Physician leaders need to plan for the new realities of recruiting and retaining clinical talent.

As the adoption of accountable care and other new care-delivery and financial models accelerates, the healthcare industry is experiencing some of its most profound changes ever. This complex, long-term transition presents challenges on a variety of fronts, not least of which is devising a strategy for identifying, cultivating, and retaining the clinical talent that is at the heart of any organization.  

Many of the same clinical and economic factors buffeting the industry as a whole are being felt—sometimes acutely—within the job market for physicians. For better or worse, newly graduated physicians now enjoy a broader array of employment options. And health systems, hospitals, clinics, and other provider networks are scrambling to outmaneuver competitors, meet regulatory mandates, and fulfill a profoundly changing set of expectations among physicians.  

Why Hospitals Are Employing Physicians

Perhaps the most significant trend across markets, geographies, and specialties is the increasing inclination of providers to directly employ the physicians who work in their facilities. In the past 10 years, the rate of physician employment by hospitals has increased from 11 percent to 65 percent, says Travis Singleton, senior vice president at Merritt Hawkins, the largest physician and advanced practice recruiter. Last year, 95 percent of his firm’s retained searches were for employed physicians. “Today, you’re coming out of medical school, nine out of 10 times, you’re going to be working in an employed model,” he says.

According to Nick Fabrizio, principal with the MGMA Healthcare Consulting Group, this trend is part of a deliberate strategy by health systems and hospitals. “To survive in the accountable care future, hospitals and health systems need to have far greater control over the patient’s total experience—inpatient and outpatient,” Fabrizio says. “If a hospital’s revenue is going to be more closely tied to care quality and patient outcomes, it’s only natural that they’re going to want to exert much more control over the care processes and clinical pathways that lead to those outcomes. There’s just so much more at stake today.”  

Singleton says hospitals need to “get bigger” to win in this new environment. “Hospitals are on a continual path toward clinical integration, so critical mass is very important,” he says. “You simply need size to compete effectively, and you need to control physician behavior like never before. That includes everything from oversight and information to technology and culture. Hospitals now need all of that under one roof, and that only happens if you employ physicians.”  

Industry watchers note that five to 10 years ago, the overarching theme in the emerging trend of physician employment was to employ primary care physicians to gain an advantage under capitation models. Today, the need is for vertical integration, so more hospitals are eager to bring in major specialties, among them cardiology and orthopedics.  

What’s In It for Physicians

Reasons why the employment model is attractive to new—and, increasingly, to well-established—physicians are plentiful and easy to understand. For recent graduates, the barriers to establishing a private practice are growing ever higher. Between legal/malpractice insurance, HR issues, IT infrastructure, regulatory compliance, and, of course, the huge task of managing payments, there are countless daunting challenges—none having to do with actual care—that require careful and competent management.  

“Instead,” Fabrizio says, “hospitals can say, ‘We’ll pay you a competitive salary that, in many cases, is the same as you’d make in private practice, without the hassles of running your own business. You’ll see patients without the paperwork headaches, and when you’re done, you go home. You’ll join a larger network of providers and have a better on-call ratio, a largely guaranteed salary, and no business risk.’ While there are pros and cons to that model, that’s a pretty compelling proposition to a Millennial coming out of med school with a lot of debt and a desire to live a life that balances medicine with family.”  

“We have 21,000 kids coming out of med school every year,” says Paul Keckley, managing director of the Navigant Center for Healthcare Research and Policy Analysis. “They’re telling us loudly and clearly that they view hanging a shingle and starting a practice as an outdated model. They do not welcome the cost and complexity of going into private practice. They want to work for organizations that have IT infrastructures, clinical protocols, benefits, work-life balance, and the ability to work in teams. They don’t want to fly solo.”  

“It's a beautiful world out there with more options than ever before,” Singleton says. “Today, a PCP in, say, Dallas, can be employed, open a private practice, work in an urgent-care facility, set up a concierge practice, work for a federally qualified health center, or pursue a narrow payer mix. There are at least 10 different models and 10 different compensation plans.”  

