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OCR for page 385
For-Profit Enterpnse in Health Care. 1986.
National Academy Press, Washington, D.C.
Hospim1 Ownership and Be Practice of Medicine:
Evidence from He Physicnn's Perspective
Robert A. Musacchio, Stephen Zuckerman,
Lynn E. Jensen, and Tarry Freshnock
The last two decades have witnessed sig-
nificant changes in the structure of the hospital
industry. While the total number of investor-
owned hospitals has remained reasonably sta-
bIe since the late 1960s, there has been sig-
nificant growth in the number ofinvestor-owned
hospitals that are a part of multihospital sys-
tems. These hospitals have grown at an av-
erage annual rate of 10.3 percent between 1972
and 1983. Further, the concentration of the
proprietary sector is quite high: the five largest
chains control over 60 percent of all general
acute care hospitals in the sector.
Concern over the implications of an emerg-
ing "medical-industrial complex" has raised a
number of questions and sparked considerable
debate (Relman, 1980, 1983~. Issues pertain-
ing to ethical provider behavior, quality of care,
and the comparative economic performance of
proprietary and not-for-profit hospitals have
recently emerged (Lewin et al., 1981; Pattison
and Katz, 1983; Sloan and Vraciu, 1983; arid
Sloan arid Becker, 1985~. Ermann and Gabel
(1984) have recently published a comprehen-
sive assessment of the issues and empirical
findings on the subject of multihospital sys-
tems. Their review found, among other things,
that Mere are no discernible differences be-
tween systems and independent hospitals in
terms of access, service availability, and qual-
ity of care.
Thus far, all studies comparing the perfor-
mance of systems versus independent hospi-
tals and for-profit and not-for-pro~t hospitals
Dr. Musacchio is Director, Department of Health
Systems Analysis, Center for Health Policy Research;
Dr. Zuckerman is Research Associate, Health Policy
Center, The Urban Institute, Washington, D.C.; Dr.
Jensen is Vice President, Health Services Policy Group;
and Dr. Freshnock is Vice President, Lance V. Tarr-
ance and Associates, Chicago, Illinois.
385
have focused on the hospital as the unit of
analysis. Given the physicians' role as the cen-
tral decision maker in the provision of health
care services, additional insight can, however,
be gained from analyzing physician involve-
ment with for-profit hospitals from the phy-
sicians' perspective. Until recently the data
necessary for such an analysis were unavail-
able. Data collected through the American
Medical Association's (AMA's) Socioeconomic
Monitoring System (SMS) and attitudinal re-
search program allow us to examine these is-
sues.
This paper describes the data sets used in
the analysis, reviews differences in physician
characteristics and practice patterns across
hospital types, considers the variation in phy-
sicians' financial arrangements with hospitals,
and examines physicians' attitudes toward for-
profit hospitals. Finally, it summarizes our
findings and suggests some areas for future
DATA
Data are drawn from three sources: (1) the
1984 SMS Core Survey; (2) the 1984 AMA
Physician Opinion Survey; and (3) the Amer-
ican Hospital Association's (AHA's) 1982 AHA
AnnualSurveyofHospitals. SMSisa quarterly
telephone survey program that collects infor-
mation from a random sample of nonfederal
patient care physicians stratified by specialty
and census division. Data collected include
information on physician incomes, practice ex-
penses, visits, hours worked, and fees, among
other socioeconomic indicators. The core sur-
vey is conducted during the second quarter of
each year and uses a sample approximately
three times as large as those used in other
quarters.
In 1984, 4,002 physicians were interviewed
OCR for page 386
386
during the core survey. This survey included
a supplemental series of questions on physi-
cians' involvement with hospitals. These ques-
tions were developed in collaboration with staff
of the Institute of Medicine for the purpose of
analyzing differences among physicians in for-
profit and not-for-profit facilities. Specific areas
covered include the number of hospital pnv-
ileges each physician has, the physician's fi-
nancial arrangement with his/her primary
hospital, the physician's evaluation of certain
aspects of this hospital, and physician own-
ership interest in their primary hospital. This
type of information is useful to determine the
overall extent of physician involvement with
for-profit enterprises and multihospital sys-
tems.
In addition, SMS also collected information
on the physician's primary hospital so that hos-
pital data from the 1982 AHA Annual Survey,
the most recent one available at the time the
research was conducted, could be merged with
the SMS file. Merging data from both sources
provided us with higher quality information
on hospital ownership, organizational struc-
ture, utilization, and hospital capacity than
would have been available from the physician.
While we are aware that some hospitals may
have been acquired by for-pro~t organizations
between the time of the AHA survey and the
SMS survey, we fee] the procedures we fol-
lowed gave us the best possible physicianlhos-
pital data set we could create. Details on the
AHA Annual Survey of Hospitals may be found
in Mullner et al. (1983~.
For each SMS physician, the unit of analysis
in our study, the hospital about which we are
collecting information is the one at which the
physician provides the most patient care ser-
vices. Since the SMS sample is limited to non-
federal physicians, only two federal hospitals
were picked up. As a result, the federal hos-
pital classification has been excluded from our
analysis. In addition, long-term hospitals have
been excluded for reasons of homogeneity.
Findings from the 1984 Physician Opinion
Survey are based on telephone interviews with
1,000 randomly selected physicians residing in
the United States. The interviews were con-
ducted during July 1984. The information pre-
sented here is part of a major attitudinal data
base which is summanzed in Physician and
FOR-PROFIT ENTERPRISE IN HEALTH CARE
Public Attitudes on Health Care Issues, avail
able Tom the AMA upon request.
