Trends in Hospital Ownership of Physician Practices and the Effect on Processes to Improve Quality
Tara F. Bishop, MD, MPH; Stephen M. Shortell, PhD, MPH, MBA; Patricia P. Ramsay, MPH; Kennon R. Copeland, PhD; and Lawrence P. Casalino, MD, PhD
A number of reports suggest an emerging trend for physician practices to change ownership from physicians to hospitals.1-8
For example, reports from the Medical Group Management Association’s (MGMA) Physician Compensation and Production Survey found that the percentage of physicians who were employed by hospitals increased from 20% in 2002 to over 50% in 2008.1,9,10
Further, the Center for Studying Health System Change found that in 2010, hospitals were rapidly increasing employment of physicians in 9 of 12 markets.11
An American Hospital Association survey also found that over 200,000 physicians were employed by hospitals in 2010—an increase of 34% since 2000.7
Published reports suggest that the movement toward hospital employment results from multiple factors.1,2,7,12
In particular, policies being adopted by federal and state payers (ie, Medicare and Medicaid) and by health insurance plans, such as the movement toward bundled and capitated payments, encouragement of patient-centered medical homes and accountable care organizations, and incentives for the adoption of electronic health records (EHRs), such as the Health Information Technology for Economic and Clinical Health (HITECH) Act and CMS’s “Meaningful Use” incentive, are thought to be large drivers of a shift to hospital-ownership.
It is unclear how a change to hospital ownership affects the quality of patient care. Given that hospitals generally have greater resources than physician practices, increased hospital ownership of practices may improve quality of care. There is evidence that hospital-owned practices use more recommended care management processes (CMPs) (eg, disease registries, nurse coordinators, health information technology [IT]) and may have the mechanisms to improve care coordination.13-15
On the other hand, there may be negative effects on quality, such as less autonomy for physicians and staff or less personalized care. Hospital ownership may also be associated with increased market share by hospitals, and increased costs.16,17
In this paper, we report findings from a series of 3 national surveys of physician groups conducted between 2006 and 2013, from which, we estimate changes in the use of systematic care management processes and health IT to improve the quality of care after practices were acquired by hospitals.
We used data from the 3 largest national surveys of physician practices in the United States: the National Survey of Physician Organizations 2 and 3 (NSPO2 and NSPO3) and the National Survey of Small and Medium Physician Practices (NSSMPP).18-20
The sample, methods, and content have been described previously and are outlined in eAppendix 1
(eAppendices available at www.ajmc.com
Briefly, all 3 were 40-minute telephone surveys with the medical director, president, or chief executive officer of the physician organization, and focused on the use of evidence-based CMPs and health IT, particularly for patients with asthma, diabetes, congestive heart failure, and/or depression. All 3 surveys collected information on the structural characteristics of the group (eg, number of physicians, ownership, specialty mix) and the external incentives that were in place to improve quality (eg, payment for achieving quality measures, public reporting), in addition to the CMPs and use of health IT noted above.
NSPO2 collected data in 2006 and 2007, focusing on large practices with 20 or more physicians; NSSMPP collected data in 2007 through 2009, focusing on small and medium-sized practices with 1 to 19 physicians; and NSPO3 collected data in 2012 and 2013, including practices of all sizes. Academic faculty practices were excluded from these surveys. The adjusted response rates for each survey were 60.3% for NSPO2, 63.6% for NSSMPP, and 49.7% for NSPO3.22
(Further details are shown in eAppendix 1).
This article focuses on 2 comparison groups: the first comparison group includes large practices that responded to both NSPO2 and NSPO3 and were owned by physicians at the time of NSPO2 (n = 73); the second comparison group includes small/medium practices that responded to both NSSMPP and NSPO3 and were owned by physicians at the time of NSSMPP (n = 768) (eAppendix 2
). We also report summary statistics for all the practices that responded to NSPO2, NSSMPP, and NSPO3, including the percentage of practices owned by hospitals in each of these surveys.
Given the complex sampling structures of NSPO3 and NSSMPP, population ratio-adjusted weights were derived based on sampling probabilities with poststratification adjustments.23
The main predictor variable was ownership, which was measured with the question: “Who owns the equipment and employs the nonphysician staff of your medical practice?” Response categories included physicians; a larger medical group; a hospital, hospital system, or healthcare system; an HMO or insurance entity, or nonphysician managers. We categorized ownership into 3 categories: 1) physician-owned if the respondent stated that the practice was owned by physicians or a larger medical group; 2) hospital-owned if the respondent stated that the practice was owned by a hospital, hospital system, healthcare system, HMO, or insurance entity; and 3) other ownership (eg, federally qualified health center or other nonprofit practice).
To explore the effect of change in ownership on the use of evidence-based CMPs and health IT, we calculated a CMP index and a health IT index.18
(These indices have been described previously and are outlined in eAppendix 3
.) Briefly, the CMP index ranges from a score of 0 to 20 and is based on a practices’ use of disease registries, nurse care managers, feedback of quality data to physicians, reminders to patients, and nonphysician staff for patient education. The health IT index ranges from a score of 0 to 14 and is based on a practice’s EHR capabilities, including documentation, clinical decision support, quality measurement, order entry, access to data, and connectivity with patients.
For large practices that responded to both NSPO2 and NSPO3 (comparison group 1, described above), we calculated the change in the CMP and health IT indices and used multivariate linear regression to compare the change in these indices between practices that changed ownership from physician-owned to hospital-owned, and practices that remained physician-owned, while controlling for other practice characteristic. We did a similar analysis for small/medium practices (comparison group 2, described above).
