The Decline of Independent Physicians in American Healthcare

Introduction

In the past, physicians were, for the most part, independent contractors who had working agreements with certain hospitals in their region. However, that is no longer the case. Physicians are increasingly joining healthcare organizations because the costs of remaining autonomous have become too burdensome. It does not matter that independent physicians, on average, still earn more than their counterparts in group practices, because the advantages of joining a healthcare group are too numerous. The primary advantage is that the individual physician is no longer solely responsible for tasks such as billing and scheduling.

Although joining a group may be advantageous in some ways, it is troubling in others. Patient care is sometimes diminished because, as with government-sponsored socialized medical practices in other countries, patients may have to wait longer for care, and care is not guaranteed to be a personal experience. Instead of having a primary physician, patients in many cases are assigned to a group and see whichever physician is available at the time. The inconvenience to the patient is secondary to the efficiency sought by healthcare organizations, and so independent doctors are becoming relics of the past. This paper examines the history of independent physicians, the reasons why they are disappearing, the benefits and drawbacks of the group system, and whether there should be concern over the decline of this institution.

Physicians have been largely independent of hospitals throughout most of medical history. In the beginning, doctors were often the ones who founded hospitals, but that role has long since been taken over by large nonprofit or for-profit organizations. The oath that doctors took — to first do no harm — was the most important professional creed, and the doctor was tasked with doing everything possible to ensure that the patient received proper care. Large hospitals began taking over this function in the early part of the twentieth century (Figliuolo, Mango & McCormick), allowing doctors to associate themselves with an institution without bearing the stress of running the entire operation. Since that time, it has become common practice for healthcare entities to employ as many doctors as possible within large groups, so that those groups can more effectively control the care their members receive.

History of Independent Physicians

Independent doctors are becoming an element of the past — much like doctors who made house calls before them — because in many ways the advantages of joining a healthcare group outweigh the pull of entrepreneurship. Doctors are trained as physicians, not businesspeople (Chufo), and many are glad to join a group that removes business pressures. However, many others enjoy the challenge of autonomy and became doctors partly because they wanted the experience of owning their own practice (Biz Times). "Many of them [physicians] are more entrepreneurial and like to have their own say in their business. Others like to be able to decide their own hours or like the locations they are in. They feel they can better serve their patients by being in their own neighborhoods" (Biz Times). This sentiment, however, is being overwhelmed by the reality that an independent doctor simply cannot survive in today's healthcare climate.

"The percentage of US physicians who own their own practice has been declining at an annual rate of approximately 2% for at least the past 25 years" (Isaacs, Jellinek & Ray). The decline is due in part to the fact that there are fewer physicians relative to the overall growth of the population, but it also reflects doctors' growing conclusion that independence is no longer worth the headaches. One source reports that independent doctors make more — in some cases significantly more — than their counterparts who work for groups. According to data from a survey conducted by the Medical Group Management Association, as reported by Carol Helwick:

Why Independent Physicians Are Disappearing

This data presents the raw numbers but does not tell the entire story. Even though many specialists earn nearly double what their group-employed colleagues earn, they must also account for administrative costs. Some of this burden is mitigated because most independent physicians are partners in a larger practice — in which they continue to work independently but share business expenses — yet that arrangement still reduces the apparent 44% advantage cited by the survey. The second and third data points illustrate declining earnings compared to group-employed physicians. The multispecialty independent physician still maintains a margin of financial success, but general practitioners actually lose money by remaining independent. This is likely why primary care physicians are the most likely of the three types to join a healthcare group.

Beyond money, there are other challenges confronting independent physicians that do not trouble those employed by healthcare entities. Chief among these are antitrust laws, which make it difficult for independent physicians to push back when they believe they have been unfairly treated by insurance companies.

"Current antitrust law prohibits collective action by independent doctors that is designed to raise the level of payment for their services or to force HMOs to accept certain contract terms. Such actions are generally characterized as price fixing or horizontal boycotts, which are illegal per se" (Berman).

It might seem that antitrust law would protect small businesses from large ones, but in this reversal of logic, the opposite is true. Antitrust laws were designed to protect consumers from anti-competitive behavior by firms dominating a large share of a market — not to prevent independent physicians from protesting unfair reimbursement rates (Chufo). Berman goes on to argue that this problem can be addressed because "doctors may avoid these proscriptions by merging their medical practices into larger groups or by combining their practices to a lesser degree through Independent Practice Associations." In other words, by forming a larger entity capable of exerting market influence in a given area, independent physicians can legally challenge the injustice — but only by giving up the very independence they sought to protect.

Another perspective holds that antitrust laws actually do protect independent physicians as written, but that those laws are not being enforced by the Federal Trade Commission (FTC) (Powers). As Powers argues:

"The bargaining position of independent physicians is substantially weakened by the lack of significant enforcement of the antitrust laws by the Federal Trade Commission [hereinafter 'FTC'] and the Department of Justice [hereinafter 'DOJ'] against managed care and insurance companies. Even in the face of the considerable market dominance in many localities by a single HMO, the federal enforcement agencies charged with the enforcement of the antitrust laws seem reluctant to interfere with their growth."

One factor Powers does not address is that the federal government cannot intervene in matters contained entirely within a single state. If an HMO dominates a region within one state, that state must bring suit against it. Most insurance companies, however, operate across state lines, so the broader argument applies. Still, the position of those opposed to collective bargaining by independent physicians carries some weight:

"A principal argument of those opposed to such efforts seems to be that such a unionization of doctors would serve to stifle competition within the healthcare arena, fattening the pockets of already overpaid physicians and yet not significantly improving the quality of care provided to patients. Fear of striking physicians and the resulting unavailability of medical services, particularly emergency care, undoubtedly fuels the opposition greatly. Accordingly, physicians' efforts to unite for collective bargaining purposes have been vigorously attacked as violations of the antitrust laws" (Powers).

Because independent physicians remain the dominant healthcare force in many regions — particularly for primary care — this concern carries some merit. At the same time, the same dynamic allows insurance companies to maintain a controlling grip on these providers, which itself stifles competition. Since the stated goal of antitrust law is to promote fair competition and protect consumers, it would seem logical for government — federal and state — to side with independent physicians. In practice, however, that has not been the case.

Conclusion

Figliuolo, Michael L., Paul D. Mango, and David H. McCormick. "Hospital, Heal Thyself." The McKinsey Quarterly (2000): 91–95.

Helwick, Carol. "Independent Physician Practices Out-Earn Hospital Practices, but Numbers are Deceiving." Medscape Medical News. Web.

Isaacs, Stephen L., Paul S. Jellinek, and Walter L. Ray. "The Independent Physician — Going, Going..." New England Journal of Medicine 360 (2009): 655–657.

Petasnick, William D. "Hospital-Physician Relationships: Imperative for Clinical Enterprise Collaboration." Frontiers of Health Services Management 24.1 (2007): 3–8.

Powers, John A. "The Stifling of Competition by the Antitrust Laws: The Irony of the Health Care Industry." Journal of Law & Health 15.2 (2000): 223–242. Print.