NCPA - National Center for Policy Analysis

The Death of Physician-Owned Private Practices

March 20, 2013

The days of doctor-owned medical practices are probably over now that the Affordable Care Act ("ObamaCare") increases the costs for doctors to practice individually. Physicians are now becoming hospital employees more frequently, which reduces quality of care and productivity, says Scott Gottlieb, a resident fellow at the American Enterprise Institute.

  • ObamaCare shifts money to favor "accountable care organizations" that provide outpatient care and turns physicians into hourly employees.
  • As hospital employees, doctors will no longer be reimbursed for how much care they deliver, which is theoretically supposed to limit unnecessary medical procedures.
  • By next year, an estimated 50 percent of U.S. doctors will be working in hospitals. This represents a nearly 75 percent increase in the number of doctors employed by hospitals since 2000.
  • Physicians who do remain independent will be mandated to install expensive information technology systems that will drive up costs.

In addition, for doctors who migrate to hospitals, productivity falls by more than 25 percent.

  • Hospital physicians see fewer patients, perform fewer timely procedures and the continuity of care declines.
  • Hospitals measure the value of physicians in Relative Value Units (RVU), which assigns a number to every service based on the time and physical effort a doctor exerts.
  • The RVU model that hospitals use fails to account for the actual quality of care provided by doctors and instead focuses doctors on goals like filling out code chart correctly.

Hospitals use the RVU system because that is how the government and programs like Medicare reimburse for care provided. Because productivity generally decreases by 25 percent to 35 percent, ObamaCare will fall short on its goal of providing more health care while containing costs.

  • Medicare pays more for services when they are delivered at a hospital than when they are delivered at an outpatient doctor's office.
  • This payment system encourages hospitals to buyout doctors' practices in an attempt to build local market share and monopolies.
  • Hospitals are favored by politicians in Washington because their mostly-unionized forces give them political power and because they are large employers in all congressional districts.

Source: Scott Gottlieb, "The Doctor Won't See You Now. He's Clocked Out," Wall Street Journal, March 14, 2013.


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