Georgia gains on shifts in physician employment models
- Inelasticity in demand, an aging population and changes in healthcare policy have led to steady and continued growth in healthcare employment—outpacing total non-farm job numbers and wage growth through 2024 for most industries.
- Georgia will be an acute winner due to availability of workforce and a growing population.
- Physician demand is strong, but lack of supply will require technology implementation and improved employment models.
- This will increase the need for physician assistants or nurse practitioners to fill the gap.
Capital seeking healthcare consolidation provides physicians security of employment, if they want it. - Factors to watch carefully are:
1. Lifting of uncertainty within the market,
2. Flow of capital toward and away from healthcare consolidation,
3. Technologies that remove the complication from medical billing,
4. Compression of physician pay and/or improving hospital profitability.
Executive Summary
In career news, healthcare is everywhere. That’s because the healthcare industry is projected to add over 4 million jobs in the period from 2012-2014—more than any other industry, according to the U.S. Bureau of Labor Statistics. And it is projected to be among the fastest-growing industries in the economy. Several factors put Georgia in place to be a huge beneficiary of this, but at the center are physician employment models that are changing—demand increases but supply is flat or declining. Other employment and healthcare delivery models are rolling out, but several unknowns stand in between today and clarity on the future. This article looks at the current state of physician employment and then addresses some of those unknowns and how they will affect the region as a whole.
Employment Trends: Past and future growth
Employment in the healthcare industry has been growing steadily for years. (See Exhibit 1) This growth is due, in part, to people depending on health services no matter what the economic climate. Even when total U.S. employment fell during the 2007–09 recession, for example, healthcare employment continued to rise. It would seem, healthcare is recession-proof. 1
The latest projections show employment among health practitioners is expected to increase by 16.4% from 2014-2024, which is significantly more than the average for occupations in general (+6.5%). 2
Job growth will most likely be the result of continued expansions of health-care-related industries. The growing and aging population is expected to contribute greatly to the overall physician job outlook as consumers continue to seek high levels of care that use the latest technologies, diagnostic tests and therapies. And, the Affordable Care Act, now the law of the land, will continue providing more Americans with health insurance.
Even more impressive is the anticipated surge in healthcare jobs expected for Georgia. Despite Georgia’s population of younger insured (Medicare beneficiaries constitute only 13% of the overall residents3) we will receive more than our fair share of healthcare jobs because Georgia is a recipient of greater than average in-migration.
The latest 10-year healthcare employment projections for Georgia shows just how significant these increases are, compared to the U.S. overall. The state’s number of practicing Surgeons is expected to increase (45%) at a rate nearly twice that of the U.S. (23%). OB/GYN (40%) and Pediatricians (39%) in Georgia are also expected to grow at a much higher rate, compared to the nation (14% and 16%, respectively.)4 (See Exhibit 2)
Reflecting the more complex healthcare needs of the growing elderly population and their higher rates of hospitalization and surgery, inpatient hospital days are projected to increase by about 19% between 2013-2025.5 Therefore, more physicians specializing in cardiology and radiology will be needed as the risks for heart disease and cancer increase as people age.6
Many medical schools are also increasing their enrollments based on perceived higher demands for physicians. Medical school enrollment in Georgia has grown more than three times the national average of states, ranking 8th for growth in student enrollment.7 From 2004-2014, Georgia’s enrollment grew by 70%, compared to the overall state median of 21%. (See Exhibit 3)
Is There a Doctor in the House?
Medical associations and industry organizations are predicting that the demand for Primary Care physicians (PCPs) will outpace the number of other doctors in the years ahead. But many believe PCPs, in particular, are becoming extinct. Currently, 30% of all physicians practice primary care (compared to about 70% in most other developed countries and about 70% in the United States fifty years ago) and this percentage is shrinking at a steady rate.8 Older PCPs are retiring early. Many others are closing their practices or seeking employment at local hospitals. And there has always been a shortage of primary care physicians in rural and urban areas. Although medical school enrollment is up, most graduates enter specialty care rather than primary care training, driving the ratio of PCPs to specialists of 30%-70% ever wider.
