Hospitals Employ Doctors

A few articles have recently appeared in the New York Times and elsewhere, saying that newly graduating doctors are choosing to be employed by hospitals, In addition, doctors and groups in practice are choosing similarly. Locally, a large group down the Peninsula recently chose to join Palo Alto Medical Foundation (PAMF). I don't know why they did this, but at least now I can say for sure that Bayside, our group, is the largest private primary care group in the Bay Area. But I guess that's off the point. Again.

Anyway, why is this happening? People talk about the new work ethic of new grads - more leisure, more "just a job," etc. Maybe so. But, that's nothing an economic determinist would accept.

Let me be economic determinist, then. To quote "Deep Throat" in All The President's Men (the movie only - line does not appear in the book): Follow the Money.

Hospitals and large health systems command monopoly rents. They not only enrich themselves as monopolies, but by taking more of the health care dollar, they leave less for smaller, physician owned practices. The systems then use their extra money to purchase the factors of production that they have starved - the doctors.

The hospitals and systems claim, as do all expanding monopolies, that they provide higher quality (often for a hypothetical future) and better technology that only they can afford. Sometimes it may be true, unless you include as part of the quality equation personal relationships, human scale, and human trust. Patients probably prefer small offices, but the lack of a true market prevents them from voting with their feet and wallets.

But the telling point will be, who can offer the new doctors entering practice a better deal, the starved personal practices, or big, rich systems that thrive on monopoly rents? Follow the money.

Budd Shenkin