Why More Physicians Prefer To Be Employed

Private medical practice has been declining at an annual rate of about 2 percent a year for the past 25 years, according to a review article in The New England Journal of Medicine. In 2001, the latest year for which overall figures are available, the AMA estimates the percentage of physicians who owned their practices at 61.5 percent. The Center for Studying Health System Change put the percentage at 55.9 percent.

More recent data from the CSHSC show that 51.8 percent of primary-care physicians owned their practices in 2005, compared with 54.3 percent in 1997. The portion of practice owners among medical specialists dropped to 47.3 percent from 58.1 percent. And among surgical specialists, the percentage fell to 68.4 percent from 75.5 percent.

According to the study’s authors, “The low percentage of primary care practitioners in independent practice may reflect the serious problems of overwork and underpayment that primary care fields have faced for many years…” Hence many primary-care doctors sought employment before specialists did, they say.

Nevertheless, they point out, this is not just a primary care issue, but is “intertwined” with the decline of small practices with 10 or fewer physicians. The number of those practices dropped 15 percent between 1996 and 2004, while the number of larger groups increased. Many hospitals, they note, snapped up medical specialists during this period. At the same time, all physicians were faced with increasing reimbursement pressures from payers as well as the increasing complexity of caring for the chronically ill. Both of those factors made it increasingly difficult to cope with independent practice, they suggest.

Also, the increasing number of women in medicine and the lifestyle preferences of younger physicians have played a role in the increasing percentage of physicians who are employed.

In some specialties, the fundamental driver of this shift is the difference in pay between independent doctors and those who work for larger groups or organizations. While certain kinds of specialists do as well or better on their own or with just a few colleagues, many physicians earn more as employees. And the amount they can make rises with the size of the group, partly because bigger practices have more clout with payers.

One indication of this comes from the 2008 physician compensation data published by the Medical Group Management Association. For example, family physicians, general internalists, pediatricians, and general surgeons all earn more in large groups than in small ones where they’re likely to be a partner. Family doctors in groups of 10 or fewer doctors made a median $156,501, versus $165,744 in groups of 11-25, $175,847 in groups of 26-50, and $181,116 in groups of 51-75. General surgeons earned a median $265,873 in the smallest groups, and $275,018, $294,371, and $320,827 in the next three higher size categories.

Interestingly, however, doctors who work for hospitals tend to make less than those who don’t. For family physicians, hospital jobs paid a median $167,231, whereas family doctors who didn’t work for hospitals earned a median $185,273. General surgeons employed by hospitals earned $307,206; those in nonhospital-owned practices brought in $323,971.

The pressures of being in private practice today are too much for many doctors, and younger physicians are reluctant to hang out a shingle. But in today’s incredibly shrinking economy, employment’s financial benefits are also appealing.