Table 1 compares AHA data to SMS data
with regard to selected hospital characteris-
tics. Several differences exist. Specifically, SMS
appears to be picking up fewer nongovern-
ment for-profit hospitals than the AHA survey.
Despite the fact that almost 15 percent of all
hospitals are categorized as for-profit, only 8.4
percent of the SMS physicians have their pri-
mary privileges at a hospital of this type. Fur-
thermore, hospitals identified through SMS
have higher annual admission rates and larger
average bed sizes than the hospital population
in general. We believe that these differences
exist for two primary reasons. First, a large
urban/rural difference exists between the two
data sets. About 81 percent of the physicians
in the SMS data set work primarily in hospitals
in urban areas. In comparison, AHA data in-
dicate that only 55 percent of the hospitals are
located in these areas. Second, and probably
more important, is that physicians' primary
hospitals the hospitals at which they provide
the most patient care services are not rep-
resentative of hospitals in general. Due to the
urban/rural differences and the characteristics
of the physicians' primary hospital, the hos-
pitals identified in this analysis do not mirror
those in the AHA annual survey.
PHYSICIAN CEIARACTERISTICS AND
PRACTICE PAI~lERNS
An analysis of physician involvement with
for-profit hospitals should start by asking the
question: Do physicians who have their pri-
mary privileges at for-profit hospitals dyer Bom
other physicians in any systematic way?
In addition, it will be useful to consider if
physicians' practice patterns vary according to
the type of hospital the physician works in.
Given this focus, our analysis is limited to those
physicians with admitting or medical staffpriv-
ileges at some hospitals. Over 95 percent of
physicians in the SMS sample had hospital
. .
prove eyes.
Table 2 shows the specialty distribution of
physicians by hospital type. A chi-square test
causes us to reject at the 99 percent confidence
level the null hypothesis that physicians' spe-
cialty and hospital type are independent. Pri
OCR for page 387
THE PHYSICIAN'S PERSPECTIVE
TABLE 1 Comparison of Hospitals in American Health
Association (AMA) Annual Survey to Those Represented by
Physicians in SMS Sample
Hospitals Hospitals
Represented Represented by
in the AHAa Physicians in
Variable Annual Survey the SMSb Sample
Hospital type (%)
Government nonfederal 29.8 16.2
Nongovernment not-for-profit 55.5 75.4
Nongovernment for-profit 14.7 8.4
Organizational structure (%)
Multihospital system 30.0 34.3
Independent hospital 70.0 65.1
Region (%)
Northeast 14.8 22.3
Norm Central 28.7 23.0
South 37.5 335
West 18.9 21.2
Location (%)
Urban 53.9 80.5
Rural 46.1 19.5
Hospital size
Average bed size 168.8 364.0
Admissions per year 5,955 13,563
aAmerican Hospital Association (AHA).
b Socioeconomic Monitonng System (SMS) of He American Medical Association
(AMA).
SOURCE: 1982 AHA Annual Survey of Hospitals and 1984 AMA Socioeco-
nomic Monitoring System Core Survey.
vale not-for-profit hospitals are staffed by a
more specialized group of physicians than other
hospitals. Nearly one out of every four phy-
sicians whose primary privileges are at a gov-
ernment or for-profit hospital is a general or
family practitioner (GP/FP). On the other hand,
only one out of eight physicians primarily af-
filiated with private not-for-profit hospitals is
GP/FP. In addition, we final that physicians
whose primary hospital is not-for-profit are twice
as likely to be in some internal medicine sub-
specialty as physicians at for-profit hospitals;
18.5 percent as compared to 9.2 percent. To
the extent that specialists treat different types
of patients than GP/FPs, these specialty-mix
differences may be indicative of variation in
hospital case mix.
In addition to the growth in for-profit hos-
pitals, the expansion of multihospital systems
(MHS) represents a major change taking place
387
in the hospital industry. Table 3 indicates that
34.3 percent of physicians have privileges at a
hospital that is part of an MHS. There is a
significant relationship between being part of
an MHS and the ownership status of the phy-
sician's hospital. Only 17 percent of physicians
primarily affiliated with government hospitals
are in an MHS. The MHS structure is most
prominent among for-profit hospitals. Sev-
enty-five percent of the physicians with priv-
ileges at these hospitals claim MHS affiliation.
To explore further differences among phy-
sicians in for-profit hospitals and those in other
facilities, data on selected physician charac-
teristics are presented in Table 4. There are
no statistically significant differences among
physicians on the basis of experience (years
since residency) across the hospital types shown.
However, significant differences exist with re-
gard to location of the medical school, em
OCR for page 388
388
FOR-PROFIT ENTERPRISE IN HEALTH CARE
TABLE 2 Specialty Distribution of Physicians by Hospital
Types (percentage)
Hospital Type
Specialty
Nonfederal Private
Government Not-for-profit For-profit
Generallfarnily practice 23.3 12.9 22.2
Internal medicine 12.7 18.5 9.2
Surgery 20.0 22.1 24.9
Pediatrics 7.2 S.4 5.5
Obstetrics/gynecology 7.6 7.8 8.5
Radiology 8.1 6.6 7.5
Psychiatry 4.1 6.6 5.5
Anesthesiology 4.6 5.8 6.5
Pathology 4.8 3.5 2.4
Other specialties 7.6 7.8 7.9
NOTE: Chi-square (18 d.f.) = 80.23, which is significant at the 99 percent
level of confidence.
