Report: Nearly 7 in 10 Physicians Now Employed by Hospitals and Corporations

Once upon a time, a medical degree was a ticket to life-time self-employment. That no longer seems to be the case—at least not the “self” part of the phrase. For years, hospitals and health networks have been gobbling up physician practices at increasing rates. And now a new study from the Physicians Advocacy Institute (PAI) finds that, as of the beginning of 2021, just 30 percent of all physicians in the U.S. are practicing medicine independently. The remaining 70 percent are employed by hospitals, private equity firms, health insurers or other corporate entities.

Whither the Independent Physician?

In addition to being a fixture of the U.S. health care system, the independent physician has been a part of Americana itself perhaps best captured in the paintings of Norman Rockwell. But now that familiar family doctor has become a nostalgic memory from a long bygone era. Thanks to consolidation, most of today’s doctors are part of a corporate network. In addition to depersonalizing the physician-patient relationship, consolidation throttles competition, dampens medical practice innovation and drives up costs and health care spending.

The PAI Study

For nearly a decade, PAI has worked with Avalere Health to study the impact of hospital and health system acquisitions of physician practices in the U.S. Their collaboration began in 2012 when the mass exodus of physicians from independent practice began in earnest. By 2018, 44 percent of U.S. physicians were employed by hospitals or health systems, compared to just one in four back in 2012. The trend continued in 2019 to 2020, but with a new twist as hospital systems and corporation began aggressively scooping up independent physician practices.

The new PAI study documents the impact of the latest trend. The headliner is the finding that the percentage of physicians employed by hospitals and corporate entities has grown steadily since 2019 and now stands at 69.3 percent.

Other key findings from the PAI study:

• From 2019 to 2020, 48,400 physicians left private practice and became employees of hospitals or corporate entities;
• Hospitals and corporate entities, including venture capital and private equity firms and insurance companies, now own nearly half of all the physician practices in the U.S.;
• The sharpest increases (32 percent) occurred during 2019 and 2020 driven by acquisitions of physician practices by health insurers, private equity firms and corporate entities;
• The COVID-19 pandemic accelerated corporate ownership of physician practices and physician employment by hospital systems and other corporate entities in the last half of 2020;
• There is a steady trend toward increased employment and hospital ownership of practices in every region of the nation, with some differences in the types of acquisitions driving regional consolidation.

The COVID-19 Impact

All regions of the country experienced continued growth in physician employment and practice acquisitions throughout the two-year study period that accelerated in the last half of 2020, suggesting a country-wide COVID-19 impact. During that period:

• The percentage of hospital or corporate-owned practices increased between 20 percent and 29 percent;
• The percentage of hospital or corporate-employed physicians increased between 9 percent and 15 percent;
• Acquisitions by corporate entities increased between 44 percent and 59 percent; and
• Corporate employment of physicians increased between 19 percent and 40 percent.

The Midwest led all regions in hospital employment at just over 60 percent, the study finds. The South has the highest percentage of corporate-employed physicians at more than 23 percent, and has also experienced the biggest increase in corporate-employment with more than 40 percent growth.

A Call to Action

Left unchecked, consolidation threatens to kill off the independent physician endangered, or even extinct, the study argues. To preserve the species and enable physicians who choose independent practice to sustain private medical practices, new government policies are needed to level the playing field. More transparency and oversight into corporate acquisitions of medical practices is needed to protect patients, the study authors argue. “Regardless of the practice setting, physicians should retain clinical autonomy to provide high quality, cost effective care for their patients.”

Takeaway

On July 9, just 10 days after the PAI published its study, President Biden issued an Executive Order calling on the Department of Justice (DOJ), Federal Trade Commission (FTC) and other federal government agencies to vigorously enforce the antitrust laws and rein in the corporate consolidation threatening competition in different markets, including health care. Although it does not specifically address medical practice acquisitions (since these transactions are typically too small to bring the DOJ and FTC into play), a strong federal policy to combat consolidation in the health care industry will provide impetus for state and local lawmakers to consider the kinds of policy changes the PAI study recommends.