The Compass

Last week, we shared our forecasts for the average rate of growth for surgical services year over year through 2029. With demand for healthcare services projected to be flat to declining, inevitably the next question becomes whether physician supply matches that demand.

Last month, the Association of American Medical Colleges (AAMC) published its annual Physician Workforce Projections, reporting an insufficient number of physicians to meet future healthcare demand. The media has faithfully reported the AAMC’s projections of physician shortages since the AAMC’s inaugural report. What remains unreported is that the AAMC’s projections validate our declining demand forecasts.

Homing in on the supply-side of the surgical demand equation, we find that the projected demand for surgeons has been declining for years. A longitudinal analysis of the AAMC’s projections shows consistent downward revisions to the surgeon demand projections over time (Figure 1). We calculate that the AAMC’s 2016 projections estimated a 1.1% CAGR in the number of surgeons needed compared to a 0.8% CAGR in 2021, a 27% reduction.

The mismatch of supply and demand extends beyond surgical services. Similarly, Figure 2 shows that annual inpatient admissions have declined by 3.5M from 2008-2016 while the number of hospitalists has nearly doubled in that time. Whereas much of the physician shortage discussion has been grounded in the assumptions of population growth and aging demographics, we must remember that demand for services is primarily a function of care trends and population shifts, each varying in its impact at the market level.

These data points should raise questions for all participants in the health economy, starting with whether the projected shortage of physicians is a matter of volume or preference. Other questions include the impact of alternative suppliers, therapeutics, technology and, importantly, physician vs. consumer preference.

We believe that these questions pale in comparison to the most important question for health systems: Is our goal to be in the hospital business, or rather to be in the healthcare delivery business? The answer to that question informs the questions about physician shortage.