Eighty percent of physicians who complete training programs over the next decade will shun private practice and seek employment, reports the Hospitals and Health Network online magazine. This new wave of physicians holds no interest in starting practices or joining small existing practices. At the same time, established physicians face exponentially rising practice costs such as malpractice premiums, as well as headaches associated with trying to keep up with technology, find trained administrators and billers, and stay abreast of billing and collection systems. "It's become a challenging environment for independent physicians to make ends meet," said Steve Nyquist with Salient Health Ventures in Cullman, Alabama. "We're seeing smaller practices evaporating because they no longer have the margins able to sustain where they want to be," Nyquist said. This leaves even fewer practices willing to recruit physicians. With basic insurance contracts not as lucrative as they once were and practice costs continuing to mount, physicians are increasingly frustrated with running a practice. "More and more physicians are saying that their practices are overwhelming them," Nyquist said. To expand the shrinking margin in their patient practices, physicians have branched into joint ventures with hospitals and private investors. Before joint ventures, physicians could only make more money when they saw more patients or did more procedures. "When they had a joint venture world out there and could partner with hospitals, there was a way for them to share in the risk and reward of a surgery center or other venture along those lines," Nyquist said. However, those opportunities are being curtailed. "Our government, through Centers for Medicare and Medicaid Services (CMS), has decreed that it makes them extremely nervous for physicians and hospitals to be in partnership on clinical services," Nyquist said. "CMS seems to be indicating they prefer for physicians to be wed in an employment relationship with hospitals, so it has to happen." But hospitals rushed to employ physicians in the mid-1990s with little long-term success. The rush began in response to private practice management firms, like MedPartners, sweeping through areas buying up practices, which included the influence and control of the physicians. "Hospitals feared that the large physician practice management firms would affiliate with national hospital companies or payers and control the physician referrals and contracting process. It made the hospitals feel like they had to get their own stable of physicians," said Colin Luke, a healthcare attorney with Balch & Bingham. It didn't work. "They were overpaying for the practices, and they had unrealistic expectations about what the physician practices could generate," Luke said. Two of the major private management companies went out of business, including Birmingham-based MedPartners, which dumped its practice management sector, changed its name and focused exclusively on its pharmacy sector by the end of the 1990s. For hospitals, the hiring of physicians didn't work, according to Luke, because physicians enjoy their autonomy, physician billing varied a lot from hospital billing and physicians weren't as motivated to perform when they were employees. "Physician employment by hospitals is coming back. It's just not coming back the same way," Luke said. Now hospitals and others are buying practices fairly cheaply, because physicians are willing to sell their practices just to be free of certain hassles of running a practice without the expectation of a large goodwill payment. For hospitals, hiring physicians is driven by need and desire. "More and more folks without primary care physicians are showing up in emergency rooms, and that's straining hospitals in ways that they haven't been strained in a long time. That situation's only going to get worse," Nyquist said. With additional physicians on staff, hospitals also acquire referrals. "It's generally the physician that drives patient admissions," Luke said. Nyquist adds that with more physicians, hospitals have an opportunity to negotiate better rates from insurance providers. But the primary motivation may lie in hospitals understanding that they can't afford to leave the evolution of medical practice to chance or to their competitors. The trepidation now for the industry is how hospitals and physicians can do this a second time. "Hospitals have learned they have to build in the right and legal kind of incentives to induce physicians to continue to work hard and stay productive," Luke said. When hiring a physician, hospitals bring a highly trained, educated, and mostly independent professional into the mentality of a bureaucratic system. "And sometimes that can be a rub," Nyquist said. Luke sees hospitals' hiring of physicians lasting only so long as both sides get a major need filled. "I see this happening until either hospitals lose a lot of money on these physician practices or physicians decide they prefer being independent." Nyquist said physicians are tired of straining to make ends meet in their world, and hospital employment offers a permanent refuge from regulated fees and rising costs. "When cost lines go up dramatically and revenue stays flat, the only way to make ends meet is to work longer hours. And for a lot of physicians, that doesn't make sense."