SOURCE: 1984 AMA Socioeconomic Monitoring System Core Survey.
ployment status, and type of practice. Foreign
medical school graduates (FMGs) represent a
greater proportion of physicians primarily af-
filiated with independent for-profit hospitals
(31.5 percent) than they do at any other type
of facility. For-profit hospitals that are part of
an MHS do not have medical staffs that are as
heavily dependent on FMGs. Only 20 percent
of these physicians received their medical
training abroad. This is quite comparable to
physicians whose primary privileges are at in-
dependent not-for-profits (19.5 percent), in-
depen~dent government hospitals (18. 7 percent),
and MHS not-for-profits (17.7 percent).
The data also show that physicians who are
full or part owners of their main practice-
self-employed physicians account for 88.2
percent of physicians primarily affiliated with
MHS for-profit hospitals. This is a higher pro-
portion than we found among physicians at any
over types of hospitals. Other types of hos-
pitals with above-average shares of self-em-
ployed physicians are MHS not-for-profits (81.3
percent) and independent for-profits (80.8 per-
cent3. Employee physicians, on He other hand,
are most prevalent among government hos-
pital staffs, making up 32.3 percent of He MHS
group and 26.2 percent of the independent
hospital group. These results suggest Hat for-
profit hospitals have not attempted to influ
TABLE 3 Distribution of Physicians Between Multihospital
Systems and Independent Hospitals by Hospital Ownership
Status
All Nonfederal Private
Type Hospitals Government Not-for-profit For-profit
Muldhospital
system (%)
Independent
hospital (%) 65.7 83.0 66.5 24.9
NOTE: Chi-square (2 d.f.) = 292.3, which is significant at the 99 percent level
of confidence.
34.3 17.0 33.5 75.1
SOURCE: 1984 AMA Socioeconomic Monitoring System Core Survey.
OCR for page 389
THE PHYSICIAN'S PERSPECTIVE
389
TA:BLE 4 Selected Physician Characteristics by Hospital Ownership Status Percentage of
physicians)
Multihospital System
Independent
- Private Private
Nonfederal Not-for For- Nonfederal Not-for For
Vanable Government profit profit Government profit profit
Years since residency
0-5 years 20.8 17.8 18.7 18.4 17.0 15.1
5-10 years 22.9 19.1 19.6 19.2 20.7 13.7
10-20 years 24.0 24.7 30.1 27.8 27.1 30.1
20-30 years 17.7 20.7 20.1 20.9 18.3 19.2
30 or more years 14.6 17.7 11.4 13.7 17.0 21.9
Chi-square (20 d.f.) = 18.5
Location of medical
school
U.S. or Canada 76.0 82.3 80.0 81.3 80.5 68.5
Other foreign
country 24.0 17.7 20.0 18.7 19.5 31.5
Chi-square (5 d.f.) = 9.9*
Board certification
No 31.3 31.4 38.6 36.2 31.3 37.0
Yes 68.7 68.6 61.4 63.8 68.7 63.0
Chi-square (5 d.f.) = 9.0
Employment status in main
medical practice
Employee 32.3 18.7 11.8 26.2 ~.1 19.2
Self-employed 67.7 81.3 88.2 73.8 77.9 80.8
Chi-square (5 d.f.) = 29.7***
Type of practice
Solo 52.7 46.3 57.4 50.1 51.4 58.8
Non-solo 47.3 53.7 42.6 49.9 48.6 41.2
Chi-square (5 d.£ ) = 12.4**
*Significant at the 90 percent level of confidence.
**Significant at the 95 percent level of confidence.
***Significant at the 99 percent level of confidence.
SOURCE: 1984 AMA Socioeconomic Monitoring System Core Survey.
ence physician practice patterns by placing the
physician in an employee's role. Other finan-
cial mechanisms that could alter practice pat-
terns are available to hospitals. Some of these
will be discussed in the following section of
this paper.
For-profit medical staffs also have a signif-
icantly higher proportion of solo practitioners
Han government or not-for-profit hospitals. Ibe
implications of this finding are not clear unless
one can argue that practice patterns of group
physicians are somehow more in tune with the
objectives of not-for-profit hospitals than they
are with other hospitals' objectives. We would
not be willing to make that argument here. If,
however, the division of physicians between
hospitals becomes increasingly a function of
practice type, this area should be explored fur-
ther. At present we do not see this as a major
issue.
While we found that for-profit MHS medical
staffs have the lowest extent of board-cer~fied
physicians, this result was not statistically sig-
nificant. However, since some view board cer-
tification as an indicator of the quality of care
delivered at a hospital, we explored this issue
farther (Table 5~. We were particularly con-
cerned that the significant specialty composi
OCR for page 390
390
tion differences might be confounding our
analysis of board certification, i.e., there might
be significant differences in board certification
for certain specialties but not for others. In
examining board certification by specialty and
hospital ownership status, we found statisti-
cally significant variations. In particular, we
found that surgeons at for-profit MISS hospi-
tals were the least likely group of surgeons to
be certified. Since the extent of board certi-
fication clearly varies by specialty, general
conclusions about the relationship between
board certification and hospital type cannot be
drawn.
