Examining the Economic Impact of a Physician Shortage

The changing regulatory environment in health care adds increased urgency to a looming physician shortage that will continue to present challenges for health care and its delivery over the next decade.

Although this issue has been well documented and discussed over the past few years, the impact of a physician shortage combined with policy changes affecting healthcare delivery and insurance will likely have a ripple effect on operations and healthcare finance. Healthcare organizations thus face the daunting task of preparing for a future in which the physician shortage unfolds even as the industry contends continuing financial and delivery-system changes.

How significant is the problem?

In a March 2017 report, the Association of American Medical Colleges (AAMC) predicts that, by 2030, the physician shortage could range from 40,800 and 104,900 physicians in the United States. The most severe shortages are noted for nonprimary care specialties, including surgery, emergency medicine, neurology, pathology, and psychiatry.

As might be expected, the severity of the shortage will be highly variable and based on geography. A July 2016 report from America’s Health Insurance Plans (AHIP) notes that 14 states have physician supply rates that are less than 90 percent of the national rate. The supply rate for psychiatrists in four states was closer to 60 percent (or less) of the national supply rate, AHIP says.

The physician shortages have real implications not only for hospital operations, staffing, quality metrics, and access for patients, but also for health plans. AHIP says, “Such shortages constrain the ability of health plans to establish high-value provider networks.” Therefore, any network adequacy standards (established as part of Affordable Care Act) should factor into the supply of physicians, AHIP says.

The challenge for health care will be to deflate the impact of a shortage on an industry. For primary care, the AAMC projects the primary care shortage could amount to as many as 43,100 physicians by 2030. Those numbers factor in a projected increase in the supply of nurse practitioners.

The primary factor driving the projected shortage is physician retirements resulting from an aging physician workforce. AAMC notes that, among specialty categories, “[O]ver one third of currently active physicians will be 65 or older in the next decade.”

The aging of the U.S. population is considered a primary driver for increasing demand. Although the problem is real, the solutions to adequately address the shortfall also seem daunting.

AHIP recommends these changes:

• Make it easier for physicians who were educated outside of the country to obtain the credentials to practice legally in the United States
• Increase federal funding for residency training openings and for the National Health Service Corps
• Expand the use of telemedicine
• Allow practitioners (physicians and nurse) and physician assistants to practice to the full extent of their education and training

Demand for health care will continue to increase. According to the AAMC report, during the period of 2015-30, the projected growth rate for the population under age 18 is less than 4 percent, compared with 55 percent for the population aged 65 and older.

Health care’s challenges are real. But there also is a tremendous opportunity to redesign care delivery by enabling technology, increasing patient engagement, and re-envisioning care processes to deliver greatly improved health care to the U.S. population.