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Point of View
August 2011, No. 2
Adapting to a new model of physician employment
By Andrew A. Ziskind, Kristin L. Ficery and Richard N. Fu
Dr. Andrew A. Ziskind is a senior executive in the Accenture Health industry group. andrew.a.ziskind @accenture.com Kristin L. Ficery is a senior executive in the Accenture Health industry group. kristin.l.ficery @accenture.com Richard N. Fu is a consultant in Accenture Strategy. firstname.lastname@example.org
Most Baby Boomers in the United States came of age in an era of healthcare when it was not uncommon for physicians to own their own practices, work long hours and treat their patients—often singlehandedly— from birth into adulthood. That time has passed. A number of factors, including healthcare reform and work-life balance issues, are causing an increasing number of physicians with private groups to sell their practices or seek employment directly with hospitals. For their part, hospitals are aggressively acquiring physicians in order to remain competitive. The implications of this trend go well beyond the physicians and hospitals—and patients—themselves. Over the coming years, medical device firms, healthcare IT enterprises and pharmaceutical companies will see their target customers shift away from individual, self-employed physicians or physician-owned practices toward hospitals and health systems. This shift will require new ways of segmenting customers as well as fresh strategies for marketing and distributing products and services toward larger corporate purchasers.
Although the total number of physicians is increasing, the percentage that are truly independent is declining
2000 – 2013 (thousands)
2000 Total number
2009 Truly independent
End of the independent physician?
A recent study from the New England Journal of Medicine found that the number of physicians who are “truly independent” has been declining at a rate of about 2 percent since the turn of the millennium. Accenture analysis predicts that the decline will reach 5 percent annually by 2013 (see chart). By that point, less than one-third of US physicians will remain truly independent. One physician recruitment firm notes that 51 percent of the positions it filled in the past year were for hospitals, up from 14 percent eight years ago. And even a growing share of the jobs the company filled in private practices included income guarantees from hospitals.
This move toward hospital-based employment provides a number of important benefits to many physicians: Sources: Accenture analysis. MGMA. American Medical Associa on • Reduced administrative responsibilities • Better access to leading-edge healthcare IT tools, facilities and equipment • Stability in a business environment made uncertain by developments such as payment reform • Generally shorter and more predictable hours and a more manageable call schedule
Hospitals: Benefits and risks
For hospitals worried about physician shortages, employing doctors can help lock in expertise and boost patient volumes and revenues in high-growth service lines, including cardiovascular care, orthopedics, cancer care and radiology. However, hospitals also face a number of critical risks as they move toward more direct employment of physicians. First, the finances are not always rosy. Hospitals can lose $200,000 or more per year over the first three years of employing physicians as doctors
transition their practices and adapt to a new environment. Another risk is that physicians might pursue other types of employment models that would enable them to maintain their independence. Indeed, some stakeholders are actively campaigning to preserve physician independence as one important part of the overall healthcare ecosystem. Such independence could hinder hospitals’ strategic planning and leave them with shortages of key specialties. These types of models include an Independent Practice Association—a loosely aligned membership association of physicians, mostly in private practice—and group practices that bring together multiple private physicians with consolidated financials and a single tax ID. Many hospital CEOs see these kinds of physician-owned organizations as a competitive threat.
Achieving high performance in a changing healthcare ecosystem
As the traditionally fragmented provider landscape gives way to one characterized by tighter physician-hospital integration, the different stakeholders across the healthcare industry will need to address distinctive challenges and marketplace opportunities.
primary care, orthopedics, geriatrics, cardiology, imaging and general surgery. Meanwhile, hospitals must also engage in a defensive play: locking in physicians and referrals, which can preserve or increase patient volumes and seize greater market share from competitors. Regardless of their specific strategy, hospitals will clearly need to align more closely with physicians.
Healthcare IT, medical device and pharmaceutical companies
The target customers for the healthcare IT, medical device and pharmaceutical sectors will be steadily shifting toward a greater percentage of hospitals and health systems. This shift will require changes in these companies’ existing sales and product strategies. The sales force will need different skill sets to sell effectively to different buyers, some of whom will be more senior-in their organizations. Customer-segmentation, go-tomarket and distribution strategies will also be affected.
Several different scenarios are possible over the coming years as physicians, hospitals and related enterprises throughout the ecosystem jostle for position. Hospitals may proceed aggressively in courting physicians, permanently altering the employment landscape. On the other hand, physicians may actively seek hospital-based employment but the institutions themselves may be constrained by regulatory and economic factors. Accenture believes the mostly likely scenario at this time is one of “maximum integration,” with a spike in acquisitions and direct-hire recruiting of physicians. In this scenario, both parties see integration as key to survival in a reformed healthcare delivery model. By preparing for the future today, the full range of stakeholders stand a better chance of navigating successfully through this more challenging healthcare marketplace.
Additional industry complexity
For other companies in the healthcare industry, differences in physician employment across US healthcare markets will require different strategies to cope with different complexities. In general, companies working to reach the physician market will find it more challenging in several ways. For example, consider a company that develops electronic medical records (EMR) systems. Strategies for selling to a market such as Houston, Texas (a geographically widespread city where many physicians have tended to remain autonomous), would differ radically from those needed for selling to the New York City market (which comprises numerous large hospitals that already have EMR systems). To serve diverse markets, the company may have to shift its sales force structure from national to regional. To serve New York City clients, it may have to develop more solutions-based offerings that span multiple specialties and functions—such as management of business processes. The issue of leverage in price negotiations is another complexity. Because physicians will increasingly associate with larger groups and healthcare systems, they will acquire greater negotiating leverage—and that must be factored into the future business strategies of vendors and payers.
Payers should focus on several kinds of proactive steps in the face of the trend toward hospital-based employment of physicians. In some cases, payers will wish to employ doctors directly through direct acquisitions or partnerships. One large national multiline for-profit health insurer, for example, is beginning to employ doctors and is expanding its home care practices. Such an approach can extend a company’s influence while also yielding less expensive clinical care options. Other approaches include investing in health information technology, something being pursued by WellPoint, for example, which is also looking to run the back-end operations of accountable care organizations. In short, many health insurance companies are looking to become more than just insurance companies.
Outlook Point of View August 2011, No. 2 Copyright © 2011 Accenture All rights reserved. The Outlook Point of View series offers insights about leading trends and innovations across all industries. David Cudaback, Editor-in-Chief Craig Mindrum, Managing Editor Jacqueline H. Kessler, Senior Editor For more information on Point of View and other Outlook publications, please visit our website: http://www.accenture.com/Outlook Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document makes reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks. The views and opinions in this article should not be viewed as professional advice with respect to your business.
Physician acquisition and recruiting strategies for hospitals will depend heavily on local market dynamics, regional demographics and competitive pressures. Overall, 61 percent of hospitals plan to make an acquisition of a medical group, while three out of four will employ a greater percentage of physicians in the near term. Specialties with especially high-growth potential include
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