Recently, a Maryland hospital made headlines in its community by splitting with a longtime community physician group. The group had originally been in private practice but a number of years ago had become employed by the hospital. Its members later decided to resign and join a large regional private practice. The result was a loss of their privileges to practice in the hospital. They can practice in the community and can visit their patients but can’t manage them in the hospital. This has upset many patients who can no longer be in their care if they are hospitalized there.

Why did this happen? What relationships between physicians and hospitals affect our health care?  Two main factors are involved: privileges and, when applicable, employment. 

Privileges

Having a medical license does not automatically allow physicians to practice in a hospital. Each hospital is required to decide who may do so in its facilities. Physicians apply for “privileges” on the hospital’s medical staff in their specialty. Having privileges allows them to admit and care for patients in that hospital. 

A hospital doesn’t own its medical staff but has a legal relationship with it through the medical staff’s bylaws. In addition to providing and ensuring the quality of medical care, the medical staff’s responsibilities include reviewing an applicant’s qualifications and experience. The Hospital Board, with the medical staff’s recommendation, may then grant privileges to practice there and care for patients within the applicant’s specialty. Having privileges is not employment.

Privileges provide some insight into the quality of a physician’s practice. Hospital credentials committees look closely at physicians’ training and experience, their references, Board certification, and any issues with the state Board of Physicians before granting privileges. Their quality review programs provide ongoing oversight of their hospital care. So privileges indicate a degree of review and approval of their qualifications and work within the hospital.

Employment

The rising cost of health care has become a growing national concern. Before 1980 physicians were self-employed or in private groups and set their own fees, which insurers paid within limits. Medicare, Medicaid, and insurers worked to reduce health care costs, in large part by reducing reimbursement to physicians by law or through contracts with physicians and hospitals. This was effective because most people would choose a physician who had a contract with their health plan. 

As a result, most physicians began to have multiple insurer contracts, each of which required them to accept the insurer’s billing procedures and fee schedule. This has reduced reimbursement and increased the cost of running an office. Maryland is one of the lowest-ranked states for physician reimbursement, and Southern Maryland is reimbursed lower than central Maryland. Many physicians have turned to employment rather than owning and operating a practice.  

There are several employment options for them. A few private practices still hire new associates on salary. Large regional or national practice associations employ physicians in multiple offices. Practice management companies have found a niche by employing physicians in a single specialty and contracting with hospitals to provide their services. This appeals to many specialists as it allows shift work and helps them achieve work-life balance. Hospitals themselves, or their parent organizations, have become major employers of physicians as well. 

Effects

Employment offers economic stability to the physician. Their salary provides a buffer against wide swings in practice revenue, a frequent frustration in self-employed practice. It also helps support a physician just starting in practice, when few appointments have been made and insurer affiliations are not in place yet. That stabilization may give patients more confidence that their physician will be there next year and the year after.

Employers are very concerned about practice quality and patient satisfaction, so they tend to set metrics and look closely at how well their physicians are doing. Physicians themselves tend to be self-motivated about the quality of their work and keeping patients happy, but it doesn’t hurt that employers often reward them for doing those well. 

Privileges at a hospital with a good reputation usually indicate high standards for physicians they accept. As noted, it doesn’t mean that they work for the hospital. However, they may be participants in or leaders in specialty programs or centers of excellence run by the hospital that may interest you. In combination with a reputable employer, privileges can add to your sense of confidence in their care.

There are a few aspects of employment that may have indirect effects.

A few health care systems are “self-contained” including hospitals, physicians, other medical professionals, and their own managed care insurance products. If you have that insurance you may be limited to only using their providers.

Hospitals logically require obtaining privileges as a condition of employment. Management companies require physicians to obtain them with contracted hospitals as well. Most employment contracts stipulate that if the physician and employer split up, the physician voluntarily resigns their privileges. If one of them is your doctor, they will not provide care there any longer. This happened to the group noted at the beginning of this blog.

Another condition of employment as a physician is the non-compete agreement. If the physician and employer sever the relationship, the employer usually does not want the physician setting up a competing practice nearby, so the physician is required by the contract to leave the area if that occurs. That could also affect your care.

So, the changing environment for physicians has been altering their practice choices, with effects on their relationship with hospitals and with their patients. There’s no automatic benefit or detriment to seeing an employed physician versus one in private practice, or a physician who has hospital privileges versus one who doesn’t. But the above factors might be important to you in choosing yours.

About Dr. Joseph Moser

Dr. Joseph Moser is the Chief Medical Officer at University of Maryland Charles Regional Medical Center. He has over 40 years of experience in the health care field and now oversees all of UM Charles Regional Medical Center’s doctors on staff.