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Physician Management Companies: When The Price May Not Be Right

March 17, 2023

One solution for clinicians facing economic challenges at work is to join a physician management company (PMC). PMCs are usually for-profit enterprises that step in and manage the business. These companies can provide staffing and management services that many clinicians cannot otherwise afford. PMCs also take over negotiating contracts with hospitals and insurers. What is the impact on the cost of care and does joining a PMC impact patient outcomes for patients? 

Yu et al (10.1542/peds.2022-057931) share their analysis of 2,858 infants admitted to 34 new PMC-affiliated NICUs from 2011 to 2017 in an article being early released this week in Pediatrics. The authors compared infants cared for in PMCs to infants in NICUs not managed by a PMC. They found that that joining a PMC was associated with an average increase of $313 per day. They note that NICUs who joined PMCs had an average 70.4% increase in prices. The increases were largely attributable to professional costs ($5,161 increase per NICU stay). Hospital costs did decrease in PMC NICUs, but not enough to overcome the professional price increases.

Did the PMCs help NICUs continue that might have otherwise gone out of business? Who bears the additional cost?  We invited Dr. Scott Lorch, neonatologist at the Children’s Hospital of Philadelphia and Senior Fellow in the Leonard Davis Institute for Health Economics at the University of Pennsylvania, to share his thoughts in an accompanying commentary (10.1542/peds.2022-060788). Dr. Lorch raises some important issues regarding the effect of PMC involvement in neonatal care, including the potential impact on insurance premiums and insurance benefits. Dr. Lorch also points out that PMCs usually invest in hospitals with a favorable payor mix. So, the ability of PCMs to help NICUs in underserved areas is questionable.  Dr. Lorch closes by reemphasizing the most important finding of the study by Yu-et al—PMCs are associated with an increase cost but not necessarily increased patient or family benefit. Let us know if you are in a PMC. Alternatively, if you are considering joining a PMC, please let us know why. Regardless, this article and commentary provide great insight into a growing aspect of healthcare financing. Link to both and learn more.

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