Aspects of the relationships that exist be-
tween physicians and hospitals may also vary
by hospital type. Data on hospital tenure, per-
cent of time spent at the primary hospital, the
total number of hospital privileges, and the
percentage of physicians having solo admitting
privileges are displayed in Table 6 as a means
for studying these relationships. The data in-
dicate that physicians with a primary for-profit
affiliation have been working at this hospital
for fewer years than physicians at both not-
for-profit and government hospitals. We find
this result particularly interesting in light of
the similarity in physicians' years since resi-
dency across hospital types (see Table 41. The
lower tenure suggests that the shift in physi-
cians' hospital practices to the for-profit sector
is a relatively recent phenomenon. This result
FOR-PROFIT ENTERPRISE IN HEALTH CARE
underscores from the physicians' perspec-
tive that the expansion of the for-profit hos-
pital sector is fairly recent. If we analyze the
data by system and nonsystem status we ob-
serve that the only real difference exists be-
tween the multifacility for-profit hospital and
its independent counterpart. Physicians at a
for-profit multifacility hospital have been af-
hliated with their hospital the fewest number
of years (8.4~.
Furthermore, physicians at for-profit hos-
pitals have a greater number of hospital priv-
ileges than their not-for-profit counterparts.
The greater number of privileges may be ne-
cessitated by the lower average bed size offor-
profit hospitals. Although for-profit facilities
have fewer beds on average, physicians at these
for-profit facilities spend about the same nllm-
ber of hours at their primary facility as phy-
sicians at nonprofit hospitals. An alternative
way to analyze physician hospital affiliations is
to examine the percent of physicians with priv-
ileges at only one hospital. Overall, approxi-
mately 37 percent of the physicians surveyed
indicate that they have solitary admitting priv-
ileges. Physicians primarily affiliated with an
independent for-profit hospital are least likely
to have privileges at only one hospital. At the
other extreme, physicians at independent non-
federal government hospitals are Me most likely
to have single admitting privileges.
As noted, there has been considerable in
TA;B~ 5 Percent of Physicians That Are Board Certified by
Hospital Ownership Status and Selected Specialty Breakdowns
Multihospital System Independent
Private Private
Nonfederal Not-for- For- Nonfederal Not-for- For
Government profit profit Government Profit profit
All physicians 68.7 68.6 61.4 63.8 68.7 63.0
Gener~/family
specialty b 43.4 40.8 53-9 43.1 b
Medical specialty b 67.3 b 65.0 70.3 b
Surgical specialty 76.5 79.3 66.7 73.8 76.4 85.0
Othera 75.9 70.1 67.2 63.2 - 70.0 73.9
NOTE: The variation in board certification by specialty and hospital status was
found to be statistically significant using a chi-square test.
aIncludes psychiatrists, radiologists, anesthesiologists, and pathologists.
bInsu£icient number of observations to provide reliable estimates.
OCR for page 391
THE PHYSICIAN'S PERSPECTIVE
TABLE 6 Dimensions of the Physiciar~/Hospital Relationship by Type of Hospital
Multihospital System Independent
Private
All Nonfederal Not-for
Hospitals Government
Number of years affiliated
with primary hospital
F test (5 d.£) = 10.6**
Percent of hospital hours
spent at primary hospital
F test (5 d.f.) = 2.84*
Number of hospitals at
which physician has
hospital privileges
F test (5 d.f.) = 19.5**
Percent of physicians having
privileges at only one
hospital
F test (5 d.f.) = 19.5**
12.3 11.0 12.9
79.8 83.4 77.9
2.1 1.9 2.4
36.7 38.5 26.4 27.3
*Significant vanadon at the 95 percent level of confidence.
**Significant vanabon at the 99 percent level of confidence.
SOURCE: 1984 AMA Socioeconomic Monitonng System Core Survey.
terest in the influence of hospital ownership
on physician practice patterns. Table 7 shows
that physicians' hours, visits, and hospital dis-
charges vary according to the type of hospital
at which they have their primary privileges.
Physicians at independent nonfederal govern-
ment hospitals work on average more total
hours, have more patient visits, and discharge
more patients from the hospital each week than
physicians at the other types of hospitals. Phy-
sicians in multifacility for-profit hospitals see
the fewest number of patients (22.7) on hos-
pital rounds. This relatively low level of uti-
lization in the hospital is somewhat offset by
the fact that these physicians spend more time
and see more patients in their offices. (Despite
these differences in utilization, physicians'
earnings do not vary significantly by hospital
type.)
Another issue in the debate regarding hos-
pital ownership and performance is whether
payer mix in for-profit hospitals is different
from the payer mix in other hospitals. Using
the hospital as the unit of observation, Sloan
and Vraciu (1983) found no significant differ
391
For- Nonfederal
profit profit Government
Private
Not-for- For
profit profit
8.4 10.8 12.9 10.2
79.7 82.7 80.1 80.9
2.7 1.8 2.0 2.6
48.3 40.5 20.5
ences in Medicare and Medicaid days as a per-
cent of total acute patient days by ownership
class.
To analyze this issue from the perspective
of the physician, we examine whether varia-
tion exists in the number of inpatient visits
that the physician makes with Medicare pa-
tients and the number of hospital discharges
by hospital type. The data indicate that there
is no significant variation in the weedy num-
ber of inpatient visits by hospital type. In ad-
dition, while there appears to be variation in
the number of Medicare hospital discharges
by hospital ownership status, it appears to be
consistent with the pattern for total dis-
charges. Taken together, these two results
suggest that physicians in both for-profit and
not-for-profit hospitals may be seeing their
Medicare inpatients more frequently than
physicians in government hospitals. As such,
one might be led to conclude that concerns
about the treatment of Medicare patients in
for-profit hospitals may be unwarranted. The
real distinction appears to be between hospi-
tals in the public and private sectors.
