Healthcare Tech Lessons: Organizational Structures in Healthcare

Today I'm going to talk about the different organizational structures that exist in healthcare from the physician's point of view.  If you're a physician, you fall into one of three organizational structures:

  1. Independent: the physician has their own practice and is responsible for all revenue and expenses.  Their success or failure depends completely on their own performance.  This is the traditional model but it's becoming more and more difficult to survive as an independent physician.  I've heard estimates that 30% of independent physicians are barely able to make payroll each month.  Rapid consolidations, declining reimbursements, increased technology and compliance requirements -- not to mention the recession -- have made it extremely difficult for independent practices.  As a result, every day more and more independent physicians are moving into the second type of structure.
  2. Employment: the physician is employed by a health system, a hospital or some other healthcare organization.  This is the model that is heating up.  There's a massive shift in healthcare away from fee-for-service and towards managed care.  Fee-for-service is when a physician gets paid for each individual treatment.  Managed care is when a group of physicians are paid a lump sum and that money is split between individuals.  It's extremely difficult to survive as an independent physician in a managed care environment.  Health systems are employing massive amounts of physicians to drive referrals between physicians and to reduce costs through the economies of scale that come from technical and clinical integration.  As healthcare reform continues to reduce revenue to providers, the physicians that are not employed are going to have a tough time surviving.
  3. Partnerships: partnerships are really every remaining structure.  Partnerships can be joint ventures, Accountable Care Organizations, physician alliance groups, etc.  It seems that as a result of the major reforms that are occurring in healthcare, a third, more equitable option such as a partnership is going to be the structure that begins to dominate.  But of course there are major unanswered questions that arise with these partnerships:  Who's in charge?  Who's going to get paid?  How are they going to split the money?  Who's going to drive decision making with patients?  Who's going to contract with the payers?

How and when the third option becomes the dominant structure in healthcare is a fundamental reason for the uncertainty in healthcare.  It'll be fascinating to watch all of this take shape over the next couple of years.