Doctor’s Perspective: Perils and Pitfalls of Corporatized Medicine

By JB McMunn, M.D.:

Over the past decade, Medicare fees have risen about 10% while the cost of running a medical practice has risen about 30%. It has become increasingly difficult to stay in business as a private practitioner. At the lower range of compensation – pediatricians, family doctors, internists – it has become almost impossible.

Many practices have stopped accepting Medicare or Medicaid, and some have opted out of third party payment altogether, electing to go to a concierge practice (flat fee for all services the doctor provides, usually paid monthly or annually) or just a straight cash-based fee-for-service model.

Another option is to work as an employee of a hospital. There are several advantages for the physician: a more secure and predictable level of income, none of the hassles that face a small business, such as personnel management, billing and collections, rent, equipment expenditures, maintenance, and so on. They have fixed hours, guaranteed vacation, a 401(k), health insurance, malpractice coverage, etc, and … higher income.

Higher income? Yup, but there’s a catch.

Physicians can receive a higher income when employed by a hospital because hospitals often receive higher payments than a private practice for the same service. For instance, a hospital can tack on a facility fee in addition to the physician fee, something a private practice cannot do. This can easily increase the fee by 70%. Thus, the hospital can afford to pay the physician more because they collect 70% more than the private office across the street just on the fee differential. Since the doctor also leverages the system with referrals for other services, they can also supplement physician salaries. If a doctor increases hospital revenues by $1,000,000 a year, do they mind paying her an extra $50,000 a year above the usual level of compensation?

Impact on physicians and care

Is it all rainbows and unicorns once a doctor goes to work for a hospital? What many doctors discover is that they are reduced to the status of livestock – that it’s all about production.

Probably the worst aspect of being a hospital employee instead of a private practitioner is the loss of autonomy. A doctor has a fiduciary obligation to the patient to do what’s best for the patient, not for the doctor. This not just a legal consideration; it’s pounded into physicians during their training (at least 7 years of indoctrination). Supermarkets, gas stations, airlines, and movie theaters have no such encumbrances.

While there are greedy doctors who exploit their patients, the vast majority of doctors, based on my 30-plus years of observation, do place their patients first. That’s one area where corporate people and medical people often bump heads.

The most significant problem with loss of autonomy is production pressure. The employed physicians are hired to draw patients into the larger system where they can be funneled into other hospital services. Many hospitals are quick to claim that there is no policy or contractual obligation to refer internally, but the physician who takes them at their word does so at his peril.

Compensation is usually linked at least in part to productivity, which can be measured in various ways, all of which have a final common pathway: money. There is intense pressure for the employed physician to use ancillary services such as blood work, x-rays, MRIs, physical therapy, etc and to refer to doctors either employed by the system or system-friendly.

How has corporatized medicine worked out so far?

Some snippets from online physician discussions:

    • In the past we were very picky in who we had join our group. Now the hospital was in charge of recruiting, and they hired any old warm body they could find. They would show us CVs of candidates with red flags all over, and we said we would never even interview these people. The hospital would hire them. And of course it would be a disaster. We had a revolving door of anesthesiologists while the old core group tried to hold it together. The hospital made ridiculous demands, required expansion into unprofitable service lines and then constantly bitched at us that we were unproductive and underutilized. Meeting after meeting: “You need to be more productive.” They just never seemed to get it that we can only provide care to the patients that surgeons bring us. If the surgeons don’t have cases, we don’t have cases. [From an anesthesiologist. They can only do as many cases as surgeons bring them. It’s like blaming the truck driver for not delivering enough packages when the factory isn’t producing enough to deliver.]


    • The administrators and medical directors are always focused on where they stand on the corporate ladder and how they can get more leverage, not only over the doctors below them, but on their counterparts and their superiors. Large systems have all the loyalty, well meaning, and altruism demonstrated by a character from Game of Thrones. [Arguably, the main difference between a large hospital system and the Lannisters is that hospital systems have more money.]


    • I knew things were severely problematic when I was having a meeting with my bosses, and the head of the PCP division said, “We don’t understand why you’re not being a ‘team player’. We expect this to operate like the Coumadin clinic. We start them on the opioids, and you just take over prescribing, and the nurses monitor the urines!” At which point the business manager for my division pops in, before I can retort, to say, “Yeah we should be able to operate that way.” Needless to say, the professional bullying from the PCPs, the administrators, etc. to run both a pill mill and a needle jockey business was tremendous. I resisted the entire time, but god it wore me out. [From a pain specialist for a large multi-specialty group.]


    • We had a meeting with administration and the whole medical staff. They wanted to know why staff meetings were so poorly attended. (They didn’t used to be.) One brave soul spoke and said “It’s a waste of time for us to attend meetings where our opinions aren’t valued and our concerns aren’t addressed.” He was gone shortly thereafter.


    • I have watched employed physicians who do it ethically, at least in their viewpoint, and are only driven out. When the hospital system starts hurting for cash, it isn’t the CEO’s salary that will be examined, it is yours and your production value . . . The Admins . . .  refer to the independents as being “outside of the framework” which seems like a bureaucratic euphemism for not liking the lack of ability to direct and control their work.” [It’s amazing to me that they allow this independent physician to hear these conversations.]


  • One day, administration fired all the ER physicians and put in place an entire department of locums and tried to rebuild. It was a disaster. They couldn’t cover shifts, the competency level was horrendous. The hospital had 3 major law suits out of that ER in the first two months of this transition.

“Locums” is short for “locum tenens”, or a doctor who is hired for a short period of time to cover vacations or other temporary short-staffing situations. Doctors who do this type of work aren’t called “temps.” They are “locum tenens.” That’s Latin for “place holder” or in common parlance, “temp worker.” Doctors have learned that you can charge more when it’s in Latin or Greek. And it all follows the theme: a perfect storm of unhappy doctors, corporate-style medicine, and higher prices. By JB McMunn, M.D.

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