NCPA - National Center for Policy Analysis

Hospitals Lure Doctors Away from Private Practice

January 20, 2011

While making the case for his health reform package, President Obama argued that his proposal would make life easier for small-business owners.  Unfortunately, ObamaCare threatens to undermine a group of small-business owners that is perhaps more important than any other to his reform effort -- doctors in private practice, says Sally C. Pipes, president, CEO and Taube Fellow in Health Care at the Pacific Research Institute.

  • The number of privately owned medical practices has declined sharply in the past five years.
  • In 2005, at least two-thirds of practices were in private hands; that figure has dropped to less than half today -- and is expected to sink below 40 percent by next year.
  • Many doctors are now choosing not to enter private practice in the first place and areinstead heading to salaried positions at large hospitals.
  • Last year, 49 percent of first-year specialists chose hospital employment.

ObamaCare will only exacerbate these trends.  Some of the law's dictates will make it more expensive to operate small practices -- even though the rules are supposed to reduce medical costs, says Pipes.

  • Take the new law's health IT initiative, which pushes doctors to set up extensive electronic health records in hopes of better coordinating care among providers.
  • But many private practices can't afford to drop five or six figures on expensive health IT systems that may not even save them money.
  • Boosters of health IT acknowledge that large organizations are more likely to enjoy its benefits.

But shoving patients into ever-larger medical groups may not actually bring down costs.  The reason is that big hospital networks have greater market power.  They can use that power to keep prices high, and there is little that insurers -- and even less that consumers -- can do about it.  Without an ownership stake in their practices, salaried doctors have an incentive to work the hours for which they are paid -- and no more, says Pipes.

Source: Sally C. Pipes, "Hospitals Lure Doctors Away from Private Practice," Chicago Tribune, January 11, 2011.

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