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Hospital-Doctor Affiliation: What Doctors are where?

While in senior management at the Greenville Health System years ago, we created a hospital-doctor affiliation system that is worth revisiting because it may help us understand our current medical care situation and a way to prioritize patient well-being going forward.

If we define medical care as the perception patients have of our healthcare system, then our situation is dire as 70%-90% of the populace have an unfavorable opinion of their medical care. As we have established, lack of availability, corporatization, depersonalization, exploitation of non-clinicians and poor communications seemingly conspire to undermine patient well-being. And while all of these are important, none is probably more contributory than the clinical burnout experienced by doctors who have lost autonomy and the sense of meaning in their work. This brings us to the hospital-doctor affiliation classification I helped create, and one that grants various degrees of doctor autonomy. The affiliation classification, a view from the perspective of the hospital, refers to “A Doctor,” “B Doctor,” “C Doctor,” and “D Doctor” affiliations. It is shown below: 

Let’s briefly summarize each affiliation. 

Up front, it is important to note that the designation of a letter (e.g., “A” vs. “B” vs. “C” vs. “D”) is not a letter grade. It has nothing to do with quality. “A Doctors” are not better doctors than “D Doctors.” The letter refers only to the relationship the doctor has with the hospital, and the subsequent level of affiliation. Understanding this, let’s start with the “C Doctor” affiliation model. It is shown below:

“C Doctor” affiliation is the classic medical staff model that served the medical profession throughout the 20th century. Hospitals and doctors in this model are independent and separate. Like farmers who bring their vegetables to the best farmer’s market, doctors in this model bring their patients needing hospital care to the best hospitals aka the ones that provide the best service and care. The simplicity (and effectiveness) of this model worked well until the payors (particularly Medicare and Medicaid, who comprise 60%-70% of payors) began requiring more hospital-doctor integration. Accordingly, reimbursement, whether tied to quality, the use of specific administrative processes or various forms of documentation, became linked to integration as well. The administrative burden of integration is particularly difficult (and expensive) for independent private practice doctors. As a result, the number of independent doctors has plummeted since 2000. In some places, only 25% to 30% of doctors are “C Doctors.”

It was the drive toward hospital and doctor integration that ultimately led to the wholesale employment of doctors by hospitals—the “A Doctor” model shown below: 

Hospital employment is now the  prevailing affiliation model. Up to 70% of doctors function as “A Doctors.” And while employment arrangements differ from hospital to hospital, most hire doctors as W-2 employees (like all other employees in the hospital). Invariably at some point in the organizational chart, doctors report to non-clinician administrators. Obviously in this arrangement, the doctors have surrendered their autonomy (self-governance). Their “moral duty” becomes that of the hospital. Ultimately, corporatization seeps into clinical decision making; the well-being of the hospital insidiously becomes a priority. This is not a sinister process. It is a well-meaning inevitability. Doctors are expected to be good team players like all other employees in the hospital, even when patient care is impacted. Like all other employees who choose not to be good team players, doctors can be terminated (even when advocating for patient well-being). Simply stated, with hospital employment, doctors do not have the control that they had in independent practice. Eventually, doctors lose their motivation. Burnout invariably happens. Hospitals become complacent in their services. With a captive referral base of patients (from their employed doctors), there is little incentive to improve. A  labor/management relationship between doctors and hospitals becomes the result. Labor unions are then an inevitability (8% of American doctors belonged to labor unions in 2022, up 26% since 2014 according to a JAMA report). And, of course, patient well-being is the ultimate casualty.

Doctor compensation with hospital employment is particularly interesting. Even though doctors are employed, the hospital billing team still submits bills for the doctor’s services, just as if they were in independent practice. The hospital collects the payment to offset the doctor’s W-2 salary. However, the salary that doctors are paid by the hospital almost always exceeds the doctor’s collections. The rationale for paying doctors more than they collect relates to surrendered ancillaries. When a doctor is hired from private practice, they no longer perform tests and lab procedures in their offices. These tests and procedures generated revenue for the doctor in private practice. Those services are surrendered to the hospital. The doctor’s lost revenue is realized by the hospital, and reimbursed back to the doctor (usually in the form of an enhanced dollar/wRVU for patient care). On the financial ledger of the hospital, money paid to doctors that exceed their collections are booked as “physician subsidy” (a term that is usually offensive to many doctors!). According to a Kaufman Hall report, the subsidy per doctor in America in 2023 was $292,000—up 2% from 2022. Such subsidies have increased by 14% from pre-pandemic numbers.

Thus the current state – increased doctor burnout, lack of incentive to produce, the threat of labor unions and increasing hospital subsidy – is producing headwinds away from the “A Doctor” model. One alternative is the “B Doctor” model shown below:

The “B Doctor” model (in its purest form) keeps doctors in independent practices such that doctor autonomy is maintained. The independent practices are then organized into a medical cooperative (usually by a third party) that contracts back to the hospital for clinical, teaching and administrative services. This transactional relationship provides integration and satisfies the desires of hospitals, mitigating the need to employ doctors. It also provides dollars to doctors above what they collect clinically, similar to hospital employment. However, unlike employment, the amount of the funds (the subsidy) is fixed, and negotiated annually. As such, the medical cooperative (not the hospital) is at financial risk for the doctor’s performance. The “B Doctor” model has been highlighted in many of our previous posts. It was the model used by the Greenville Health System. 

Lastly, there is the “D Doctor” model. “D Doctors” are in one of three other models, but attached to a competing hospital.

Our next article will take a deep dive into the medical cooperative (“B Doctor” affiliation model). As we will see, medical cooperatives provide the opportunity for doctors to improve how patients perceive the healthcare system. As a result, they may be the best hope for restoring patient well-being and medical care as the priority.  


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