Coping with tough markets: Doctors struggle with staying independent

September 21, 2007

With hospitals in rural North Carolina heavily recruiting, physicians face the hard choice of whether or not to sell their practices.

Key Points

All politics is local-and so is all healthcare, it's been said.

It's true that the market conditions doctors face in one part of the country may be quite different from the ones they face in another. And day to day, these local conditions often have a bigger impact on their practices and professional lives than many outsized national trends. At the same time, there are enough common threads (and shared struggles) to make some strategies worth pursuing, wherever you happen to practice.

With that in mind, we set out to examine three local healthcare markets in depth. In each case, we wanted to know:

The healthcare environment in a nutshell

North Carolina's western corner encompasses rolling hills, mountains, dense forests, and cities that have retained much of their small-town charm. Despite the region's general allure, however, many local hospitals have had to work hard to attract and retain physicians, in large part because of the rural nature of much of the region.

"Any community that doesn't have a medical school in its immediate vicinity is going to have a greater challenge in recruiting physicians, and probably a more intense need to do so," says Don Dalton, a spokesman for the North Carolina Hospital Association. Primary care doctors, a potential source of referrals, are especially coveted, but so are many specialists, particularly in hard-to-come-by fields like endocrinology, neurology, neurosurgery, and pulmonology.

Nowhere has this recruitment activity been more intense than in the cities and towns close to US 321/I40 corridor, an hour or so northwest of Charlotte. Along, or 20 miles or so, from this north-south corridor are eight hospitals-six of them are part of multifacility healthcare systems-all perpetually focused on physician supply. Recruitment strategies differ, but two methods for attracting and retaining physicians stand out, says Michael P. Brady, the president of Healthcare Business Consultants, in Asheville: the direct acquisition of established practices and the income guarantee. Typically, says Brady, hospitals offer a time-limited monetary floor below which earnings can't drop despite unforeseen market fluctuations as a way of attracting experienced physicians to the region.

Ceding ownership to stay afloat

While beleaguered doctors continue to sell their practices to hospitals and large healthcare systems, the inflated prices that were typical in the 1990s are gone, Brady says. "Given low reimbursements and high overhead, doctors are in more of a desperate mode these days. They'll accept almost any money they can get to relieve themselves of some of the burdens of trying to make ends meet."

An internist we spoke to, who requested anonymity, says it was administrative overload, not money problems alone, that drove him and his partners to enter into a "somewhat Faustian deal" with a local hospital. Eager for relief from the day-to-day burdens of running a busy office, they traded "a lot of their independence" for a chance to focus on patient care. For the most part, the internist told us, the hospital has lived up to its end of the bargain, "neither interfering in how we decide to deliver care to our patients nor pressuring us to use the hospital's ancillary services."