Is The End Of Private Practice Nigh?

Is The End Of Private Practice Nigh?

Nearly three in four doctors now work for a hospital, health system, or corporate entity, according to new data from Avalere. That’s a 7% increase from a year ago—and an almost 20% jump since 2019.

In other words, the independent physician is becoming an endangered species. The corporatization of medicine is sapping competition in the healthcare marketplace. And that’s leading to higher prices for patients—and lower pay for providers.

The pandemic accelerated the longstanding trend of greater consolidation in medicine. Large health systems acquired more than 36,000 physician practices between January 1, 2019—the year before the pandemic began—and January 1, 2022. That represents a 38% increase in the share of practices that are corporate-owned.

Facing financial strain and burnout because of the pandemic, some independent physicians felt they had no choice but to close their practices and go to work for larger healthcare corporations. Roughly 83,000 physicians have become employees of hospitals or other corporate entities since the start of the pandemic, according to Avalere.

Pandemic-related factors aside, it’s not hard to see why corporate medicine might be enticing to a private physician.

As an employee of a larger system, doctors don’t have to deal with the administrative headaches of billing and paperwork that accompany private practice. They’re also guaranteed a set salary and working hours—unlike an independent physician, whose income and hours often depend on the volume of care he or she delivers and the overhead expenses the practice accrues.

But as large health systems seize an ever-growing share of the market, they accumulate more leverage to demand higher prices from patients and insurers. And they’re not shy about using it. When a hospital acquires a physician practice, prices for healthcare services increase by more than 14%, according to research published in the Journal of Health Economics.

Those higher costs don’t translate to higher salaries for doctors. A recent Health Affairs study found that a physician’s salary actually decreases after his or her practice is acquired by a hospital. Doctors in some specialties experience average salary cuts of nearly $10,000 after a hospital takes over their practice.

There’s no evidence that higher prices lead to better care for patients. In fact, practices owned by a hospital report higher preventable hospital admission and readmission rates among their patients than small, independent practices, according to a report published by the Annals of Family Medicine.

That’s because consolidation in the healthcare market limits competition and choice. The consequences, per a National Bureau of Economic Research working paper? “Patients are more likely to choose a high-cost, low-quality hospital when their admitting physician’s practice is owned by that hospital.”

That’s sometimes because doctors employed by large conglomerates are often prohibited from referring patients to providers outside their health system. So a patient might not be able to see a specialist with expertise on a particular health condition if that specialist isn’t part of the referring provider’s network.

It’s no wonder patients report lower satisfaction rates when they receive hospital care in markets with higher levels of concentration.

Health systems are keeping much of those higher prices from consolidation for themselves. Studies indicate that a hospitals’ revenue jumps nearly 20% after it acquires a physician practice.

Patients and providers should lament the increasing corporatization of medicine. All too often, it’s a recipe for lower-quality, higher-priced health care.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.