Hospital Ownership of Practices
Among all the practices that responded to NSPO3 in 2012 and 2013, 287 (13.2%) physician practices were owned by hospitals. (The characteristics of the practices in our sample are shown in eAppendix 4
.) Among large practices, 26.6% were owned by hospitals in 2004 through 2006, and 35.6% were owned by hospitals in 2012 and 2013. Among small and medium practices, 8.3% were owned by hospitals in 2007 through 2009 and 11.3% were owned by hospitals in 2012 and 2013. (The change in ownership is shown in eAppendix 4).
Changes in Care Management and Health Information Technology
Among large practices that were physician-owned in 2005 and 2006, those that changed to hospital-owned had, on average, a lower baseline CMP score than practices that remained physician-owned (30.8 [SE = 6.4] vs 47.0 [SE = 3.1]; adjusted P
= .03) (Figure
). By 2012/2013, practices that were acquired by hospitals had similar CMP scores compared with practices that remained physician-owned (41.8 [SE = 7.8] vs 40.0 [SE = 6.2]; adjusted P
= .14), which reflected a significantly higher increase among practices that changed to hospital ownership (11.0-point increase vs 7.0-point decrease; adjusted P
Among small and medium practices that were physician-owned in 2005/2006, those that changed to hospital-owned had a similar baseline CMP score compared with practices that remained physician-owned (20.0 [SE = 2.4] vs 18.4 [SE = 0.5]; adjusted P
= .10). By 2012/2013, small and medium practices that were acquired by hospitals had a slightly, but statistically significant, higher CMP score compared with practices that remained physician-owned (23.8 [SE = 4.4] vs 21.0 [SE = 0.7]; adjusted P
= .03), which reflected a significantly higher increase in the CMP score among these practices (3.8-point increase vs 2.6-point increase; adjusted P
At baseline, health IT index scores were similar among large, hospital-owned practices and physician-owned practices (53.5 [SE = 12.1] vs 40.0 [SE = 6.01]; adjusted P
= .54) and increased similarly for both groups (29.7-point increase [SE = 6.7] vs 32.2-point increase [SE = 5.4]; adjusted P
= .79). Among small practices, those that changed ownership had a higher baseline health IT index score (39.6 [SE = 1.9] vs 31.4 [SE = 0.3]: adjusted P
<.001). In both groups, the health IT index increased a similar amount [17.2 [SE = 2.3] vs 17.2 [SE = 1.3]; P
In this analysis of 3 national surveys of physician groups, we found that the majority were owned by physicians at all time periods; however, practices that were acquired by hospitals had greater change in their use of CMPs compared with practices that remained physician-owned. We found no difference in the use of health IT among practices acquired by hospitals versus those that remained physician-owned.
The current findings suggest that hospital acquisition of practices may have beneficial effects for patients with chronic illnesses. We found significant increases in the use of recommended evidence-based CMPs among practices that changed to hospital ownership compared with practices that remained physician-owned. This was true for practices of all sizes, and may be the result of more financial resources or shared resources that become available to practices as they are acquired by hospitals.
Like CMPs, one could argue that the financial resources of a hospital enable practices to cover the capital expense of installing an EHR system. Our findings do not support this hypothesis, however, as we found no difference in the use of health IT or change in the use of health IT in practices that were acquired by hospitals versus those that remained physician-owned. This may be due to policies such as the HITECH Act, enacted under the American Recovery and Reinvestment Act of 2009, which provided incentives for the meaningful use of health IT (and EHRs in particular).24
However, there may be off-setting negative effects if practices acquired by hospitals enable them to raise prices through increased negotiating leverage with payers. A recent study found that markets where hospitals report an increase in ownership of practices were associated with higher healthcare spending.14
Hospital acquisition of practices may also have unintended effects on physician autonomy or rapport with patients—although, to date there are no data to support this possibility.
There are 2 main limitations to the present analysis. First, the response rate ranged from almost 50% to more than 63% across the 3 surveys. Although this is a robust response rate—particularly for physician groups—there may be unobservable differences between respondents and nonrespondents. Second, the data are based on the responses of a single informant in each group. We sought the person who was the most knowledgeable respondent for the questions asked; however, it was beyond the scope of our research to validate the responses. Nevertheless, a number of internal checks of the responses suggested consistent validity.
These surveys of physician groups showed minimal increase in the percentage of practices that were owned by hospitals. However, there appears to be increased use of processes for the management of chronic disease among practices that did change ownership. As the healthcare environment continues to change and evolve due to changes in public and private policies, it will be important to continue to monitor both the prevalence and the effects of hospital ownership of practices on patients and physicians. This is particularly important, given the current findings that those practices that became hospital-owned experienced a significant increase in their use of recommended evidence-based CMPs for patients with asthma, congestive heart failure, depression, and diabetes. Future research should examine the relationship between practice ownership and clinical and patient-reported outcomes of care.
The statements, findings, conclusions, views, and opinions contained and expressed in this article are based in part on data obtained under license from the following IMS Health information services: Healthcare Organizational Services, (2007) IMS Health Inc. All rights reserved. The statements, findings, conclusions, views, and opinions contained and expressed herein are not necessarily those of IMS Health Inc, or any of its affiliated or subsidiary entities.