Lurking Risks

Despite all of the options and freedom, along with an apparent convergence of interests between employers and physicians, significant risks and obstacles have yet to be addressed. “There’s a legitimate concern that the employment model can change the passion and motivation of an entire generation of physicians,” Singleton says. “They’re coming out of school, and the employment model is all they've known. It’s not 6 a.m. to 6 p.m. with a few hours of paperwork afterward. Now, you check in at 8 and leave at 3. You may be just as good of a doctor, but you don’t really own the patient relationship. If we’re not careful, the patient ends up losing because a dissatisfied physician just leaves his job and finds another position 11 miles away. The danger is this: If you treat physicians like a commodity, they start acting like a commodity.”

Keckley agrees, identifying key issues for hospitals and health systems when considering physician employment: “Physicians want clinical autonomy, whether employed or not,” he says. “Physicians want the technologies and tools that are required to ply their trade, and they expect them to help, not hinder their work. Physicians want to be heard on matters of consequence to the entire organization, not just clinical issues du jour. Physicians want to be ‘in the room,’ not outside looking in. Physicians want to be compensated for their experience and aptitude, not just their production. And they want to be aligned with a winning organization that’s recognized for quality and is well-positioned long term.”

Sidebar: Differentiating the Deal

What are the top factors when physicians negotiate employment offers with hospitals and clinics? Salary is always a major consideration, but Paul Keckley of Navigant Center for Healthcare Research and Policy Analysis suggests other factors may come into play.

Brand. Residents emphasize the importance of working for a reputable employer. If you give up your personal brand as a private practitioner, you want some prestige on the business card.

Package. Increasingly, candidates want extras such as four to six weeks of travel for continuing medical education, liability insurance, and attractive call schedules.

Debt forgiveness. With average debt of $158,000, new graduates are eager to find ways to work that down within a few years and not have it hanging over their heads as they look to start a family and buy a home.

Performance evaluation. Physicians scrutinize the metrics that are used to conduct annual performance reviews, including production, quality, patient satisfaction, and more.

Finding the Compensation Formula

In employment models, the still-unsolved issue concerns the makeup of the total compensation package. “What’s the right comp plan with the right tradeoff between volume and quality and value? Well, that’s like building a perpetual-motion machine or finding a unicorn—no one’s done it yet,” Singleton says. 

Singleton’s firm studied the compensation packages of more than 3,000 physicians and found that 71 percent had a salary with a production bonus and 23 percent had a quality component. The latter share actually is down from 39 percent two years ago. 

“That tells me that there’s a frustration in our industry because we haven’t figured out a fair way to compensate based on quality and value,” Singleton says. “The metrics are all over the map and changing every year—so what behavior are you really altering?” 

Compensation may vary based on specialty, geographic location, and local market dynamics, but Keckley notes that production remains the predominant starting point for any compensation plan. However, from his perspective, quality-driven metrics can affect a larger component of compensation “Across all employed docs that we’ve studied, about 80 percent of compensation is based on production,” he says. “The rest is an amalgam of patient outcomes, the physician’s responsibilities, satisfaction rankings, and leadership. Quality-based incentives (i.e. adherence to best evidence, accuracy in diagnosis, and patient outcomes) are not easily measured, so employment arrangements are not currently focused on quality to a significant degree—but that could change. Today, it’s less than 20 percent of a total incentive package.” 

“The unfortunate reality is that physician compensation is only going to become more complicated as time goes on,” Fabrizio says. “We’re all pursuing transparency and the right quality metrics, but there are challenges ahead. Capturing and analyzing the data is a major obstacle, which impacts recruiting and retention. Getting that right will be a major milestone for our industry.” 

Michael Dowding is a freelance writer, Wordscape Communications.

Interviewed for this Article

Travis Singleton is senior vice president, Merritt Hawkins; Nick Fabrizio is principal, MGMA Healthcare Consulting Group; Paul Keckley is managing director, Navigant Center for  Healthcare Research and Policy Analysis. 

Publication Date: Tuesday, September 29, 2015