Despite the impressive demand growth for healthcare in Georgia, the state struggles with a serious primary care shortage, as well. It is identified as one of the worst states for its PCP-to-patient population ratio. Based on per capita treatment, Georgia ranks 39th among states for its low number of primary care physicians per 100,000 population in 2014.9
With a number of economic pressures, PCPs are forced toward increased volume of patients per day in an environment of increasing overhead. Fewer and fewer medical school graduates are opting for primary care, too (See Exhibit 4).
Could Primary Care Physicians be Replaced by Non-MDs?
Although the demand for physicians and surgeons should continue, some factors will likely reduce the rate of growth. New technologies will allow physicians to treat more patients in the same amount of time, thereby reducing the number of physicians who would be needed to complete the same tasks. Physician assistants and nurse practitioners can do many of the routine duties of physicians and are increasingly being utilized to reduce costs at hospitals and outpatient care facilities. In fact, the demand for these advanced practitioners are expected to improve significantly in the near future, considering the growth of the aging population, and the supply of physicians in shorter supply.10
Georgia is projected to experience a 54% increase in Nurse practitioner positions and 68% among physician assistants from 2012-2022, compared to 35% and 38% growth, respectively, nationwide. (See Exhibit 5)
Furthermore, demand for physicians’ services is sensitive to changes in healthcare reimbursement policies. Consumers are seeking fewer physician services, as changes to health coverage have resulted in higher out-of-pocket patient costs.
Mergers & Acquisitions – Healthcare’s Version of Darwinism
In 2014, 100 mergers or acquisitions took place in the hospital industry, reaching “record-breaking” proportions, according to Irving Levin Associates. And in the first nine months of 2015, nationwide mergers and acquisitions worth about $270 billion had already been announced, outpacing previous records.11
As a result, the shift toward large health system employment of physicians will continue. In the latest 2015 Medscape report, 63% of physicians said they are now employed, with less than a third (32%) in private practice. This is even higher among women (72%) compared to men (59%). This rise in popularity follows the trend reported by a major physician recruiter, which revealed a hospital employment rate of doctors at 11% in 2004, rising to 64% in 2014.12
With all the mergers creating medical enterprises, it’s no wonder physicians are seeking security in hospital employed healthcare groups, and hospitals are consolidating to achieve scale. It’s healthcare’s version of Darwinism—the survival of the fittest requires adaptation. Physicians are adapting by becoming hospital employees in growing numbers due to the increasingly uncertain environment and burdensome administrative requirements in private practice. But they aren’t naive: they acknowledge they’re trading autonomy for security, and in most cases, recognize that their income may be less in time. (See Exhibit 6)
According to Medscape’s study on employed doctors, the financial challenges of private practice played a huge role in prompting more than a third of physicians (38%) to seek employment with a larger health system. Not having to worry about billing, office management, and administrative issues was the key motivator for about 29% of respondents, and working shorter and more regular hours had the strongest pull for 19% of employed doctors.13
Factors That Will Determine the Future
Uncertainty in the Market. Since Obamacare became the law of the land, uncertainty has wracked the market. Physicians sought safety within health systems who purchased practices, patients, equipment and contracts. As the uncertainty begins to lift, physicians will begin to look outside of their employer systems for opportunities to advance their careers. Many professionals are saying that it’s different this time, and they may be right, but uncertainty always lifts and when it does, physicians will be looking for a more lucrative path.
Capital Flow for Mergers and Acquisitions. Should uncertainty lift and physicians return to entrepreneurial pursuits, a continued flow of capital into the market could still drive physician employment. If debt capital becomes significantly more expensive, hospital systems may decide to unemploy physicians and force them back into the market. The flow of capital is likely the greatest catalyst in determining physician employment models going forward.
