Physician Compensation Supply of Medical Services

ACOs transform physicians from entrepreneurs into salarymen

That is the finding from a recent study by Mahajan et al. (2018).  The authors use data from the American Community Survey between 2011.  They compare hours worked and the share of physicians who were self-employed over time.  To determine whether any changes were correlated with increaed Accountable Care Organization market share, the authors examined regional variation — where region is defined as a hospital referral region (HRR) — in physician work profile based on the change in ACO market share in a given HRR.  They found that:

a 10–percentage point increase in accountable care organization enrollment in a hospital referral region was associated with a statistically significant reduction of 0.82 work hours per week among male physicians. In addition, the 10–percentage point increase was associated with a decrease of 2% in the probability of all physicians being self-employed.

With individual physicians or small physician practices no longer bearing the full risk and reward from their practice, we see that physicians appear less entrepreneurial, work fewer hours, and are more likely to be an employee than an owner or partner.  Your thoughts on whether you believe this is a positive or negative development likely depend on whether you believe that physician entrepreneurs lead to more innovation, creativity and effort or the profit motive will distort physician incentives.

1 Comment

  1. Or one could say that the smartest entrepreneurs go where the money is. With larger medical groups employing physicians, they get to sit at the helm of the practice of medicine and will increase those procedures and prescription methods which generate the most income. This, in turn, should increase the salaries for physicians.

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