Bargaining power for docs comes at the expense of hospital leaders

Giving doctors more bargaining power may hurt hospitals in the long run, according to research published in Organization Science.

Researchers, led by Jill A. Brown of Bentley University in Waltham, Massachusetts, observed and conducted interviews at an unnamed nonprofit hospital in a competitive market for 15 months and combined their findings with archived material, including public reports and press releases.

The hospital began the process of transitioning to a nonprofit/for-profit structure, under which it shared ownership of for-profit facilities with physicians, in 1994, in hopes of retaining physicians within the competitive environment.

As part of this transition, the hospital also shifted its governing structure, increasing physician autonomy in managing activities and costs across hospital units, which achieved the goal of physician retention amid heavy competition, but it also significantly increased physicians' bargaining power at the expense of the hospital's, dramatically increasing replacement costs for physicians as they became part owners of shared facilities. As the hospital's internal bargaining power eroded, the loss eventually canceled out the external competitive advantage the new governance structure had given it, according to Brown and her team.

These concerns are particularly relevant as primary care physicians increasingly flock to the hospital sector and healthcare leaders seek to give hospital doctors a bigger seat at the C-suite table.

"Our results show that human capital bargaining power is a 'double-edged sword,' shifting the governance structure to benefit those with power by providing additional rents, but creating challenges for the ongoing management and retention of such valuable human capital," the authors wrote. "Our findings have implications for the long-term survival of talent-intensive organizations where human capital bargaining power is strong."

To learn more:
- read the study abstract