Industries—big and small—have natural life cycles. There’s birth, then proliferation, competition thins the herd, then consolidation. The hospitalist movement within the healthcare industry is no different, as frequent contributor Jay Greene points out in this issue’s Top Story.
In 1996, when the term "hospitalist" first appeared in an article in the New England Journal of Medicine, there were about 800 physicians nationwide who specialized in taking care of hospital patients in lieu of the patients’ own primary-care doctor. More than a decade later, that number has jumped to 15,000, according to the Society of Hospital Medicine.
In between that time, a number of entrepreneurial physicians saw a business opportunity. They formed small businesses, hired hospitalists and contracted them out to hospitals across the country. Many of those businesses served small geographic markets with small pools of hospital clients. But it didn’t take long for the big boys to sniff out a business opportunity in the $2 trillion healthcare industry.
As Greene points out in his piece, national companies like IPC-The Hospital Co., Team Health, South Inpatient Physicians and Cogent Healthcare are on a feeding frenzy, gobbling up small hospitalists shops across the country. Interesting, three of those four firms are run by physicians-turned-businessmen.
What does all this mean for hospitals and other institutional providers that use outside help to staff their hospitalist needs? The polar views are not surprising. The users fear less choice, worse service and higher prices as would any consumer watching a market consolidate into a handful of big players. The sellers, of course, say never fear. Consolidation will offer more choice and better service at competitive prices, they vow. And besides, they add, the hospitalist market is still saturated with smaller operations, and users will continue to have plenty of choices.
Here’s our guess at what may happen next. The big players not only will buy up smaller hospitalists businesses, they’ll also soak up most of the individual hospitalists themselves. That may lead to a shortage of qualified physicians to hire out to institutional providers. Those institutional providers, in turn, may start recruiting their own hospitalists rather than outsourcing that function to the major companies. It’s only natural.