The two major trends that have defined physician staffing over the past five years – hospital employment of physicians and consolidation of outsourced physician groups – show no signs of slowing. The uncertainty that characterizes the next phase of health care reform all but ensures that these trends will continue for the foreseeable future. A closer look, however, reveals that both hospitals and physician groups are engaging in creative ways to address the rapidly changing health care landscape.

Achieving the flexibility to address these new uncertainties is prompting hospital leaders to re-evaluate their staffing strategy and rethink what the physician-hospital relationship should look like. A look beneath the surface shows that strategies available to hospitals look quite different from the way they looked just a few years ago. There are three primary staffing models, each with its pros and cons.

Hospital employment

Estimates vary, but roughly half of all physicians in the United States now work for a hospital or health system. Four of five residents will begin their careers working for a hospital, supporting the prediction that this trend is expected to continue. While there is some variability among the medical specialties (for example, about two-thirds of emergency physicians are still independently employed), the trend lines are the same.

As hospitals take over more independent groups and increase their in-house hires, hospitals are becoming much more adept at managing physicians as employees of a special class, embracing a transition from a vendor-client relationship to a more practical partnership with physicians. Managed effectively by attuned and enlightened administrators, employed physicians will come to identify with the goals of their employer and will be more willing to relinquish some of their prized autonomy for the benefit of the facility.

If this relationship is managed poorly, on the other hand, physician satisfaction will nosedive, turnover will increase, and animosity will ensue. It takes a highly self-aware hospital management team to honestly ascertain what kind of leadership it can provide to employed physicians. Its staffing strategy should accord with that assessment.

Pros: There is closer physician-hospital alignment, the physician group has less administrative burden, the hospital is better able to build bridges to post-acute care, and physicians may develop more solid community ties.

Cons: Productivity may suffer slightly without an offset in improved quality; a “corporate” culture may negatively affect physician morale; the cost of physician support may be hidden or difficult to identify but still present; and it can be difficult to maintain successful recruiting efforts in key medical specialties.

National multispecialty groups

In recent years, several physician companies have experienced rapid growth and attained a national footprint in fields such as hospital medicine, emergency medicine and anesthesia; the list of their medical specialties keeps growing. Some of these “mega-groups” count their staff in the thousands. One company has a roster approaching 20,000 physicians, and other companies are not far behind.

For hospital leaders who decide against employing a substantial portion of their physicians, the big multispecialty groups offer a way to centralize physician operations in the hands of focused, professional physician operators. The groups also enable hospitals to focus accountability and streamline physician vendor relations in a single interface.

All the mega-groups are public companies (or divisions of public companies) with strong financial resources. Consequently, they have multiple stakeholders to satisfy. This leaves them open to concerns that their physicians have potential conflicts of interest, including a duality of loyalties: to the hospital client and to their own company. As one might expect, the mega-groups tend to view members of their own physician workforce as the best advocates for their employer's brand name and reputation.

Pros: These groups may deliver more-efficient practice management among multiple specialties, they offer focused and experienced practice-management talent, they have strong physician infrastructure and support, and subsidies for physician compensation can be spread among multiple specialties.

Cons: There is only a moderate level of identification with facility goals, multiple stakeholders need to be satisfied, clinical focus in multiple specialties may lessen overall physician performance, physician recruiting places less emphasis on local and community roots, and competing corporate loyalties may interfere with physician-hospital alignment.

Local practice groups

The past five years have seen fewer independent practice groups in virtually every medical specialty. Much evidence suggests that smaller local practices are being absorbed by hospitals and the large multispecialty companies.

Yet, for several reasons, it would be premature to categorically put small groups on the endangered species list. There are still some markets of considerable size where these hardy survivors continue to thrive, and their hospital clients highly value their community roots.

In certain respects, small-practice management has become less costly. Outsourced service costs such as accounting, charge capture and data processing have been on the decline, although other costs such as compensation and insurance continue to rise.

Many hospitals, particularly in small towns and rural communities, value their relationships with the smaller practices and offer them support services to maintain their viability. Also, the small practice continues to be a sentimental favorite of many physicians, even while their pocketbooks lead them in other directions, at least for now.

Pros: Small practices have good relationships with local referral sources, close-knit ties throughout the community, good working knowledge of other local health care facilities, expertise within a single medical specialty, strong loyalty from physicians who prize independence and autonomy, and generally higher physician retention and satisfaction.

Cons: These practices are frequently underresourced financially, limiting growth options and the ability to respond to some client needs; they are inexperienced in physician training and development; they may struggle with compliance or administrative requirements under the Medicare Access and CHIP Reauthorization Act of 2015 or other quality reporting mandates; and single-specialty focus places an additional management-integration burden on the hospital.

Using multiple staffing strategies

Most facilities settle on a combination of staffing strategies. In some cases, particularly in larger hospitals, all three strategies may be actively employed, even within the same medical specialty. Hospital administrators often justify this approach by arguing it avoids putting too many eggs in one basket; it spreads the risk of any one practice losing stability or effectiveness.

The true costs of maintaining a layered staffing strategy are easy to overlook and sometimes difficult to account for. A patchwork of practice groups large and small may come and go without an overall plan that clearly lays out the roles and responsibilities of the various players over the longer term. Perhaps out of neglect or inertia, an excess of practice groups may simply cohabitate within the hospital’s four walls, each with its own culture and with an agenda that may or may not comport with that of the hospital.

No staffing model has the statistical support to claim an advantage in delivering superior patient outcomes. Each has its share of successes and failures in every specialty and in every market. The key to success is to put into place a long-term strategic plan that will (1) structure a meaningful alignment between the hospital and each of the practice groups; (2) integrate care between practice groups, both within your facility and with the surrounding post-acute care facilities; and (3) build a program that coordinates care with all the community stakeholders who are responsible for population health management.

Todd J. Kislak is a health care consultant based in Los Angeles.

The opinions expressed by the author do not necessarily reflect the policy of the American Hospital Association.