By Jeff Goldsmith

For the past 30 years, the U.S. health care system has been powered by baby boomer physicians, many of whom are now considering retirement at a younger age than prior generations due to burnout, deteriorating practice economics, and disillusionment with the logistical challenges of practice. I don’t believe that a majority of these physicians will cease to work in the near future; rather, they will find new roles inside and outside the health system that are more satisfying and less stressful.

As these busy physicians retire, often on very short notice, their patients are cascading down onto a new generation of physicians–a large number of whom are women–with fundamentally different goals, work styles, and values. This new generation has already gravitated toward medical specialties that mesh better with family and work-life balance priorities, and they evince a desire to practice medicine 40 hours a week or less. They are also much less ideological than their elders about medical practice and its prerogatives and less likely to remain in the same community for their entire practice.

It is hard to argue with younger physicians’ desires for a more balanced life. After observing the wreckage that 24/7 medical practice has left among their elders–divorces, intra-professional conflict, disability due to stress, even suicides–younger physicians are entirely justified in wanting to organize their lives differently.

However, this generational changing of the guard in medicine is wreaking havoc on hospital-physician relationships and may herald a crisis of access, particularly for primary care physicians and rural specialists, as baby boomers begin to enroll in Medicare starting in 2011.

Here are some of the likely outcomes of this generational transition:

1. Surge in physician employment. We can expect a sharp rise in the number of physicians employed by hospitals. Unlike multi-specialty physicians groups, many of which are thinly capitalized, hospitals have enjoyed five years of record profits and have the financial resources to absorb the economic losses associated with starting up and sustaining medical practices. They also have the capital resources and IT infrastructure to facilitate the digital conversion of a medical practice. In rural areas, the hospital will likely become, by default, the employer of last resort for a majority of the community’s physicians.

The current generation of hospital executives is wary and uncomfortable about assuming a larger role in organizing medical practices in their communities. This is due to the large economic losses, political disputes, and poor relationships engendered by their last foray into physician employment in the 1990s. Many hospital CEOs acknowledge that they failed to add value to the practices they acquired during that period. The result of these concerns will be far fewer practice buyouts than we saw in the 1990s, as well as less generous compensation packages focused better on clinical productivity.

Hospital executives are unlikely to pursue physician employment to increase profits or obtain health plan contracts (two strategies that had limited success in the 1990s). Extending the hospital’s imperial dominion into the physician sphere is not what this new wave of “integration” will be about. Rather, hospital involvement in physician practice operations will be, in most places, an exercise in damage control and loss avoidance. Transparency, wide consultation in the broader physician community, and guidance from statesmen in that community are all essential to navigating the potential landmines in this delicate process.

2. Fewer hospital-dependent physician practices. We can expect a more definitive separation of hospital-dependent and hospital-independent practitioners in adult services, with hospital-based services increasingly provided by hospitalists and intensivists. Many younger physicians who have ambulatory practices are turning away from the hospital and searching for new ways of interacting with colleagues, including online (as evidenced by the explosive growth of Sermo, the physicians-only online community).

I believe this tilt away from hospital-centered practice accounts for the declining rate of growth in hospital admissions over the past four years and the surprisingly rapid acceptance of hospitalists and intensivists in many communities. Practicing physicians in many areas have asked, even pleaded with, hospitals to staff up to manage their hospitalized patients. The shift to intensivists is happening a lot slower than the shift to hospitalists, but is driven by the same factors. While the hospital’s economic gains from this shift have proven elusive, markedly improved quality of care and reduced malpractice risk provide ample justification.

An important political consequence of this movement is that the hospital’s medical staff will represent a shrinking percentage of the total physician community, and the hospital’s real power, its power to convene the community’s physicians, will diminish. Creating online clinical communities through clinical IT, digitizing billing and collections, and collaborating to improve clinical quality under pay-for-performance plans present new opportunities for the hospital to add value for physicians who do not directly admit patients.

3. Conflict over call coverage. We can expect intensified conflict with private physicians over the hospital’s 24-hour mission and service obligation, specifically providing physician coverage after hours and on weekends. Younger physicians have shown decreased willingness to trade their personal time to cover hospital call in exchange for hospital admitting privileges as their elders did. Those admitting privileges are either less essential or completely unnecessary in an increasingly ambulatory practice environment. The present solution is for hospitals to pay stipends to independent practitioners for call coverage or to contract with single specialty groups large enough to rotate call internally.

As fewer physicians depend on the hospital for practice income, however, this arrangement will probably give way, in larger hospitals at least, to hospital employment of general surgeons, cardiologists, and others to cover the evening and weekend service demands created by emergency surgery and cardiac intervention. This transition is also politically perilous and fraught with the potential for conflict. However, hospital spending on stipends has soared, and continued rapid growth in these expenses appears unsustainable. Shifting to employment or economically accountable contract relationships will eventually replace most stipend arrangements.

4. Widening physician shortages. Unless there are major changes in how primary care physicians are paid, particularly by Medicare, we can expect a growing shortage of primary care physicians. Some rapidly growing sunbelt communities are already experiencing this problem. Surveys suggest that close to 30% of Medicare beneficiaries experience difficulty in finding new physicians, and this number will increase as baby boomer physicians retire in the next decade. Reforming and substantially increasing physician payment for primary care services, through the “medical home” or other models, is essential to avoiding a catastrophic shortage of physicians over the next two decades.

Regardless of what Washington policymakers do about reforming payment, primary care practitioners must also develop a new operational model, which hospitals can help “midwife.” Information technology must play a major role in this transition, with larger amounts of non-clinical or minimally-clinical interactions with patients either automated, through voice response technology, handled online through e-mail exchanges (e.g. prescription renewals, office visit follow-up), or supported by nursing personnel (who will also be in scarce supply). Finally, movement to end-to-end electronic adjudication and payment of medical claims will be vital to reducing practice overhead, a process which Medicare could markedly accelerate if the program’s managers made the right policy choices.

There is a wide gap between policymaker perceptions of physician need and those that are increasingly apparent in many communities. Hospitals are going to play a major role in filling the widening gap in physician coverage in their communities. They will also have to advocate more aggressively in Washington and with private health plans for physician payment reform. With a larger stake in the physician enterprise, that advocacy will make greater economic as well as political sense. The changing of the guard in medicine will widen the hospital’s role in the larger medical community, even as it is exposed to new economic and political challenges.

Jeff Goldsmith is President of Health Futures, Inc. and Associate Professor of Public Health Sciences at the University of Virginia. He is the author of The Long Baby Boom which will be published in May, 2008 by Johns Hopkins University Press.