- The share of physicians working in private practices, or those wholly-owned by physicians, fell by 13% between 2012 and 2022 — from 60.1% to 46.7%, according to a survey released this week from the American Medical Association.
- The percentage of physicians working in practices at least partially owned by a hospital or health system increased by almost 8% during that time frame, while the share of physicians working in hospitals increased by 4%.
- Four out of five physicians surveyed who sold their practice cited a need to negotiate higher payment rates with payers as a main driver for their decision, while others pointed to a need to manage administrative and regulatory requirements.
Over the past decade, independent physicians in the U.S. have become increasingly scarce as hospital systems, private equity firms and payers have acquired individual practices — a trend that accelerated under financial stresses from the COVID-19 pandemic. In 2021, the Physician Advocacy Institute estimated nearly 70% of all U.S. physicians were employed by hospitals or corporate entities.
Now, factors including complex payer relationships, rising costs and labor shortages continue to make practice buyouts an attractive option for physicians, experts told the New York Times.
Financial pressures for physician practices have increased over the past twenty years, AMA researchers noted. Physician payment in the Medicare program declined after adjusting for inflation in practice costs, and a majority of physicians describe associated burden as “high or extremely high,” the report found.
“The shift away from independent practices is emblematic of the fiscal uncertainty and economic stress many physicians face due to statutory payment cuts in Medicare, rising practice costs and intrusive administrative burdens,” AMA President Jesse Ehrenfeld said in a statement. “Practice viability requires fiscal stability.”
However, even if buyouts can offer financial benefits for practices, individual providers may not directly reap rewards.
A December 2021 study in Health Affairs analyzed physician compensation between 2014 and 2018 and found acquisition by hospitals was associated with a modest drop in provider compensation, even as hospital profits tended to expand.
Patients are also likely to pay higher premiums for care when hospitals or PE firms acquire practices. A 2018 analysis published in Health Affairs found that prices for services at a facility integrated with a hospital system were 5% higher for primary care and 9% more for specialty services. Another analysis, published by the Petris Center this week, found that when PE firms controlled more than 30% of the market, cost for some specialties increased — in some cases by double digits.
In response to concerns about possible anti-competition effects of acquisitions, the FTC announced a multi-year study investigating healthcare mergers in 2020. Multiple watchdog groups, including Public Citizen and Brookings, have called upon Congress to take a closer look at PE’s role in the healthcare industry and possibly introduce procompetitive reform legislation.