In defense of the employed physician

Share with your friends


I wish to make one clarification and one prediction regarding employed physicians.

The clarification is this:  There is a common misconception that if healthcare operated under free market conditions, it would primarily be a cottage industry of solo practices and of small physician-owned hospitals.  Such operations would not develop the capabilities of large healthcare entities that we commonly associate with central planning.

In reality, however, the opposite would be the case. If healthcare were unregulated, many physicians would ultimately become employees in large organizations because patient demands for better and more specialized care would foster the emergence of large medical firms that would accelerate an effective and innovative division of labor.  Economist Per Bylund has elaborated a general theory of the development of the firm along those lines.

In the case of healthcare, the historical record also supports that contention.  My favorite example is that of the Mayo Clinic, a product of the free market and a stellar example of an organization that pushed the boundaries of innovation and specialization.

In the Sketch of the History of the Mayo Clinic and the Foundation, we learn that William W. Mayo and his two sons rendered all medical and surgical physician duties until 1892.  Thereafter, however, doctors were rapidly added to the staff so that, by 1920, the clinic was offering an astonishing number of specialized services: a dozen or so surgical and medical services, and laboratories which included clinical and surgical pathology, roentgenology, electrocardiography, metabolism, and biophysics!  In addition, the Mayo supported a large number of associated professional services, a division of records,¹ a division of correspondence, and a division of publication.

Another example is the Cleveland Clinic which was founded on a model emulating the Mayo Clinic.  By 1921 it had 14 employed physicians on staff, and would later go on to employ many more.  If the healthcare market had been left unhampered, it is likely that many similar institutions would have emerged to serve the public.

Instead, political maneuvering by the American Medical Association in the 1920s and 1930s ensured that hospitals would adopt organizational models that preserved the autonomy of the medical staff and discouraged the employment of physicians.  The argument advanced in favor of such arrangements was that a physician’s relationship to patients was unique, and being accountable to a third party constituted “a conflict of interest.”

In effect, the autonomous medical staff model, established by state-level regulations, promoted a peculiar structure where authority and accountability for the care of patients was split.  This allowed many physicians to remain self-employed which, in many ways, hampered the development of truly efficient medical firms.

Today, the push for accountable care organizations (ACOs) is sensing the error of the past and turning the argument 180 degrees:  we are now told that the employment of doctors no longer constitutes a conflict of interest but, instead, fosters “an alignment of interest” for better utilization of resources.

So the prediction is this:  When the current reforms pushing physicians to become employees fail to solve the healthcare crisis, doctors will be blamed for being employees.

We are already seeing signs of this.  In a lengthy article on “The Tangled Hospital-Physician Relationship,”  Health Affairs describes how the tug-of-war between hospitals and physicians is evolving: Decades ago, doctors had the upper hand.  In the era of the ACO, it is hospitals that dominate.

Unfortunately, employed MDs are not fulfilling the promise of the alignment of interests:  In addition to increasing payroll expenses for ACOs, physicians contribute to increased utilization of healthcare.  How dare they!  Since medical licensing laws continue to place doctors at the nexus of all healthcare transactions, the scapegoating is unlikely to abate.

In defense of the employed physician, I would like to make the following points about the ethics of being an employee and its potential for conflicts of interests:

Ethics pertain properly to the behavior of individuals and to the choices they make, not to the position they hold.  I have known employed physicians who, day in and day out, demonstrate heroic dedication to patients—far greater than I could show—and who give of themselves far more than they materially receive in exchange.  In my opinion, the motivation to excel has little to do with external rewards or financial gain.

Conversely, bad apples are not confined to any particular setting.  There is nothing intrinsically unethical or conflicting about being an employed physician.  As I have argued many places before, the main systemic dislocation of interests is in the practice of third party payment and its inevitable moral hazards, not in the employment status of physicians.

I must emphasize that even direct pay and free market arrangements do not eliminate potential for conflict.  In the free market, for example, physicians are under pressure to please patients.  In many instances—but not always—promoting health and pleasing patients are converging goals.  At times, however, physicians whose income depends directly on satisfying the patient may be tempted to make unhealthy accommodations in the care they provide.

No matter the setting, then, there are opportunities to shine or fumble.  Physicians wanting to practice medicine, then, may have good reasons to seek employment in a large organization.

First of all, no matter how foolish the healthcare system is, and no matter how misguided the current reforms are, there’s a practical argument to join an ACO: that’s where patients are being corralled.  If one wishes altruistically to have a busy practice, it seems logical to follow that trend.

Secondly, physicians have families and personal obligations.  In these tumultuous times, it’s perfectly reasonable to bet on what may seem like a more financially secure prospect.  In addition, the regulatory burdens of medical practice are enormous, and so are the liability risks of being found “non-compliant” with the rules.  It is therefore rational to seek cover under the umbrella of an ACO.

Third, the ACO idea is the logical next step in a series of interventions begun decades ago once society agreed to objectify the doctor-patient relationship.  What could a doctor possibly do individually to counter that sociocultural trend?  Given our current state of affair, some degree of cooperation with evil seems inevitable no matter what the practice setting might be.

