70 Percent of Doctors are Employed by Hospitals, Private Equity Firms or Insurance Companies

This video provides an in-depth exploration of the significant shift in physician employment patterns within the United States healthcare system, highlighting that 70% of doctors are now employed by large organizations rather than operating independently. Dr. Eric Bricker, the speaker, frames this trend as "fee-for-service on steroids," emphasizing the financial incentives driving this consolidation and its profound impact on medical practice and patient care.

The presentation begins by citing recent reports indicating that 50% of doctors are employed by hospital systems, and an additional 20% are employed by private equity firms or insurance companies. This leaves only 30% of physicians practicing independently, a stark contrast to 20 years ago (around the year 2000) when 57% of doctors were independent. Dr. Bricker then delves into the motivations behind this shift, explaining that hospitals primarily employ physicians, particularly primary care physicians (PCPs), to control patient referrals. By directing referrals to their own specialists and facilities, hospitals can maximize revenue from facility fees, tests, and procedures, which represent a much larger financial opportunity than professional fees alone.

The analysis further examines the role of private equity firms, which are inherently for-profit organizations that often acquire physician practices using significant debt. Their priority is to generate billing revenue to service this debt and deliver profits to investors, frequently leading to strategies like taking physicians out of network to charge higher fees. While insurance companies (like Kaiser Permanente's Permanente physician group) also employ doctors, their motivations may differ, often focusing on cost control within their integrated systems. However, Bricker stresses that regardless of the employer, an external force is influencing physician decisions. A specific focus is placed on primary care, where 43% of internal medicine physicians and 57% of family practice physicians are employed. This is crucial because PCPs are the gatekeepers for specialist referrals, and the rate of these referrals has dramatically increased over time: from 4.8% of PCP visits resulting in a referral in 1999, to 9.3% in 2009, and a staggering 18% in 2018 – meaning almost one in five PCP visits now leads to a specialist referral. This trend, likely exacerbated by shorter patient visit times, perfectly aligns with the hospital systems' strategy to drive more services and facility fees. The video concludes by asserting that this consolidation is now the norm, fundamentally altering the independence of physician decision-making in patient care.

Key Takeaways:

• Dominance of Employed Physicians: A significant majority, 70%, of doctors are no longer independent practitioners. This includes 50% employed by hospital systems and 20% by private equity firms or insurance companies, marking a dramatic shift from 57% independence two decades ago to just 30% today.
• Hospital Motivation: Referral Control and Facility Fees: Hospitals employ physicians primarily to control the referral pipeline to their own specialists, tests, and procedures. This strategy allows them to maximize "facility fees," which are a much larger revenue stream than the professional fees earned by doctors, effectively turning healthcare into "fee-for-service on steroids."
• Private Equity's Profit Imperative: Private equity firms, as for-profit entities, acquire physician practices with the goal of maximizing billing revenue to cover debt and generate investor returns. This often leads to practices being taken out of network to charge higher fees, prioritizing financial gain over other considerations.
• Insurance Company Influence: While insurance companies (e.g., Kaiser Permanente) may have different motivations, such as integrated care and cost control, their employment of physicians still represents an external influence on doctors' decisions, impacting their autonomy.
• High Employment in Primary Care: Primary care physicians (PCPs) show particularly high rates of employment, with 43% of internal medicine and 57% of family practice doctors working for larger organizations. This is strategically important for employers due to PCPs' role as referral sources.
• Dramatic Increase in Specialist Referrals: The rate of primary care visits resulting in a specialist referral has quadrupled in less than two decades, from 4.8% in 1999 to 18% in 2018. This means nearly one in five PCP visits now leads to a referral, providing a constant stream of patients to specialists within employed systems.
• Impact on Physician Independence: The overarching implication is that physician decisions regarding patient care are increasingly influenced by their employers' financial incentives and organizational structures, rather than being solely independent. This consolidation fundamentally alters the landscape of medical practice.
• "Fee-for-Service on Steroids" Concept: This term encapsulates how the employment of physicians by large systems amplifies the fee-for-service model, driving greater utilization of services, tests, and procedures to maximize revenue for the employing entity.
• Implications for Pharma and Life Sciences: This consolidation means that pharmaceutical and life sciences companies must adapt their commercial and engagement strategies. Understanding the influence of hospital systems and private equity on prescribing patterns and referral networks is critical for market access, sales operations, and medical affairs.
• Data-Driven Insights for Strategic Planning: The trends and statistics presented (e.g., physician employment percentages, referral rate increases) are vital data points for companies developing business intelligence dashboards and AI solutions to track market shifts and optimize their commercial strategies.

Key Concepts:

• Fee-for-Service: A payment model where services are unbundled and paid for separately. This video highlights how physician employment by large organizations amplifies this model, driving higher utilization of services.
• Facility Fees: Charges billed by hospitals or outpatient facilities for the use of their space, equipment, and support staff, distinct from the professional fees charged by physicians. These are a major revenue driver for hospitals.
• Private Equity in Healthcare: Investment firms that acquire healthcare practices or facilities, often with the goal of increasing profitability through operational efficiencies, expansion, or strategic billing practices.
• Physician Independence: The ability of doctors to make clinical and business decisions free from external organizational or financial pressures. The video argues this is significantly eroding.
• Referral Patterns: The routes patients take from primary care physicians to specialists or specific facilities. These patterns are increasingly controlled by employing organizations.

Examples/Case Studies:

• Kaiser Permanente/Permanente Physician Group: Mentioned as the largest physician group in America, owned by the Kaiser Permanente insurance company, illustrating how insurance companies also employ doctors, albeit with potentially different motivations than hospitals or private equity.