As more and more physicians become employed by health systems and hospitals, concerns are raised regarding how the employers may manipulate physician behavior based on the master-servant nature of employment. In light of those concerns, the AMA has issued Principles for Physician Employment. The principles address conflicts of interest that can arise in employment relationships, contracting issues, the right to advocate, the separation of employment from the physician's status as a member of the organized medical staff, the need for peer review and approaches to performance evaluation, and transparency associate with payment by payors. The 26 individual principles provide a checklist for negotiations with potential employers, but they likely will not always be addressed in contracts. Moreover the principles offer some hope for independent physicians who seek to remain so but are worried that their referral base will erode as health systems require their employees to refer in network, so to speak. Those physicians who lose some of these referrals are often surprised to learn that the Stark regulations specifically permit the requirement of directed referrals under the personal services exception, the employment exception and the managed care exception. In other words, the policy antipathy toward self-referral in the physician world is not so honored in the health system and managed care world. We have long argued that the profound consolidation taking place right now is building powerful cartels often with no value proposition at all. We believe many of the hastily arranged transactions we have reviewed and advised on will not produce success for the employers or the employees.  We take the position that clinical integration and alignment to produce value do not require employment.