OCR for page 392
392
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OCR for page 393
THE PHYSICIAN'S PERSPECTIVE
FIN^C~ ARRANGEMENTS
One area which some analysts feel may be
altered by the growth in the for-profit sector
of the hospital industry is physicians' financial
arrangements with hospitals. Shorten and
Evashwick (1981) found that arrangements
whereby physicians are compensated by the
hospital are more common in for-profit rather
than voluntary hospitals. Steinwald (1983), on
the other hand, found that hospital ownership
had little bearing on the compensation meth-
ods of the hospital-based physicians. Based on
Steinwald's earlier research (Steinwald and
Neuhauser, 1980), he had expected for-profits
to "attract physicians by providing relatively
lucrative and unencumbered working condi-
tions." This hypothesis, however, was not sup-
ported by his data.
In this study, we examine three specific types
of financial arrangements that physicians may
have with hospitals. First, we consider the
proportion of physicians who received some
part of their 1983 income directly from their
primary hospital. This may be viewed as the
most basic category of physician/hospital con-
tract. Second, we measure the extent of lease
agreements that physicians have with hospi-
tals. Under a lease agreement the physician
or his practice compensates the hospital for
the use of its facilities or services. Finally, we
consider a phenomenon unique to the for-profit
sector: the degree to which physicians have an
ownership interest in their hospital.
Table 8 presents data on the first two ar-
rangements to be considered. Column3 shows
that 23.5 percent of all physicians in our study
either receive some type of direct payment for
their hospital or had a lease agreement. This
percentage varied significantly by hospital type.
However, upon examination of direct nav-
ments and lease agreements separately we find
that only the percent receiving direct pay-
ments showed significant variation. The prob-
abiLty of receiving a direct payment was highest
for physicians at government hospitals (25.1
percent) and lowest for physicians at for-profit
hospitals (11.4 percent). These results are sup-
portive of Steinwald's hypothesis regarding
"unencumbered working conditions" in for-
profit hospitals. In particular, we find that phy-
sicians affiliated with hospitals that are a part
393
of for-profit chains are the least likely to re-
ceive payments from their hospital.
To control for differences in physician char-
acteristics, we examine differences in financial
arrangements using a linear probability model.
Among the control variables we include phy-
sician specialty, location of medical school,
board certification, employment status, sex,
experience, type of practice, and hospital bed
size. Holding these variables constant, we find
(Table 9) that physicians in for-profit chains,
not-for-profit chains, and independent not-for-
profit hospitals are significantly less likely to
receive direct payments than physicians in in-
dependent government hospitals (the omitted
category). This supports the results of our uni-
variate analysis. Lease agreements continue to
remain unrelated to hospital ownership.
Data on the methods by which the hospital's
direct payments are made are shown in Table
10. Despite the fact that variation by owner-
ship status and organizational structure is not
significant, the table provides useful infor-
mation on compensation arrangements. The
numbers shown do sum to over 100 percent
across the rows since each physician may re-
ceive payments through a number of arrange-
ments. Our results indicate that salary and fee-
for-service compensation are the most com-
mon methods. Overall, 59.0 percent of those
physicians receiving payments were paid some
of it in the form of salary, while 37.7 percent
received some fee-for-service payments. In this
study, we define fee-for-service to include ar-
rangements in which the physician receives a
fixed percentage of a hospital's charges.
Even though there is a lack of statistical sig-
nificance regarding compensation and orga-
nizational structure, it appears that government
and not-for-profit hospitals are different from
for-profits with regard to the methods of com-
pensation. In particular, the physicians at for-
profit chains seem least likely to be involved
in a salaried relationship and most likely to
receive payments on a fee-for-service basis or
as a percent of net or gross department bill-
ings. These latter three methods can be viewed
as incentive arrangements that are designed
to align the financial interests of the physician
with those of the hospital. Unfortunately, firm
conclusions about the relationship between
hospital type and methods of compensation
OCR for page 394
394
FOR-PROFIT ENTERPRISE IN HEALTH CARE
TABLE 8 Physicians' Financial Arrangements with Hospitads
by Hospital Ownership Status and Organizational Structure
(percentage of physicians)
Direct Payments
or Lease***
Direct Lease
Payments* Agreement**
All physicians 18.4 7.1 23.5
Nonfederal government 25.1 7.9 31.1
Multihospital system 24.2 5.2 28.4
Independent hospital 25.3 8.5 31.7
Private not-for-pro~t 17.8 7.1 22.6
Multihospital system 16.5 6.0 21.1
Independent hospital 18.4 7.6 23.3
For-profit 11.4 5.6 16.5
Multihospital system 8.8 5.6 14.2
Independent hospital 19.4 5.5 23.3
*3-way chi-square (2 d.f.) = 26.77; Away chi-square (5 d.f.) = 32.28, both
significant at the 99 percent level of confidence.
**3-way chi-square (2 d.f.) = 1.55; Away chi-square (5 d.f.) = 4.99, neither
significant.
***3-way chi-square (2 d.f.) = 27.39; 6-way chi-square (5 d.f.) = 31.91, both
significant at the 99 percent level of confidence.
SOURCE: 1984 AMA Socioeconomic Monitoring System Core Survey.
cannot be drawn from this study due to the
small number of physicians in our sample who
have Foliations with for-profit hospitals and
receive direct payments.
