70% of Doctors No Longer Independent... Implications for Employee Health Plans

By: Eric Bricker, MD

70% of doctors are now employed by hospitals, private equity firms, and insurance companies.  

Conversely, only 30% of doctors are independent, which is a major drop from 20 years ago when 57% of doctors were independent. 

Breakdown of the 70%:  

–50% of doctors are employed by hospital systems 

–20% of doctors are employed by private equity firms or insurance companies 

More specifically, for primary care physicians:  

–43% of internal medicine doctors are employed  

–57% of family practice doctors are employed  

Hospital systems want to employ primary care physicians (PCPs) so they can drive PCP referrals to their own specialists, who will then order a lot of tests and procedures within their facilities. 

These PCP referrals are becoming MORE important because referrals are done much more frequently today… In 1999, 4.8% of PCP visits resulted in a referral. In 2018, 18% of PCP visits resulted in a referral. It went from 1 in 20 visits to 1 in 5!  

Employers and employees must understand that large organizations–hospitals and private equity firms–influence the MAJORITY of doctors to maximize fee-for-service revenue. It is now the norm. 


What an Employer Can Do About Doctors Being Owned 

When members of an employee health plan choose a doctor—whether a specialist or PCP—it is important to take into account the hospital system that employs them. 

Is that hospital system the most expensive in the area on a unit-cost basis?  That is, does that hospital system have the highest commercial insurance contract rates for imaging such as MRIs, lab, procedures, and surgery? 

The vast majority of employees would never ask themselves these questions when choosing a doctor and even if they did, it is very difficult for them to find the answer. 

However, the unit costs of a hospital system can be determined by analyzing claims data.  These unit costs can subsequently be translated into easy-to-understand copays for plan members. 

For example, two orthopedic surgeons of comparable quality who practice at two different hospital systems can be assigned two different copay levels based on the unit-cost difference between the hospitals.   

The orthopedic surgeon associated with the high unit-cost hospital system can have an office visit copay of $120 and the orthopedic surgeon associated with the low unit-cost hospital system can have an office visit copay of $60. 

This copay approach is much more flexible for employees than the traditional HMO, gatekeeper model of the past.   

No referral is needed.  No prior authorization is needed.  No bureaucracy gets in the way.  The plan member is free to choose a doctor and go… knowing the price of the visit upfront with no surprises. 

Employers have choices.  They can address the challenges associated with doctors no longer being independent through data, plan design, and simplicity. 

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