The Choice of Employment Arrangement in the Market for Hospitalist Services

Hospitalists specialize in the management of patients who are hospitalized. Despite a uniformity of work sites, educational backgrounds, and tasks, however, newly available survey data from the American Hospital Association and the Society of Hospital Medicine reveal substantial diversity in employment arrangements. We reconcile these observations by noting that the two principal players on the health care continuum—primary care physicians who refer their patients and hospitals who admit them—have strong but differing motives for using hospitalists. We show how strategic interaction between the two players may give rise to multiple equilibria in which either the primary care physician group or the hospital ends up being the sole employer of hospitalists in a given market. Over time, the growing infrequency of hospitalization and variation in the cost of setting up a hospitalist program may explain the shifting predominance of different employment arrangements.