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It's widely believed that primary care physicians who work in practices owned by large hospital or other health care systems are paid more and produce less than their peers at large physician-owned group practices. But a Towers Perrin study of physician compensation and productivity turns that theory on its ear. The consulting firm drew a sample of 229 family physicians, each of whom had worked at least two years in a practice operated by a primary care network that was under the ownership of a multihospital system. Average 1997 cash compensation and productivity, measured as relative value units, were compared against the Medical Group Management Association's same findings for 311 family physicians employed in doctor-owned-and-operated multispecialty practices with at least 70 physicians. There was no statistical difference in salary, while physicians employed by hospital systems were, on average, 10 percent more productive.

Though physicians in practices owned by hospital systems were paid 8.5 percent less per unit of production, Towers Perrin acknowledged that hospital-owned primary care networks are assembled for different reasons than large multispecialty practices — namely, to provide a patient stream. That hospital-owned practices built solely for their strategic value often lose money can be attributed in part, according to the authors, to hospitals' cash-compensation plans, which generally fail to align physician incentives with those of the larger health care system.

SOURCE: HEALTH INDUSTRY RESEARCH REPORT, TOWERS PERRIN, NEW YORK, 1999

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