Private practices just became an endangered species – Pacific Research Institute

Private practices just became an endangered species


Last year was the first year in which physicians working in private practice accounted for fewer than half of all practicing doctors, according to a new new report from the American Medical Association. Many of these formerly independent doctors went to work for big healthcare systems.

That finding may sound obscure. Why should patients care whether a doctor draws his or her paycheck from a hospital or a private practice he or she owns?

But the corporatization of medicine could be bad news for patients. The consolidation of physician practices will result in less competition — and thus higher prices.

Hospitals have been busy buying up private practices. The share of physicians working at a practice at least partially owned by a hospital increased by almost 40% between 2012 and 2020.

That’s a reasonable career move for some. Employment under a large hospital group may offer a set salary and consistent working hours — an enticing combination for physicians working to pay off medical school debt or trying to balance work and family.

But the bigger these provider groups get, the more leverage they have with insurance companies to insist on higher payment rates. Prices for physician services increase by nearly 15% after a practice is acquired by a hospital, according to a 2018 study in the Journal of Health Economics.

Various studies have found no evidence that the higher price tag leads to higher quality care. In fact, increased practice consolidation is associated with lower levels of patient satisfaction.

It also limits patient choice. One 2016 study found that “patients are more likely to choose a high-cost, low-quality hospital when their physician is owned by that hospital.”

In other words, incentives matter. When providers don’t have to compete as intensely for patients’ business, they have less incentive to keep patients happy or provide high-quality care.

Trade-offs like these make the shift away from private practice worrisome. If the market for physician services becomes less competitive, patients will be the ones who suffer.

Sally C. Pipes (@sallypipes) is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020).

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.

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