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Originally published February 13, 2014 at 8:09 PM | Page modified February 14, 2014 at 9:08 AM

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As U.S. health care shifts, doctors switch to salaried jobs

Health economists are nearly unanimous that the U.S. should move away from fee-for-service payments to doctors because it drives up the nation’s $2.7 trillion health-care bill by rewarding overuse.


The New York Times

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U.S. physicians, worried about changes in the health-care market, are streaming into salaried jobs with hospitals. Though the shift from private practice has been most pronounced in primary care, specialists are following.

Last year, 64 percent of job offers filled through Merritt Hawkins, one of the nation’s leading physician-placement firms, involved hospital employment, compared with 11 percent in 2004. The firm anticipates a rise to 75 percent in the next two years.

Today, about 60 percent of family doctors and pediatricians, 50 percent of surgeons and 25 percent of surgical subspecialists — such as ophthalmologists and ear, nose and throat surgeons — are employees rather than independent, according to the American Medical Association (AMA). “We’re seeing it changing fast,” said Mark Smith, president of Merritt Hawkins.

Health economists are nearly unanimous that the United States should move away from fee-for-service payments to doctors, the traditional system where private physicians are paid for each procedure and test, because it drives up the nation’s $2.7 trillion health-care bill by rewarding overuse. But experts caution that the change from private practice to salaried jobs may not yield better or cheaper care for patients.

“In many places, the trend will almost certainly lead to more expensive care in the short run,” said Robert Mechanic, an economist who studies health care at Brandeis University’s Heller School for Social Policy and Management.

When hospitals gather the right mix of salaried front-line doctors and specialists under one roof, it can yield cost-efficient and coordinated patient care, such as the Kaiser system in California and Intermountain Healthcare in Utah.

But many of the new salaried arrangements have evolved from hospitals looking for new revenues and could have the opposite effect. For example, when practices are bought by a hospital, a colonoscopy or stress test performed in the office can cost far more because a hospital “facility fee” is tacked on. Likewise, Smith said, many doctors on salary are offered bonuses tied to how much billing they generate, which could encourage physicians to order more X-rays and tests.

Mechanic studied 21 health systems considered good models of care — including the Mayo Clinic and the Palo Alto Medical Foundation — and discovered that many still effectively rewarded doctors for each procedure. “It doesn’t make any sense,” he said.

Hospitals have been offering physicians attractive employment deals, with incomes often greater than in private practice, because they need to form networks to take advantage of incentives under the Affordable Care Act. Hospitals also know that doctors they employ can better direct patients to hospital-owned labs and services.

“From the hospital end, there’s a big feeding frenzy, a lot of bidding going on to bring in doctors,” Mechanic said. “And physicians are going in so they don’t have to worry; there’s a lot of uncertainty about how health reform is going to play out.”

In addition, Medicare had reduced its set doctors’ fees in the past decade, while insurers have become increasingly aggressive in demanding lower rates from individual practices that have little clout to resist. Dr. Robert Morrow, a family doctor in the Bronx, said he now received $82 from Medicare for an office visit but only about $45 from commercial insurers.

Dr. Cathleen London practiced family medicine for 13 years outside Boston but recently took a salaried job at a Manhattan hospital. She said she accepted a pay cut because she could see that she was losing ground in her practice. “I think the days of what I did in 1999 are over,” she said. “I don’t think that’s possible anymore.”

The base salaries of physicians who become employees are still related to the income they can generate, ranging from less than $200,000 for primary-care doctors to $575,000 in cardiology to $663,000 in neurosurgery, according to Becker’s Hospital Review, a trade publication.

Because of the relatively low salaries for primary-care doctors, Dr. Suzanne Salamon said that for the past two years, she has had trouble filling a prestigious Harvard geriatrics fellowship.

Doctors can become employees by practicing in a hospital building or by selling their multispecialty practice to a hospital, so their office becomes part of a network. That has attracted specialists, including many cardiologists. The fraction of cardiologists employed by hospitals rose to 35 percent in 2012, up from 11 percent five years earlier, according to the American College of Cardiology.

Dr. Joel Jacowitz, a cardiologist in New Jersey, and his 20 or so partners decided to sell their private practice to a hospital. In addition to receiving salaries, that meant they no longer had to worry about paying malpractice premiums themselves or finding health insurance for their employees.

Jacowitz said economics drove the choice and the only other option would have been to bring in more revenue by practicing bad medicine: ordering more heart tests on patients who did not need them or charging exorbitant rates to people with private insurance. He said he knew of one cardiologist in private practice who charges more than $100,000 for a procedure for which Medicare pays about $750. “Some people are operators and give the rest of us a bad name,” he said, adding that he had changed his opinion about the U.S. fee-for-service health-care system. “I’m fed up; I want a single-payer system.”

Dr. Kirk Moon, a radiologist in private practice in San Francisco, also sees advantages for the nation when doctors become employees. “I think it’s pretty clear that sooner or later we’re all going to be on salary,” he said. “I think there’ll be a radical decrease in imaging, but that’s OK because there’s incredible waste in the current system.”



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