Ethan Rhodes
Hospitals are increasingly buying small physician practices, leading to a decline in competition and raising antitrust concerns. This consolidation in healthcare has resulted in a significant shift towards hospital employment, with more than three-quarters of U.S. doctors employed by health systems or corporations. The trend is evident across all regions, with the Midwest having the highest proportion of hospital-employed physicians. From 2012 to 2015, the number of hospital-employed physicians increased by almost 50%, and this trend has continued, albeit with some doctors transitioning back to independent practices for greater autonomy and flexibility. Overall, the healthcare industry is projected to experience rapid employment growth, with hospitals often being the largest employers in small towns and rural areas.
| Characteristics | Values |
|---|---|
| Number of hospital-employed physicians in 2012 | 25% of all physicians |
| Number of hospital-employed physicians in 2015 | 38% of all physicians |
| Increase in number of hospital-employed physicians from 2012 to 2015 | Almost 50% |
| Number of physician practices owned by hospitals in 2012 | 14.29% of all practices |
| Number of physician practices owned by hospitals in 2015 | 25% of all practices |
| Increase in number of physician practices owned by hospitals from 2012 to 2015 | 86% |
| Number of physician practices acquired by hospitals from July 2015 to January 2015 | 13,000 |
| Region with the greatest share of hospital-employed physicians in 2015 | Midwest (almost 50%) |
| Region with the lowest share of hospital-employed physicians in 2015 | South, Alaska, and Hawaii (33%) |
| Average number of projected annual openings in healthcare occupations from 2023 to 2033 | 1.9 million |
| Median annual wage for healthcare practitioners and technical occupations in May 2024 | $83,090 |
| Number of hospital-employed physicians in 2023 | 73.9% of all physicians |
| Number of hospital-employed physicians switching to independent practices in 2018 | 28% of all hospital-employed physicians |
| Number of hospital-employed physicians switching to independent practices in 2019 | 132 |
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What You'll Learn
- Physician practices owned by hospitals increased by 86% from 2012 to 2015
- The Midwest has the greatest share of hospital-employed physicians
- Hospitals buying small physician practices drives up the price of care
- Physicians are leaving hospital employment for independent practices
- Hospitals are the largest employers in many small towns and rural areas
Physician practices owned by hospitals increased by 86% from 2012 to 2015
The number of physicians employed by hospitals has been increasing over the years. From July 2012 to July 2015, the number of hospital-employed physicians increased by almost 50%. However, the number of physician practices owned by hospitals increased by a much larger percentage during the same period. Between 2012 and 2015, the number of physician practices owned by hospitals grew by 31,000, an 86% increase. This significant increase in hospital ownership of physician practices has been driven by several factors.
One of the main factors contributing to this trend is the financial pressure and declining reimbursements for some specialties, which have made it difficult for small independent practices to stay afloat. Hospitals have been able to offer more secure and stable employment opportunities for physicians, which has been appealing in light of the financial challenges of running an independent practice. Additionally, hospitals have been acquiring not just individual physicians but also their physical buildings and equipment, further contributing to the increase in hospital-owned practices.
The shift towards hospital employment and ownership of physician practices has had implications for the cost of care. As hospitals acquire more practices, prices tend to rise without a corresponding increase in the quality of care. This consolidation in healthcare has also led to a decline in competition, raising antitrust concerns. By 2018, 28% of physician practices were owned by hospitals in the South and West regions of the US, and this trend is expected to continue.
While the number of hospital-employed physicians has been on the rise, there is also a countervailing trend of doctors leaving their hospital positions to establish or join independent practices. Physicians who choose to leave their hospital employment cite the desire for more autonomy, flexibility, and the opportunity to provide more patient-centric care as reasons for their departure. They also experience lower burnout rates due to their independence from corporate regulations and decision-making processes. Despite this pushback, the number of hospital-owned physician practices is still increasing, and it remains to be seen whether the trend will continue or reach a point of equilibrium.
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The Midwest has the greatest share of hospital-employed physicians
The number of physicians employed by hospitals has been steadily increasing over the years. A National Bureau of Economic Research study shows that more than three-quarters of US doctors are employed by health systems or corporations. Hospitals are continuously buying small physician practices, which is driving up the price of care. By 2016, almost half (47.2%) of physician practices were owned by hospitals, and this number increased to 73.9% by 2022.
The shift towards hospital employment and ownership of physician practices has significant implications for spending. Medicare often pays more for certain services when patients receive them in a hospital outpatient department (HOPD) setting compared to a physician-owned office. This payment differential can drive up costs for patients and impact the healthcare industry's spending.
The increase in hospital-employed physicians is attributed to several factors. One reason is the financial strain and physician burnout during the COVID-19 pandemic, which led to the rise of practice acquisitions by hospitals and other entities. Additionally, hospitals seek to achieve more clinical integration and expand their referral networks by acquiring independent physician practices. This trend is not unique to hospitals, as private equity firms, insurers, and large pharmacy chains are also purchasing medical practices.
The impact of corporate ownership on patient care is a concern. While hospitals can offer stability and resources to physicians, there may be a conflict between a physician's ethical responsibility to patient health and a corporation's focus on profits. The decline in competition due to hospital consolidation raises antitrust concerns, and the quality of care may not always match the increase in prices.
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Hospitals buying small physician practices drives up the price of care
The number of physicians employed by hospitals has been steadily increasing over the years. From July 2012 to July 2015, the number of hospital-employed physicians increased by almost 50%. By 2015, 38% of physicians were employed by hospitals, and this trend has continued, with 49.3% of doctors employed by hospitals/health systems by the end of 2020.