Data not shown in the tables indicate that
few physicians with their primary privileges at
for-profit hospitals have any ownership inter-
est in the hospital. Fewer than one out of ten
physicians on for-profit staffs indicated that they
were Fill- or part-owners of their hospital.
However, we do find that hospital ownership
is significantly more prevalent among physi-
cians whose privileges are at independent for-
profit hospitals. Twenty-two percent of these
physicians were hospital owners as compared
to only 6 percent of physicians primarily afEl-
iated with chain hospitals. In the case of chain
hospitals, hospital ownership includes owning
stock in the company that controls the hos-
pital.
PHYSICIAN ATTITUDES
In the preceding sections we examined the
for-profit issue by analyzing a range of socio
economic variables. We found some substan-
tive differences in the areas of medical school
location, employment status, utilization, and
financial arrangements. However, an equally
important avenue for analysis is physicians' at-
titudes toward for-profit hospitals. If physi-
cians, for whatever reason, were to oppose the
for-profit concept, then conquer growth in
this sector could produce increased tension
among medical staffs and hospital administra-
tors. In considering these attitudinal results,
it is important to remember that fewer than
10 percept ofthe physicians have their primary
privileges at a for-profit hospital. Therefore,
many of the opinions regarding for-profit hos-
pitals are not likely to be based on firsthand
experience.
Table 11 presents results from the 1984 AMA
Physician Opinion Survey. The exact ques-
tions that were asked and the filll range of
potential responses are included in the table.
According to question 1, only 52 percent of
physicians believe that hospitals can be op-
erated properly on a for-profit basis. This per
OCR for page 395
THE PHYSICIAN'S PERSPECTIVE
TABLE 9 Determinants of Physicians' Financial Arrangements
with Hospitals: A Multivanate Linear Probability Mode]
(ordinary least squares estimate: N = 3,023)
Dependent Variable
-
Direct
Independent Direct Lease Payment
Variablesa Payment Agreement or Lease
Physician Characteristics
Specialty
Internal medicine0.14**0.000080.14**
(6.56)(0.01)(5.46)
Surgery-0.07**0.02- 0.05*
(3.73)(1.12)(2.04)
Pediatrics- 0.02- 0.01- 0.02
(0.66)(0.70)(0.69)
Obstetncs/gynecology- 0.05*0.0009- 0.05
(1.99)(0 05)(1.53)
Radiology0.01- 0.010.01
(0.39)(0.57)(0.34)
Psychiatry0.04- 0.010.03
(1.43)(0.35)(0.84)
Anesthesiology0.010.010.02
(0. 17)(0~45)(0.66)
Pathology0.49**- 0.00090.48**
(12. 14)(0.03)(10.32)
Other0.11**0.06**0.16**
(4.07)(2.71)(5. 11)
Years since residency
0-100.050.050.08
(0.76)(0.91)(0.98)
10-200.030.020.04
(0.51)(0.32)(0.44)
20-300.020.010.02
(0.33)(0. 11)(0.24)
30 or more0.001- 0.01- 0.01
(0.02)(0.09)(0.13)
Board certification0.0003- 0.0007- 0.004
(0.02)(0.07)(0.24)
Foreign medical school0.010.0040.001
graduate(0.75)(0.31)(0.06)
Sex (male)- 0.040.03- 0.02
(1.74)(1.43)(0.88)
Self-employed0.07**-0.03*0.03
(3.66)(2.22)(1.55)
Solo practitioner-0.003- 0.02*- 0.02
(0.22)(2. 16)(1.58)
Hospital Characteristics
Bed size-0.000020.00001- 0.00002
(1. 13)(0.65)(0~53)
(`continued)
395
OCR for page 396
396
FOR-PROFIT ENTERPRISE IN HEALTH CARE
TABLE 9 Continued
Dependent Variable
Direct
Independent Direct Lease Payment
Vanablesa Payment Agreement or Lease
Ownership and structure
Government,- 0.03- 0.01- 0.04
mul~hospital(0.71)(0.25)(0.74)
system
Not-for-profit,- 0.06**- 0.01- 0.07
independent(3.23)(0.25)(3.11)
hospital
Not-for-pro~t, muld-- 0.05*- 0.02- 0.06
hospital system(2.34)(1.10)(2.60)
For-profit,- 0.020.01- 0.02
independent(0.46)(0.20)(0.49)
hospital
For-profit,- 0.10**- 0.02- 0.10
mul~hospital(3.45)(1.00)(3.16)
system
Constant0.080.080.17
(1.11)(1.~)(1.~)
it-square0.110.020.09
aAll variables are categorical variables that equal 1 if the physician has the
indicated characteristics; O otherwise (t-statistics are shown in parentheses).
*Significant at the 95 percent level of confidence.
**Significant at the 99 percent level of confidence.
cent differs among physicians depending on
their experience with the for-profit sector.
Among physicians reporting some staff privi-
loges at a for-profit hospital, 64 percent favor
the for-profit concept. Only 47 percent of the
remaining responded affirmatively to this
question. More interesting, however, is the
fact that 28 percent of the group with for-profit
experience oppose the for-profit approach.
Unfortunately, data from the Physician Opin-
ion Survey could not be disaggregated in a way
that allows us to contrast physicians practicing
in MHS hospitals to those in independent hos-
pitals.
Question 2 asks physicians to compare the
quality of care in for-profit versus not-for-profit
hospitals. The pattern of responses is similar
to that for the preceding question. A slight
majority of physicians believe quality is un-
affected by the profit-nonprofit distinction.
