Dr. Anne Furey Schultz examines a patient at Northwestern Memorial Hospital in Chicago City.
Photograph by Scott Olson — Getty Images
By Laura Lorenzetti
November 14, 2014

After the Republican landslide in the midterms earlier this month, pundits have been analyzing the future of Affordable Care Act (ACA), wondering if the GOP’s pledge to repeal or replace elements of the new health law will come to pass.

Healthcare executives have long worried about the high cost of implementing Obamacare, but these days they have something else on their minds: the rising cost of labor. The number of doctors, especially those focused on everyday care, has declined in recent years, and that shortage has executives worried about their bottom lines. Hospitals and other large medical facilities are facing higher salary costs in order to attract primary care physicians.

Executives now say the cost of labor is a bigger cost driver in their organizations than those associated with implementing Obamacare, according to a quarterly survey by Premier (PINC), a healthcare consulting firm.

More than 68% of C-suite executives are concerned about the growing shortage of primary care doctors, and the concern is even more pronounced in the Northeast, Mid-Atlantic and Southeast regions of the U.S.

“It’s not a surprise. We’ve been talking about [doctor] shortages for quite some time,” said Mike Alkire, chief operating officer for Premier. “There’s pressure on a market that has a small supply, and it’s having financial implications.”

Indeed, the nationwide shortage of doctors has been a problem for years, and it is only expected to get worse, especially when it comes to primary care physicians. By 2020, there will be a shortfall of 91,000 doctors, half of which are primary care physicians, according to the Association of American Medical Colleges (AAMC).

The shortage could become even more pronounced as an aging population and a growing number of insured patients — an effect of the ACA —seek out additional medical services.

While a record high number of students enrolled in U.S. medical schools this fall, there number of available residency positions — the post-graduate training necessary for newly-minted MDs — has barely changed.

The federal government currently funds most of these positions, and the total number is capped. While medical school enrollment has climbed over the past decade, the number of residencies required to train grads has increased only slightly, according to the AAMC.

This shortage will eventually mean higher costs for hospitals and patients. Who exactly absorbs growing labor costs is a complicated calculation. Essentially, it gets divided between hospitals, Medicare (and therefore taxpayers) and, eventually, patients via increased insurance premiums.

The distribution of the cost burden depends on reimbursement rates offered by insurance companies, and by Medicare. These rates are set using a wage index designed to reflect the cost of labor in any given geographic area.

To ease the growing strain, executives are looking for solutions beyond M.D.s, such as better utilizing nurse practitioners and physician assistants, said Alkire.

The industry refers to these positions as “extenders.” Like doctors, they can diagnose conditions and write prescriptions. By 2020, the number of NPs and PAs, which require master’s degrees, is expected to increase by 30% and 58%, respectively, according to the Health Resources and Services Administration.

By implementing alternative staffing solutions — and even new approaches, such as telemedicine — leaders of health organizations can lessen the impact of the ongoing doctor shortage and associated higher wage costs.

“This is where the creativity comes in,” said Alkire. “Organizations need to figure out how other clinicians step up to fill the gaps so doctors can be more efficient.”

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