Health systems are hiring specialists from private equity-backed companies as hospitals look to reduce costs by cutting out staffing agencies while easing staff shortages.
Higher pay and the prospect of less administrative work have allowed health systems to hire an increasing number of specialists from private equity-backed staffing firms and independent clinics, industry observers said. Health system executives said they plan to directly employ more physicians to combat persistent gaps in specialty care without relying on staffing agencies.The growing number of hospital-employed physicians may galvanize unionization.
Related: Private equity-backed consolidation divides physicians
“Our community needs them,” said Dr. Jason Mitchell, chief medical and clinical transformation officer at Presbyterian Healthcare Services, adding that New Mexico does not have enough doctors to meet demand. “We are happy to provide a bridge for physicians who are leaving their private practice because they can’t work hard enough to overcome not having back-office scale, which our health system has.”
Anesthesiologists have been particularly hard to find as demand grows along with the aging population and as some private equity-funded staffing companies like Envision Healthcare have downsized, health system executives said.
Physicians are increasingly interested in joining Virginia Mason Franciscan Health as the Tacoma, Washington-based system has expanded its recruitment efforts over the past several months, executives said.
“Every health system in the state has had challenges finding anesthesiologists because many of the smaller or larger groups that were private equity-based or independently owned have had challenges with their economic model and the ability to recruit,” said Ketul Patel, CEO of Virginia Mason Franciscan Health System and president of Chicago-based CommonSpirit’s Northwest region. “In many situations, we have brought those physicians in. We’re changing our approach to that hospital-based service.”
Health systems often contract with staffing firms like Envision to supplement their physician workforce. In addition to filling staffing gaps, these arrangements can spread the financial risk of providing care for the uninsured and underinsured. For instance, staffing firms typically take on a portion of a patient's unpaid medical bill. But those staffing agency contracts carried a significant premium that dented hospital margins.
There have been fewer opportunities to contract with staffing agencies after private equity-backed companies pulled out of certain markets or closed entirely. Envision, for instance, emerged from Chapter 11 bankruptcy last year after private equity firm KKR sold its ownership stake.
As a result, health systems have been directly hiring more physicians. In some cases, that is saving those organizations money, given the high rates health systems would pay staffing agencies, experts said.
An Envision spokesperson said in a statement the company is committed to being a reliable partner to clinicians by fighting for adequate reimbursement, providing mentorship and leadership programs and other benefits.
"We remain focused on empowering clinicians and hospitals and supporting the communities we serve together. At times, that may mean transitioning, modifying or expanding services to fit a need," the spokesperson said.
The American Investment Council, an association that represents private equity companies, did not return a request for comment.
“Hospitals are getting smarter,” said Dr. Lisa Newsome, a locum tenens anesthesiologist for Northwestern Medicine in the Chicago area. Newsome has also worked for Penn Highlands Dubois, a health system based in Central Pennsylvania, and for private equity-funded North American Partners in Anesthesia.
“Hospitals are asking, ‘Why should we partner with Envision, which charges $600 an hour meaning that physicians take home about $350, when we could pay physicians $400 an hour and save $200?” she said.
Albuquerque, New Mexico-based Presbyterian, which has a physician group of about 1,200 doctors, has added about 80 physicians over the past year, Mitchell said. The health system recruited many of those clinicians from out of state, a small number of whom were part of private equity-funded companies, he said.
“We might be seeing a shift back to where physicians feel they have a home, connection to the community and continuity,” Mitchell said.
Hiring physicians directly gives health systems more control over treatment pathways and staffing coverage since employed doctors are typically on call, said Dr. Marco Fernandez, president of Midwest Anesthesia Partners, a physician-owned group in the Chicago area. He is also president of the Association for Independent Medicine and a founding member of the Coalition for Patient-Centered Care, which opposes private equity investment in physician practices.
Despite the unpredictable hours under a health system employer, physicians would likely choose to work for a hospital over a private equity firm, he said.
“With a hospital, there is a little room for negotiation,” said Fernandez, referencing some flexibility among hospital employers in compensation and treatment models.
The shift toward physician employment may spur a wave of unionization, Fernandez said.
An increasing number of doctors have looked to join unions seeking better pay, fewer administrative tasks and improved working conditions. For instance, nearly 300 primary care physicians at Boston-based Mass General Brigham filed a petition to unionize this month with the National Labor Relations Board.
“A highly educated profession with resources could potentially create one of the most powerful unions that ever existed,” Fernandez said.