So I just wanted to lend moral support to my colleagues who can’t avoid the machine and who continue to do their best to help patients and remain faithful to the profession.  As we’ve all learned in medical school, illegitimi non carborundum.

[Related article: One hundred years of managed care]


1. The Mayo Clinic pioneered the development of the modern medical record in the early 1900s.  The department of records became legendary for its astounding capabilities and was key to the Clinic’s success in clinical research.  What a sad sign of decline to see that the Mayo was compelled last year to adopt the maligned EPIC electronic health record system!

Leave a Reply

Your email address will not be published. Required fields are marked *

6 thoughts on “In defense of the employed physician

  1. Michael–you missed target this time.
    ACOs are mini-HMO insurance corporations where doctors are bedside gatekeepers with pay contingent on restricting care. Order “too much” (whatever the corporate bosses say that is) and get a “negative payment adjustment”; order less care and enjoy a “bonus opportunity” reward [fed-speak, not mine–see House Committees on Energy & Commerce and Ways & Means and the Senate Committee on Finance Staff. SGR Repeal and Medicare Provider Payment Modernization Act; Feb 6, 2014. Available at: Accessed Dec 6, 2015. ]. ACO gatekeeper bonus pay contingent on restricting patient access to medical care is simply profiteering wrapped in the noble-cause sophistry of “reform,” “stewardship,” “accountability,” or whatever. It creates a patently corrupt financial conflict of interest between ACO corporate gatekeepers and patients.
    The Mayo clinic practices medicine. Mayo experimented with doing an HMO years ago and failed.
    ACO insurance corporations have no patients, no money, no sales force, no actuaries, no lobbyists, no tax-free reserves, and no back office. Of necessity ACOs must have a “joint venture” (the FTC euphemism for its wavered merger mania result) with a real insurance corporation, an HMO.
    So ACOs are not just group practices–they are insurance corporations practicing medicine with gatekeepers bribed to protect corporate treasure.
    And the Mayo is a group practicing medicine.
    Your insights are always quite wonderful–you missed the target only once in hundreds of blogs; keep up the good work and Thanks, Bob

    • Thanks, Bob, I don’t disagree with you and I don’t think I was exculpating ACO’s. I just wanted to point out that being an employee is not per se a conflict of interests.

      • Michel,

        Thanks. By definition ACOs are mini-insurance corporations where underwriting the population costs is shifted to docs (or “teams”) at the bedside. This corporate gatekeeper wearing a stethoscope is quite different from an employee, which is the distinction I was trying to make. A patient can’t trust a profiteering (“incentivized”) gatekeeper, but theoretically can trust an employee. I say theoretically, because corporate employees not “incentivized” (i.e., paid a salary and or FFS) can still be intimidated into non-monetary gatekeeping, when a termination slip could be in their next pay envelope. Our current crop of hospitalists here in the Twin Cities are not yet “at risk” in the merged local ACO-HMO combines, but are under strict corporate guideline controls and feel quite helpless at times as do their patients–I can give you anecdotes from our own family experiences in our formerly beloved hospitals, which are now insurance corporations practicing medicine and the employee milieu is that patients are culprits ripping off the “hospital” until proved otherwise–the employees include not only corporate cost watchdogs in the ERs but chief nurses and “patient advocates” on the wards. It is frightful to consider what will happen, when each of these salaried employees will be part of the “medical” team put at financial risk for the cost of the population they insure…er…care for. You see my concerns regarding the mindset of a whole system when the next step is to put employee “teams” at risk for their patients’ costs making patients viewed as cost culprits. This is the same mindset of corporate managers, who regard their gatekeeper “teams” as culprits if they “spend too much” corporate money–the insurance ‘reserves” for these wee insurers are their future pay deductions for “bad” corporate behavior. I am afraid that the day of the employee-team-underwriter is closer than folks realize. Doctors (the theoretical team leaders) have already been thoroughly demonized as the culprits of cost inflation–their managed care “teams” will be indicted as soon as corporation profits are endangered.
        Michel, I do not think I am a pessimist, but rather a realist, as I have seen medicine de-professionalized into commercial corporations practicing medicine and profiteering by restricting patient utilization of “scarce resources”–the corporations have won the battle for control by that weapon of mass destruction: euphemism.
        Best of luck and again, keep up the good work. Bob

        • Thank you, Bob. Again, in full agreement. Perhaps the only thing to note is that at this moment, physicians who wish to practice for the welfare of patients are now torn between stepping out of the system, a move which greatly reduces the ability to practice (especially for specialists), or staying within the system and try to do the best they can through acts of resistance or disobedience to the mother ship–a very tough conflict.

  2. hi mike,

    i’m new to your blog. i’m an advocate of free markets (healthcare included).

    at the end of this blog post you say that the EPIC electronic health record system is maligned.

    can you explain what you mean?

    Rami Rustom

    • I should clarify that all EHR’s are maligned. EPIC being the dominant company gets most of the flack. A simple google search can show you a number of articles and complaints about EHR’s in general and EPIC in particular.