How Hospitals Can Get the Most Value from Their Physicians

H&HN opinion piece from Navigant experts Jeff Goldsmith, Jimmy Burnett, and Ross Nelson, M.D.

Originally published in Hospital & Health Networks (H&HN)

"Hospital and health system management need to take a more holistic view of the role of their physician practices to fully realize their value," write Navigant experts Jeff Goldsmith, Jimmy Burnett, and Ross Nelson, M.D. in this H&HN opinion piece.

In the past decade, as the baby boom physicians who had dominated our health system edged toward retirement, hospitals filled the gap in care by employing a sizable number of new medical graduates. According to the American Hospital Association, in 2014, hospitals employed almost 123,000 physicians (not counting interns and residents but including dentists), a 76 percent increase since 2003. How hospitals maximize the value of their substantial physician franchise has become a major strategic challenge.

The immediate result of the physician employment surge was escalating financial losses. With hospitals’ top-line revenues and volumes mostly flat, physician compensation (including call pay and directorships) became many hospitals’ fastest-growing expense. A recent report by Moody’s Investors Service found that physician employment was damaging hospital operating margins and, thus, their creditworthiness.

Ultimately, hospital and health system management need to take a more holistic view of the role of their physician practices to fully realize their value.

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