Another factor is negotiating clout with healthcare payers. When a hospital employs a greater proportion of physicians in a healthcare market, it can often negotiate more favorable payment rates with health insurers. The Federal Trade Commission has taken an interest in this trend, lodging complaints against hospitals for employing too high a percentage of local physicians. In some cases, the FTC has even filed lawsuits against such hospitals.

Hospitals also argue that by employing physicians, hospitals can achieve greater integration of care. For example, they say they can reduce needless variations in practice, including the use of different medical devices for the same procedure, such as knee joint replacement. They also argue that they can ensure better coordination of care between different medical specialties, as well as between physicians and other hospital-employed health professionals such as nurses.

This is not the first time that hospitals have gone on a medical practice buying spree. Something similar took place in the 1990s when the rise of managed care made it appear that hospitals needed to exert more control over patient referral patterns. But widespread public revolt against managed care quickly led to the opening up of such network restrictions. Moreover, as physicians became employees, their productivity fell. Before long, hospitals began divesting themselves of physician employees.

Hospitals hope that this time will be different. For one thing, more sophisticated information systems enable hospitals to do a better job of tracking physician behavior. Even if hospitals lose money on a per-physician basis, they hope that more favorable payment rates and control of referrals will enable them to make up the difference. If successful, they would both get more patients and generate more revenue per patient.

But there is another pitfall in physician employment. Compared to the independent physicians of 20 years ago, today’s employed physicians often exhibit poor morale. It is easy to see why. When physicians become employees, they forfeit a substantial degree of professional autonomy. They are subjected to more institutional rules and regulations, feel increasing pressure to practice according to prescribed patterns, and often labor under escalating productivity quotas.

A related danger is a loss of autonomy on the part of the entire profession of medicine. Increasingly, physicians find themselves working for non-physicians, individuals who never trained in the health professions or cared for the sick. As the trend toward physician employment continues, the people in charge of medical practices are less likely to sport white coats and stethoscopes and more likely to be in business suits. Many physicians feel they are losing control of their profession.