Docs and hospitals – can these new marriages last?

January 12th, 2015

New data confirm what we’ve all been noticing for a while now -- that the uncertain payment environment brought about by health care reform is driving physicians in record numbers away from private practice and into the waiting arms of hospitals.

But do these new relationships really have staying power?

Some of us have been around long enough to remember that this sort of thing has happened before. In search of increased market share, many hospitals in the mid-1990s acquired physician practices, and in many of those instances, things went south in a hurry. As this article from the Philadelphia Inquirer notes, “Hospitals felt they had overpaid for the doctors and complained that doctors stopped working as hard once they went on salary.” As a result, many hospitals divested themselves of the practices they had acquired.

History could always repeat itself, but it’s at least possible that health care reform has been such a game-changer that closer relationships between hospitals and physician practices have become vital to the survival of both groups. As a piece last year from the New England Journal of Medicine notes, hospitals now are willing to take a short-term loss in hiring physicians “in part because hospitals fear physicians becoming competitors by aggregating into larger integrated groups that direct referrals and utilization to their own advantage.”

So on one level at least, this is a hedge against possible competition by the types of accountable care organizations the Obama administration seems to be encouraging. And many hospitals, having learned their lesson from last time, are now building quality and productivity targets into the contracts they extend to physicians. I still wonder, however, if these marriages of convenience will end in a fresh round of messy divorces a few years down the line.