However, views toward quality differences are
also affected by actual experience in for-profit
hospitals. Twenty-four percent of physicians
who have some involvement in for-profit hos-
pitals say quality of care is better in the not-
for-profit sector. Part of the reason that phy-
sicians may view quality as being lower in the
for-profit sector is that only 9 percent of them
believe that for-profit hospitals afford them a
greater degree of clinical discretion (question 31.
Changes in the health care sector are caus-
ing new ethical issues to emerge. A substantial
majority of physicians believe that referring
patients to facilities in which they have an own-
ership share is a conflict of interest. Physicians
who have some experience in for-profit hos-
pitals are less likely to indicate conflict of in-
terest. However, even among this group, a
majority of 59 percent agree with the conflict-
of-interest position. This potential for conflict
of interest may be the major reason why few
physicians have ownership interests in hos-
pitals.
As the for-profit hospital sector continues to
grow, concerns intensify about graduate med-
ical education and its evolving role in an en
OCR for page 397
THE PHYSICIAN'S PERSPECTIVE
vironment increasingly affected by profit
considerations. In question 5, physicians were
polled concerning their views toward estab-
lishing residencies in profit-oriented hospitals.
As indicated, a plurality of physicians believe
that the quality of graduate medical education
would be negatively affected by locating it in
a for-profit hospital. Actual experience in for-
profit hospitals malces no difference in the phy-
sicians' opinion on graduate medical educa-
tion.
Physicians were then asked about their pref-
erence for practice in profit versus nonprofit
hospitals. The most prevalent response among
physicians interviewed is that no preference
between for-profit and not-for-profit hospitals
exists, but of those with a preference the not-
for-profit hospital was the predominant choice.
This seems to reflect the distribution of phy-
sicians across hospital types when viewed from
the standpoint of their primary affiliation
(Table 11.
In an effort to evaluate views on the quality
of hospitalcare delivered, the SMS survey asked
physicians to compare their primary hospital
397
to other hospitals that they may be familiar
with, along certain specific dimensions. These
results are displayed in Table 12. We find that
physicians primarily admitting to government
MHS hospitals are least likely to view their
facility as better than other facilities. In fact,
almost half of these physicians see their hos-
pitals as worse than other other hospitals with
respect to technical resources and equipment
offered.
Among physicians admitting to private-
sector hospitals, opinions are mixed as to
whether for-profits or not-for-profits are bet-
ter. Few physicians at any of the private hos-
pitals would rate their hospital as worse than
other hospitals. In terms of nursing support,
the for-profits get a higher rating than not-for-
profits among physicians at independent hos-
pitals, but a lower rating among the MHS group.
We observe a similar mixed pattern in terms
of physicians' evaluation of the level of patient
satisfaction. In two areas, physician opinions
on He for-profit/not-for-profit comparison are
clearer, but are contradictory in their evalu-
ation of hospitals. Physicians at for-profit hos
TABLE 10 Methods of Compensation by Hospital Ownership Status and Organizational
Structure (percentage of physicians)
. . . .
' ~0 ~
Share of
Net
Fee for DepartmentShare of
Status/Structure Salary Servicer RevenueGross Other
. .
All physiciansb 59.0 37.7 8.012.1 24.6
Nonfederal government 60.4 35.5 8.812.6 24.8
Multihospital system 78.3 31.8 9.19.1 36.4
Independent hospital 56.5 36.2 8.?13.3 - .6
Private, not-for-profit 59.5 37.5 7.2ll.S 24.0
Multihospital system 50.4 43.4 4.510.4 25.0
Independent hospital 63.5 35.0 8.312.1 23.6
For-profit 48.5 50.0 15.618.2 31.3
Multihospital system 36.8 57.9 11.126.3 27.8
[~.~ade hospital ~.3 ~.5 21.4 7.1 ~.7
NOTE: In this table, none of the variation by hospital ownership status and organizational structure is statistically
significant based on chi-square tests.
aIncludes arrangements involving the physician receiving a percentage of hospital charges.
bThose receiving part of their 1983 income directly from hospital.
OCR for page 398
398
FOR-PROFIT ENTERPRISE IN lIEALTH CARE
TABLE 11 Physician Attitudes on Issues Related to Hospital Ownership by Extent of
Involvement with For-profit Hospitals (percentage)
Question
All
Response Physicians
Involvement with
For-profit
Hospitals
Some None
1. As you may know, there has been a rapid
growth of"for-profit" multihospital systems in
recent years. Do you favor or oppose the view
that hospitals can be operated properly as
profit-making organizations?
2. In general, do you believe that not-for-
propt hospitals provide better, worse, or about
the same quality of care as for-propt hospitals?
3. In your opinion, do physicians have
greater, less, or the same amount of clinical
discretion at a for-profit hospital as they do at a
not-for-profit hospital?
4. Do you believe it is a conflict of interest
for physicians to refer patients to a hospital or
over health care facility in which they have an
ownership interest?
5. Do you believe that graduate medical
training in for-profit hospitals would be better,
worse, or the same as that in not-for-profit
hospitals?
6. Assuming Me medical staff privileges,
compensation arrangements, and work
conditions are the sane, would you rather
practice at a for-profit hospital, a not-for-profit
hospital, or would you have no preference?
