October 07, 2016
5 min read

Hospital employment is a personal decision

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The number of physicians who are employed by hospitals increased by 34% between 2000 and 2010. According to Orthopaedic Practice in the U.S. 2014, the latest American Academy of Orthopaedic Surgeons census survey, 15% of the 28,047 orthopedic surgeons in the American Academy of Orthopaedic Surgeons are employed by a hospital and 15% are employed by an academic center or HMO. Sixty percent of orthopedic surgeons remain in some form of private practice. This is a remarkable change since the 2010 survey, in which only 8% were employed by a hospital, and 65% were in private practice.

Anthony A. Romeo

Anthony A. Romeo

Hospitals benefit substantially by having employed orthopedic surgeons, averaging almost $3 million of annual revenue per surgeon through the inpatient and outpatient care of patients, including facilities fees and ancillary services that are substantially higher than in private practice offices or surgicenters, even if performed by the same surgeon with the same technique and outcomes. Based on the average salaries offered to employed orthopedic surgeons and the cost of their overhead, this revenue provides an attractive return on investment for the employer. Furthermore, having more patients due to more physicians provides more influence on contracts and negotiation at all levels of care, including insurance rates and supplies.

Increased integration

Many health care experts believe increased integration between hospitals and physicians may foster better care and potentially decrease health care spending. The underlying theory is that when physicians are employed and influenced by the hospitals where they work, they are less likely to focus on the business of health care and more likely to focus on patient care. These discussions rarely note the incredible increases in revenue seen by non-profit and for-profit hospitals, as well as health care systems.

The government is attempting to create incentives to slow the growth of health care expenses yet improve the quality of the provided care. The instituted programs favor the concept of a physician workforce that is employed and integrated with a hospital to help improve the quality metrics or performance measures for care throughout the episode of care and to create better consistency of care with closer adherence to clinical guidelines. This thereby maintains or improves value, while hopefully developing more cost-effective ways to deliver care.

However, these relationships have not had their desired consequences. In fact, these have been associated with higher costs per episode of care, as well as a significant change in physician behavior when changing from private practice to employment. Large non-profit hospital systems were more likely to have embraced physician employment, and typically these are the institutions that generate the highest amount of revenue over expenses. Improved information systems and methods to influence physician behavior may help the hospital reap the rewards of physician employment, but it is difficult to see where this has been passed on to patients and population health care costs.

Revenue creation

The reality is underlying incentives are expressed in favorable terms, such as value-based care for each partner in the process of delivering health care, but the bottom line is still about creating revenue. Maintaining or increasing revenue in the face of the many external factors in play to reduce cost and spending on health care is the primary motivating force for hospitals, as evidenced by increasing salaries for administrators and C-suite executives, as well as the record levels of annual revenue that is reinvested into the institution. Investing in physician practices, even at prices above previously established market value parameters, is attractive to hospitals, so they can secure a supply of patients and services associated with their care.

The hospital public relations team will highlight and promote their mission being based on providing better or higher quality of care, but this has not been proven to be the case for orthopedic care. Not one study has demonstrated hospital employment of orthopedic surgeons improves the quality of care and reduces costs to the overall health care system. This is true with other medical specialties and recent studies have failed to show that hospital employment of physicians in general is associated with evidence of improvement in delivering higher quality of care, based on four key primary composite quality metrics: risk-adjusted hospital level mortality rates; 30-day readmission rates; length of stay; and patient satisfaction scores.

Generational changes

The increase in hospital-employed physicians may not only be a reflection of the changes in health care, but also reflect changes in residents and fellows. The millennial generation has demonstrated characteristics that favor the relatively low-risk practice environment of hospital employment, where administrators and physician leaders are responsible for the business of orthopedics and orthopedists can focus on patient care. Surveys have suggested millennials have a higher priority on life-work balance, lifestyle and social issues than previous generations. They have a higher priority for civic-minded efforts and may favor activities that provide improvements in population health care, even if it affects their own financial rewards.


Overall, the millennial generation seems to be more positive about its financial future than previous generations. With these characteristics, employment by a hospital may seem attractive, whereas members of previous generations may see this as a loss of control and an inability to be rewarded for hard work — a personal style of high-quality patient care and perseverance beyond their peers.

Slower transition

While the number of physicians employed by hospitals is growing rapidly, orthopedic surgeons have been making this transition at a slower pace than other specialties. The perceived lower risk, convenience and focus on patient care is attractive to some, but many orthopedists do not want to give up independence, autonomy and personal approach to providing musculoskeletal care. Private practice provides the opportunity for physicians to maintain autonomy over the business of health care delivery.

Working in a private practice allows orthopedists to make decisions for their patients based on the desire to provide the best care possible and provides the ability to make changes quickly to adjust to new information or procedures. Furthermore, in private practice, the surgeon is motivated to not only perform more cases for more revenue, but also to improve technical skills as higher volume surgeons have been shown to have better outcomes and less complications. In private practice, the orthopedist can take control of the entire episode of care. The physician receives the benefit of increased ancillary revenue instead of the funds being redirected to non-orthopedic interests as these often are in a hospital setting.

As a hospital employee, the physician is provided a safe and secure work environment, although the ability to personalize the environment is limited. Typically, the initial salary offer is more than can be expected from starting in a group private practice, but the maximum amount of possible income is less than private practice. The surgical environment is stable, but important issues such as block time, consistent surgical staff and evaluation of utilization are prioritized from the perspective of the hospital, not the orthopedists. Although orthopedic and spine cases are typically associated with the highest revenue and therefore should be priorities from a business perspective, that is often not a leverage point for a hospital-employed physician.

Previously, issues such as payer mix and volume of care were not a concern for many hospital-employed surgeons, but that is changing. Surgeons are being held more accountable to financial incentives for the hospital, even if that has little or no change in compensation. They often do not have the advantage of considering their contribution to ancillary services. As hospitals acquire more surgeons, existing surgeons are often treated as a commodity, replaceable with another surgeon for less expense and with the impression that skill sets are interchangeable.

Personal decision

Ultimately, the decision to become a hospital employee is a personal one. Surgeons should be introspective about their current and future priorities. Private practice will not be replaced and many practices are becoming more secure and independent from hospital relationships.

However, it is clear there are more opportunities for hospital employment as there are increasing challenges on the private practice model to maintain autonomy, independence and revenue. For an increasing number of surgeons, being employed by a hospital system may provide the environment that fulfills their goals as physicians.

Disclosures: Romeo reports he receives royalties, is on the speaker’s bureau and a consultant for Arthrex; does contracted research for Arthrex and DJO Surgical; receives institutional grants from AANA and MLB; and receives institutional research support from Arthrex, Ossur, Smith & Nephew, ConMed Linvatec, Athletico and Miomed.