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Home / News & IndustryManaged Care Insight and Analysis
Updated: Oct. 21, 2008
Hospitals Buying Physician Practices And Employing The Doctors

Hospitals across America are employing an increasing number of physicians.

Based on analysis conducted by Pam Waymack, managing director of and Evanston, Ill.-based Phoenix Services, the number of physicians employed by community hospitals in 2006 (the most recent year forwhich data is available) topped 80,000 physicians and dentists.

This number grew by 11 percent over the prior year and has doubled over the past twenty years. Waymack notes, "Hospitals have been quietly accumulating physician practices over the past few years. As a group hospitals now employ a sizeable portion of the physician workforce."

Data available from the American Hospital Association’s (AHA) Hospital Statistics 2008 show a total of over 113,000 physicians and dentists employed by hospitals across America. These physicians represent about 13 percent of all physicians in the country in 2005 based on the Phoenix Services analysis using the AHA data and manpower projections from the Bureau of Health Professions.

Over 4,400 physicians and dentists were employed by community hospitals in Illinois in 2006 and that number is growing. Based on analysis by Waymack community hospitals in Illinois employ over 10 percent of all practicing physicians in the state.

Over the past 20 years, the number of physicians employed by community hospitals in Illinois has grown by 150 percent, more than doubling the number of physicians employed by hospitals in the state, said Phoenix Services.

The 78 community hospitals in the Chicago metropolitan area employ over 3,700 of the physicians in the state. Looking at the trend over time "area hospitals bought primary care practices in the early 1990s as a managed care defensive strategy to lock in referrals. Today these same hospitals are buying specialty practices as an offensive strategy to build their depth of services. Many of our clients are suddenly realizing that by acquiring a practice here and employing a physician there, they suddenly have over 60 physicians and a dozen or more practices that they are managing," Waymack observed.

Fewer physicians today are choosing to run their own practice. This is a result of the financial pressures on physicians, the complexity of running a physician business today and changing lifestyle demands of today’s physician workforce, said Phoenix Services.

The re-emerging trend of hospital employment of physicians is indicative of strategies by community hospital executives across the country, and in Illinois, to expand their profitable, specialty service lines.

Community hospitals can be expected to continue to employ a growing percent of the primary care and specialty physician workforce to meet the business needs of hospitals. But these hospitals must develop the infrastructure to manage the practices they acquire.

In the not too distant future, they will need to demonstrate to physicians that they have a core competency in managing practices, Phoenix Services predicted.

The real challenge according to Waymack has yet to be reached, "With deep pockets, anyone can play in the physician employment market today. But given physician manpower shortages, to effectively compete for productive physicians, hospitals will need to provide productive and professionally satisfying practices while meeting the lifestyle demands that physicians want today."

Address: Phoenix Services Inc., 5800 Mnroe St., Suite D, Sylvania, OH 43560; (419) 885-2157,

  This article was taken from:
The Executive Report on Physician Organizations

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