What Is the Value and Return of the Medical Group Enterprise?

Over the past several decades, both freestanding hospitals and integrated healthcare delivery systems have employed physicians and placed them into separate operating units called Medical Group Enterprises (MGEs).

The number of physician practices owned by hospitals has increased 86% over the past four years, with a corresponding 50% rise in the number of physicians employed by hospitals.¹ By 2016, nearly 4 of 10 physicians were employed by a hospital and one in four practices owned by a hospital.¹

There are many reasons why healthcare systems and physicians opt for employment. Healthcare systems desire to retain a physician’s patient panel in order to create networks that offer patients a broader range of clinical services directed at the system’s other programs. The goal is that employment will align physicians to help capture or maintain market share and to allow systems to compete in value-driven or population-based market niches (such as accountable care organizations [ACOs] or Bundled Payments for Care Improvement projects) to create clinically integrated networks (CINs) and combat the narrowing of networks and panels of commercial insurers. Further, physicians may prefer the security of employment rather than trying to manage their clinics through a difficult phase of healthcare reform and dynamic marketplace evolution.

Published October 21, 2019