Dueling Actuaries
Tim Mosler

Dueling Actuaries

Employment of Physicians Impact on MPL Insurance

Tim Mosler October 03, 2014 Posted in: Blog Posts, Health Care / MPL, Insurance / Insurers
On August 20, 2014, Pinnacle’s monthly APEX webinar focused on healthcare reform and its impact on medical professional liability (MPL) insurance. Art Randolph and Tim Mosler, both senior consulting actuaries with Pinnacle, squared off in a series of six debates. Each debate centered on a key healthcare reform issue and its impact. Elissa Sirovatka provided the background for each issue and moderated the debate.


The second issue debated was the impact of increased employment of physicians by hospitals. Data was presented showing that while the number of doctors practicing has increased by roughly 10,000 per year since 2000, the number of solo practitioners has decreased by almost the same amount. Since 2009, this decrease has jumped to roughly 15,000 per year.


The audience was asked to vote on how they saw increased employment of physicians affecting MPL costs. Of the 79 participants who responded, their answers were relatively split on the impact with a slightly larger share expecting a decrease rather than an increase:
Several factors drive growth in the number of physicians employed by hospitals.

First, there is the hospital’s need to control quality. The Affordable Care Act (ACA) facilitates the publication of quality ratings by hospital. Further, there are reductions in the rate of Medicare reimbursement for those hospitals with higher than acceptable levels on metrics such as readmissions, infections, and deaths. While there are strong incentives for the hospital to deliver quality care, the reality is that management is largely dependent on the doctors that practice in its facility to deliver that care. Doctors decide when a patient is well enough to be released (with minimal risk of readmission). Doctors direct the prevention and treatment infections. And, doctors are ultimately responsible for keeping patients alive. The hospital benefits by having greater control over the quality of care its doctors provide.

Another cause is the revenue advantages for the hospital in employing physicians. A private practice physician may perform procedures at several facilities. But a hospital-employed physician will perform as many procedures as possible at their employer’s facilities. The hospital can also influence the physician’s referrals so that a greater number of them are within the hospital’s network. And, if the hospital is part of an accountable care organization (ACO), then the ACO’s potential profit is increased by adding the doctor’s patients.

Finally, it is becoming harder for a single doctor’s medical practice to be a successful business. Since well before healthcare reform, cost control measures on government healthcare programs have eroded doctors’ profits. These measures have only increased as a result of ACA. Additionally, there are new requirements for paperwork and accounting and the very large expense of converting to electronic health records. Ultimately, many doctors view hospital employment as a practical alternative.


As a result of the doctor’s prior administrative and managerial duties now being handled by hospital staff, the doctor has more time to focus on providing quality care to his or her patients. The doctor then has capacity to handle a larger number of patients and to devote more time to providing quality care.

Within the hospital system, there is the potential for a consistent risk management approach. If an aspect of a doctor’s provision of care is significantly different from his or her peers (and detrimental to patient safety) then it has a greater chance of being detected in the hospital environment than in private practice. There are also benefits for handling problematic claims. Currently, when a bad outcome occurs due to negligence and a claim is filed, it’s possible for the providers involved to blame one another. Through the discovery process, this benefits the plaintiff as they can build stronger cases against each defendant based on the information provided by other defendants. If all of the defendants have a common hospital employer, there will be a more coordinated defense and less finger pointing among the defendants. Greater coordination will ultimately lead to lower claims costs.


The team environment that exists in a hospital could lead to bad outcomes as doctors may feel less ownership of responsibility for the care of the patient. In private practice, it is possible for a doctor to receive new information and quickly change a patient’s course of treatment. In a hospital setting, multiple care providers are involved. It may be difficult for one doctor to change the course of treatment without getting buy-in from the other professionals involved. In situations in which the course of treatment is a matter of judgment, the doctor may find it more practical to continue with the current course of treatment. That could ultimately lead to a suboptimal outcome for the patient and potentially a claim.

Detecting poor performers could take longer in a hospital setting. In a private practice, deficiencies in the care a physician provides are usually noticed quickly by the patient. If the care is substandard, the patient finds another doctor. In the hospital setting, the doctor’s care is partially dependent on the nurses and assistants that support them. So, there is the potential for an underperforming doctor to go unnoticed if they have the benefit of strong support. When that support changes or when a situation arises that is beyond the training of the support staff, a patient could suffer a bad outcome and a negligence claim could result.

Once there is a claim, what happens if the hospital wants to settle and the doctor wants to defend? For a hospital, settling a claim can be a business decision, but for the doctor it is a very personal decision. Physician insurers market themselves to doctors by describing their stance of defending good medicine. If the hospital settles against the doctor’s wishes, it may lead to a negative attitude among physician employees that could make them less cooperative in defending future claims against the hospital.

Alternatively, if the hospital defends claims in the same way that physician insurers do, it needs to be recognized that physician claims are different from hospital claims. The hospital may face a learning curve in the best way to defend them. Particularly in the short term, there could be an increase in costs if suits go to trial and the hospital loses.

Given these arguments, pro and con, how would you have voted on the question of whether MPL costs will rise as more and more physicians become employees of a hospital?

To share your opinion, email Tim Mosler at tmosler@pinnacleactuaries.com.

For more information on Tim Mosler, Art Randolph or Elissa Sirovatka visit our People page.

Tags: ACA, MPL, APEX webinar
«July 2018»