This increase is partly due to hospitals acquiring more physician practices. Hospitals are buying up small physician practices, and in doing so, they are driving up the price of care. This is due to a few factors. Firstly, when hospitals acquire physician practices, they gain more market power, which allows them to control referrals and demand higher prices. This leads to higher premiums and costs for patients. Secondly, the acquisition of small practices by hospitals reduces competition, which creates incentives to increase prices without improving quality. In fact, research has shown that provider consolidation leads to lower patient satisfaction and does not improve the quality of care.
The trend of hospital acquisitions is driven by factors such as declining reimbursements for some specialties and the high overhead costs of running an independent practice, including expenses like electronic health record systems. Additionally, the pandemic and its financial pressures contributed to many physicians' decisions to sell their practices to hospitals or other corporate entities.
The increase in hospital employment and ownership of physician practices has significant implications for healthcare spending. For certain services, Medicare pays more when patients receive care in a hospital outpatient department (HOPD) setting compared to a physician-owned office. This payment differential can drive up costs for patients and insurers.
Some have suggested solutions to address the issue of rising prices due to hospital acquisitions. One idea is to implement site-neutral payments, where the same rate is paid for services regardless of the setting. This would remove the incentive for hospitals to acquire small practices to increase profits. Additionally, enforcing antitrust regulations and removing regulatory incentives for acquisitions could help mitigate the harm caused by this trend.
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Physicians are leaving hospital employment for independent practices
There has been a notable increase in the number of physicians employed by hospitals. Between 2012 and 2015, the number of hospital-employed physicians increased by almost 50%, with 38% of physicians employed by hospitals in 2015. By 2022, 73.9% of physicians were working for someone else, including 52.1% working for hospitals and health systems. This figure rose to 77.6% in 2023.
Despite this trend, some physicians are leaving hospital employment and opting for independent practices. The COVID-19 pandemic highlighted the challenges of hospital practice, with healthcare providers facing immense strain and risking their lives to care for critically ill patients. The stress and long hours took a toll on many, prompting some to prioritize self-preservation and explore alternative career paths.
One attractive option is independent practice, which offers physicians greater autonomy and flexibility. They can choose their practice location and set their own hours, improving their work-life balance. In addition, advancements in technology have enabled independent practitioners to access the same high-level technology previously only available in hospitals.
The shift towards independent practice is also driven by economic factors. The pandemic's financial pressures, declining reimbursements for certain specialties, and increasing expenses have made it challenging for small independent practices to thrive. As a result, some physicians may seek the stability of employment within a hospital or corporate entity. However, others may embrace the entrepreneurial spirit and view independent practice as an opportunity to build a valuable asset that can be sold upon retirement.
Furthermore, the traditional model of private practice is evolving. The rise of telehealth and changing patient preferences have created new opportunities for independent practitioners to deliver high-value, patient-centric care outside of the hospital setting. While there are challenges associated with managing a private practice, physicians can now leverage technology and focus on providing efficient, effective care to meet patient needs.
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Hospitals are the largest employers in many small towns and rural areas
In the US, hospitals are the largest employers in 38 states, including many small towns and rural areas. The healthcare industry is a core driver of the local economy in such places. The number of hospital-employed physicians has been increasing over the years, with more than three-quarters of US doctors employed by health systems or corporations. From July 2012 to July 2015, the number of hospital-employed physicians increased by almost 50%, with a consistent increase in all regions. By 2015, 38% of physicians were employed by hospitals, and this number has continued to rise, with 73.9% of physicians working for someone else by the start of 2022.
There are various reasons for this trend. Firstly, hospitals offer security and stability to employed physicians. Secondly, hospitals are acquiring independent physician practices, driving up the price of care. This consolidation in healthcare has led to a decline in competition, raising antitrust concerns. Hospitals and health systems acquire not only physicians but also their physical buildings and equipment, making it challenging for independent practices to compete. Additionally, factors like declining reimbursements for certain specialties and the expenses of electronic health record systems have made it difficult for small independent practices to remain afloat.
While the number of hospital-employed physicians is rising, there is also a counter-movement of doctors switching to independent practices. Physicians who leave their hospital employers cite the desire for more autonomy and flexibility, and the opportunity to provide more affordable and patient-centric care. They also experience lower burnout rates due to their independence from corporate regulations and decision-making processes. However, being independent does not necessarily mean being anti-hospital, as independent practices can still collaborate with hospitals.
The shift towards hospital employment has implications for spending. Medicare pays more for certain services when patients receive them in a hospital outpatient department (HOPD) setting compared to a physician-owned office. This payment differential could impact the ongoing shift towards hospital employment and ownership of physician practices. Additionally, the heavy focus on fee-for-service medicine in certain regions, such as the Southeast, also contributes to the success of independent practices.
Overall, the dynamic between hospital-employed physicians and those in independent practices is complex. While hospitals offer security and stability, the appeal of independence, the impact on patient care, and potential cost implications must all be considered in the broader healthcare landscape.
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Frequently asked questions
As of 2022, 52.1% of physicians in the US were employed by hospitals and health systems, amounting to over three-quarters of US doctors.
Yes, the number of hospital-employed physicians has been increasing. Between 2012 and 2015, the number of hospital-employed physicians increased by almost 50%, and the number of physician practices owned by hospitals grew by 31,000 (an 86% increase).
Physicians are lured by hospitals offering to reduce their administrative burdens and allowing them to focus on medicine. Additionally, physicians may seek the security, stability, and reduced financial risks associated with hospital employment.
Yes, there are concerns about the impact on competition and patient costs. The decline in independent practices may raise antitrust issues, and when hospitals acquire physician groups, prices tend to increase without a corresponding improvement in care quality.
