Dive Brief:
Inadequate payment rates, high resource costs and regulatory red tape are increasingly driving physicians away from work in private practice toward employment at hospitals or practices owned by private equity firms, according to a new analysis published by the American Medical Association.
Just over 42% of physicians worked in private practices in 2024, representing an 18 percentage point drop compared to 2012. Meanwhile, more than a third of the nation’s physicians worked in practices owned by hospitals last year, representing an 11 percentage point gain over the same period. Nearly 7% of doctors worked in firms owned by private equity, an increase compared to 2020.
Physicians are also less likely to have ownership stake in their practice, according to the analysis. The AMA found the percentage of physicians who partially owned their practices fell from 53.2% in 2012 to just 35.4% in 2024.
Dive Insight:
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.
Small practices are also on the decline, the AMA said. Last year, the share of physicians working at practices with 10 or fewer physicians dipped below 50% for the first time since the AMA has conducted its survey. For comparison, in the early 1980s around 80% of physicians worked in small practices, and just 12 years ago, 61.4% of physicians did.
The top three reasons physicians choose to sell their practices to corporate entities include to better negotiate higher payment rates with payers, improve access to resources, and better manage regulatory and administrative requirements, according to the report.
“The share of doctors working in practices wholly owned by physicians is unraveling under compounding pressures,” said AMA President Bruce Scott in a statement about the analysis. “The cumulative impact of burdensome regulations, rising financial strain, and relentless cuts in payment poses a dire threat to the sustainability of private practices.”
Scott noted that unfavorable Medicare reimbursement rates compounds the problems.
Industry groups, including the AMA, have laid into CMS for years for issuing what they see as insufficient payment rates. Scott said that after adjusting for inflation practice costs, Medicare physician payments have fallen 33% over the past 25 years, which he said has “severely destabilized private practices.”
In March, MedPAC, which advises Congress on Medicare policy, again recommended tying physician pay to inflation, which could help providers better keep up with the rising costs of providing care. However, even with the update, industry groups say they are still likely to run a deficit for providing Medicare.
As the industry consolidates, physicians have reported correlations between corporate ownership and decreased care quality, including having less time to spend with patients. Other research finds consolidation leads to higher healthcare costs for patients without a corresponding increase in care quality.
Calls have been mounting for regulators to take a more active stance reviewing healthcare deals, with both federal and state regulators looking to increase oversight of healthcare transactions.
