of healthcare.

What impact has this paradigm shift had on careers in medicine?

Eyal Press, writing in The New York Times, says, “As the focus on revenue and the adoption of business metrics has grown more pervasive, young people embarking on careers in medicine are beginning to wonder if they are the beneficiaries of capitalism or just another exploited class. In 2021, the average medical student graduated with more than $200,000 in debt. In the past, one privilege conferred on physicians who made these sacrifices was the freedom to control their working conditions in independent practices. But today, 70 percent of doctors work as salaried employees of large hospital systems or corporate entities, taking orders from administrators and executives who do not always share their values or priorities.

Philip Sossenheimer, a 30-year-old medical resident at Stanford, told me that these changes had begun to precipitate a shift in self-perception among doctors. In the past, physicians “didn’t really see themselves as laborers,” he notes. “They viewed themselves as business owners or scientists, as a class above working people.” Sossenheimer feels that it is different for his generation, because younger doctors realize that they will have far less control over their working conditions than their elders did — that the prestige of their profession won’t spare them from the degradation experienced by workers in other sectors of the economy. “For our generation, millennials and below, our feeling is that there is a big power imbalance between employers and workers,” he says.”

This sense of powerlessness has led many resident physicians to form unions. At Stanford, the medical resident voted to form a union by a tally of 835 to214. This has led to others forming unions in an attempt to have some measure of control over their environment and working conditions.

Forming unions is just one way that patient advocates are finding to push back against such inequities. Critics of private equity’s growing role in the health care system are also closely watching a California lawsuit that could have a major impact. In December 2021, the American Academy of Emergency Medicine Physician Group (A.A.E.M.P.G.), part of an association of doctors, residents and medical students, filed a lawsuit accusing Envision Healthcare, a private-equity-backed provider, of violating a California statute that prohibits nonmedical corporations from controlling the delivery of health services. A.A.E.M.P.G.’s aim in bringing the suit is not to punish one company but rather to prohibit such arrangements altogether. “We’re not asking them to pay money, and we will not accept being paid to drop the case,” David Millstein, a lawyer for the A.A.E.M.P.G. has said of the suit. “We are simply asking the court to ban this practice model.” In May 2022, a judge rejected Envision’s motion to dismiss the case, raising hopes that such a ban may take effect.

But the solution is not in litigation; it is in returning to the private practice of medicine. Physicians who have entered into employment agreements with hospitals or large corporations have done so because they were attracted by guaranteed salaries and benefits, freedom from the business of medicine, and regular working hours. But they didn’t recognize they were paying a high price for those benefits – the loss of freedom to make their own medical decisions. That’s a price I would never agree to pay and neither should other physicians. When they realize the price was too high, they will return to the practice of private medicine and both they and their patients will be happier.

In Part I and Part II of this series, we’ve talked about a new condition, known as moral injury, which is plaquing physicians and nurses who are employed by hospitals and large corporations, because they feel they must compromise their best judgement in treating patients. The pressure from their employers is making them treat their patients in ways that sacrifice their moral values for the sake of corporate profits.

Eyal Press, writing in The New York Times, has called attention to this phenomenon, which was first reported by a psychiatrist, Dr. Wendy Dean, who worked for the U.S. Army. Dean has continued her study of the problem and finds it is increasing as more and more physicians leave private practice and join hospital or large corporate staffs.

 Press interviewed one emergency room physician who insisted she remain anonymous for the interview. She had recently taken a leave of absence and was unsure if she would return. “It’s all about the almighty dollar and all about productivity,” she said, “which is obviously not why most of us sign up to do the job.”

Press says that’s not always clear to patients, many of whom naturally assume that their doctors are the ones who decide how much time to spend with them and what to charge them for care. “Doctors are increasingly the scapegoats of systemic problems within the health care system,” Mona Masood, a psychiatrist says, “because the patient is not seeing the insurance company that denied them the procedure, they’re not seeing the electronic medical records that are taking up all of our time. They’re just seeing the doctor who can only spend 10 minutes with them in the room, or the doctor who says, ‘I can’t get you this medication, because it costs $500 a month.’ And what ends up happening is we internalize that feeling.”

Press writes, “Concerns about the corporate takeover of America’s medical system are hardly new. More than half a century ago, the writers Barbara and John Ehrenreich assailed the power of pharmaceutical companies and other large corporations in what they termed the “medical industrial complex” which, as the phrase suggests, was anything but a charitable enterprise. In the decades that followed, the official bodies of the medical profession seemed untroubled by this. To the contrary, the American Medical Association consistently opposed efforts to broaden access to health care after World War II, undertaking aggressive lobbying campaigns against proposals for a single-payer public system, which it saw as a threat to physicians’ autonomy.”

I am no fan of the American Medical Association and dropped my membership over thirty years ago. Today, only about 12% of American physicians are members of the AMA. However, I will defend the AMA’s efforts to oppose a single-payer public system, which is simply the road to socialized medicine. Ironically, the same AMA was quite cooperative in facilitating the passage of the Affordable Care Act (ObamaCare) by the Obama Administration some 50 years later, which was a big step forward in the effort to implement socialized medicine.

A single-payer public healthcare system would quickly put private insurance plans out of business since they couldn’t match the lower pricing when the taxpayer picks up the tab for declining revenues. But what is happening now is a gradual corporate takeover leading to a gradual government takeover. The more healthcare is driven by the corporate world, and not independent physicians, the more the government will ultimately be able to control healthcare. That’s the long-term goal of progressives in Washington.

Press writes, “Throughout the medical system, the insistence on revenue and profits has accelerated. This can be seen in the shuttering of pediatric units at many hospitals and regional medical centers, in part because treating children is less lucrative than treating adults, who order more elective surgeries and are less likely to be on Medicaid. It can be seen in emergency rooms that were understaffed because of budgetary constraints long before the pandemic began. And it can be seen in the push by multibillion-dollar companies like CVS and Walmart to buy or invest in primary-care practices, a rapidly consolidating field attractive to investors because many of the patients who seek such care are enrolled in the Medicare Advantage program, which pays out $400 billion to insurers annually. Over the past decade, meanwhile, private-equity investment in the healthcare industry has surged, a wave of acquisitions that has swept up physician practices, hospitals, outpatient clinics, home health agencies. McNamara estimates that the staffing in 30 percent of all emergency rooms is now overseen by private-equity-owned firms. Once in charge, these companies “start squeezing the doctors to see more patients per hour, cutting staff,” he says.

What impact have these changes had on careers in medicine?

(Note: I’ll address this question and more in the next post – Part IV)