Technology. Everything from simplified medical billing to remote telemedicine offers the promise to change the trajectory of physician employment models. Removing complexity that has been built into (and recently reinforced with the requirement of big data) the system will likely increase the courage that physicians have to enter back into the market independently.
Profitability. On either end—compression of physician compensation or significant improvements in hospital profitability—physicians on the fence about employment or independence will enter back into the market. The Goldilocks Quandary—keeping profitability hot enough to increase physician pay but cool enough not to entice them to go on their own—is improbable. At either end, with the help of one or two of these other factors, it means independent physician delivery models pick up.
Today, more than 200,000 physicians in the U.S. are employees, and three in four medical residents will start their career as employees of a medical group, hospital or faculty plan.14 But just like your arms’ resting position is down by your sides, physicians won’t stay employed forever. There’s just too much pushing them to embrace risk and independence. It’s not if, but when.
1 Torpey, E & Hogan, A. (2014, Spring). “Working in a Gig Economy.” Career Outlook report. Bureau of Labor Statistics. Available online at www.bls.gov/ooq
2 News release (2015, Dec. 8). “Employment Projections – 2014-24.” U.S. Bureau of Labor Statistics. Available online at http://www.bls.gov/news.release/pdf/ecopro.pdf
3 Reese, S. (2015, May). “Medscape Best & Worst Places to Practice 2015.” Medscape. Report available online at http://www.medscape.com/features/slideshow/best-places-to-practice-2015
4 “State Occupational projections 2012-2022.” Developed by Bureau of Labor Statistics. Accessed March 2016 online at http://www.projectionscentral.com
5 Dallas, T. (2014, Feb.). “Making the Case for More Specialist Training.” Physicians Weekly. Available online at http://www.physiciansweekly.com/specialist-training/
6 Preventative Medicine Physicians – Job Outlook and Opportunities to Get Ahead. Accessed online March 2016 at http://www.myfuture.com/careers/growth/preventive-medicine-physicians_29-1069.09
7 (2015, Nov.). “2015 State Physician Workforce Data Book”. Association of American Medical Colleges. Center for Workforce Studies. Available for download at http://members.aamc.org/eweb/upload/2015StateDataBook%20(revised).pdf
8 Schimpff, S., MD. (2014, Feb. 17). “Why is There Shortage of Primary Care Physicians?” Web blog post. KevinMD.com. Available online at http://www.kevinmd.com/blog/2014/02/shortage-primary-care-physicians.html
9 (2015, Nov.). “2015 State Physician Workforce Data Book”. Association of American Medical Colleges. Center for Workforce Studies. Available for download at http://members.aamc.org/eweb/upload/2015StateDataBook%20(revised).pdf
10 Dunkin, M. (2014, Dec.). “In Transition” Georgia Trend. Available online at http://www.georgiatrend.com/December-2014/In-Transition/
11 Abelson, R. (2015, Oct. 29). “Health Care Companies in Merger Frenzy.” The New York Times. Available online at http://www.nytimes.com/2015/10/30/business/dealbook/health-care-companies-in-merger-frenzy.html?_r=0
12 Florence, T. (2014, June 30). “Trends in Physician and Advanced Practitioner Employment.” Candidate Corner blog post. Merritt Hawkins. Available online at http://www.merritthawkins.com/Candidates/BlogPostDetail.aspx?PostId=40004
13 Kane, L & Peckham, C. (2014, April). “Medscape Physician Compensation Report 2014.” Medscape. Report available online at http://www.medscape.com/features/slideshow/compensation/2014/public/overview
14 Keckley, P., Ph.D. (2015, July 27). “A Fresh Look at Physician Employment by Hospitals.” Pulse Weekly blog post. Navigant. Available online at http://www.naviganthrp.com/a-fresh-look-at-physician-employment-by-hospitals/
Beki Golden