Favor
Oppose
Unsure
Better
Worse
Same
Unsure
Greater
Less
Same
Unsure
Yes
No
Unsure
Better
Worse
Same
Unsure
For-profit
Not-for-profit
No preference
52
37
11
32
5
50
13
9
28
37
27
·65
28
7
5
46
34
16
7
64 47
28 41
8 12
24
8
59
9
11
27
50
12
59
35
7
44
37
13
13
42 31
51 57
46
14
28
32
32
68
26
6
4
47
34
16
48
47
SOURCE: 1984 AMA Physician Opinion Survey.
pitals are more satisfied with the responsiveness
of the hospital to their professional needs, but
less satisfied with the available technical re-
sources and equipment than their not-for-profit
counterparts. On the basis of these results, no
clear preferences are apparent among private-
sector physicians.
SUMMARY AND DISCUSSION
The purpose of this paper has been to com-
pare characteristics of physicians at for-pro~t
hospitals to those of other physicians. In ad-
dition, we explored physician attitudes toward
aspects of the growing for-pro~t hospital sec
tor. At this point in time, physicians have lim-
ited experience with for-profit hospitals. Even
so, the attitudinal data (Table 11) show that
half of all physicians believe hospitals can be
operated properly as profit-maldng organiza-
tions. However, data on specific areas of hos-
pital operation (Table 12) produced mixed
results with regard to preferences for partic-
ular hospital types. While we realize that our
own data could suggest that physicians are not
satisfied with for-pro~t hospitals, a more ap-
propriate interpretation would be that physi-
cians are clearly aware of and concerned about
potential issues that could arise. A less ten-
tative conclusion is unwarranted until more
OCR for page 399
399
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OCR for page 400
400
physicians have firsthand contact with these
facilities.
To summarize, examining the physician
characteristic data, we identified a number of
important differences between for-profit med-
ical staffs and those at other hospitals. First,
there are relatively more GP/FPs and rela-
tively fewer internists on the staffs offor-pro~t
hospitals. This may reflect differences in hos-
pital case mix. Second, the typical physician
on the staffofafor-profit MHS hospital is more
likely to be self-employed than other physi-
cians. Third, this same physician is least likely
to receive any direct monetary compensation
from his/her hospital. Taken together, these
last two findings suggest that the financial link
between the hospital and the physician may
be weakest at for-profit MHS facilities, a result
that may be counter to some views of the for-
profit sector.
Finally, physicians primarily affiliated with
for-profit hospitals discharge the fewest pa-
tients from the hospital in an average week.
This, combined with their higher average rate
of office visits, suggests that their practices
may be somewhat less involved with the hos-
pital than are those of other physicians. The
lower level of hospital involvement is quite
likely due to the specialty composition ofthese
physicians and the case mix of their patients.
Our results show that, along several dimen-
sions, medical stabs at for-profit hospitals dif-
fer from those at other facilities. It appears that
the specialty composition differences may be
the driving force behind our findings. The
higher proportion of GP/FPs relative to in-
ternists at for-profit hospitals could result in
less-hospital-oriented practices and the larger
proportion of self-employed physicians that we
observe. For-profit hospitals may be treating
comparable types of patients with less spe-
cialized physicians. On the other hand, by vir-
tue of their specialty differences, for-profit
medical stabs may be admitting a different mix
of cases to their hospitals. Our data do not
allow us- to choose between these competing
hypotheses. The relationship between the ob-
served specialty differences, case mix, and
quality of care is an area that should receive
Farther investigation.
This study was not designed to be an ex-
haustive analysis of the for-pro~t multihospital
FOR-PROFIT ENTERPRISE IN HEaLTH CARE
system issue. We feel a number of other fruit-
ful areas for future research remain open with
regard to the physician. One important area
that might help us to better understand phy-
sician/hospital relations in general is: What fac-
tors cause a physician to seek privileges at a
particular type of hospital? For example, do
physicians affiliate with a for-profit hospital or
multihospital system because it is the only one
located near them, or are there specific aspects
of the hospital environment that make for-profit
hospitals more desirable to some physicians?
Likewise, do for-profit hospitals grant hospitaV
physician privileges to different types of phy-
sicians? A second area of research that seems
appropriate in light of our findings with regard
to financial arrangements is: As for-profit hos-
pitals grow, will new types of financial arrange-
ments between physicians and hospitals
develop? Physiciar~lhospital joint ventures and
physician ownership of stock in hospital man-
agement companies are two such develop-
ments that have the potential to alter practice
patterns and, therefore, should be studied ~r-
ther. Finally, will Medicare's prospective pric-
ing system, other regulatory devices, or compe-
tition change the need for a financial tie be-
tween hospitals and physicians.
Throughout most of this paper we have at-
tempted to array the data so as to allow us to
analyze differences among government, not-
for-profit, and for-profit hospitals. On the basis
of Table 7, we observe that physicians prac-
ticing primarily in government hospitals ex-
hibit utilization patterns that are no more similar
to the not-for-profit group than the for-profit
group is to the not-for-profit group. In partic-
ular, physicians who practice at government
hospitals have a higher rate of Medicare dis-
charges. This higher rate may be indicative of
a shift in the treatment of the aged towards
the public sector. While these results are by
no means conclusive, we feel that they suggest
a need for farther research on public/private
differentials.
ACKNOWLEDGMENTS
The views expressed in this paper are not
necessarily those of the American Medical As-
sociation or the Urban Institute and its spon-
sors. The authors would like to thank Steven
OCR for page 401
THE PHYSICIAN'S PERSPECTIVE
D. Culler, lanes Wilier, Bradford Gray, and
two anonymous reviewers for their helped
comments and able assistance on this research
project.
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Representative terms from entire chapter:
profit profit profit
