Most physicians employed by a hospital or corporation, report finds

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Hospitals and corporate entities such as insurance companies and venture capital firms now own nearly half of U.S. physician practices.

Independent physicians are becoming increasingly rare, with just 30% of U.S physicians practicing medicine independently as the year began, according to a new analysis from Avalere for the Physicians Advocacy Institute.

The remaining 70% are employed either by hospital systems or other corporate entities, such as private equity firms and health insurers. The catalyst for this trend is that hospital systems and corporations have been driving consolidation in healthcare by aggressively acquiring physician practices over the past couple of years, particularly during the last half of 2020, in the depths of the COVID-19 pandemic.

WHAT’S THE IMPACT?

Hospitals and corporate entities – primarily insurance companies and venture capital and private equity firms – now own nearly half of U.S. physician practices, the findings showed. During the two-year period, these entities acquired 20,900 additional physician practices.

About 48,400 additional physicians left independent practice and became employees of hospitals or other corporations in that timeframe, and 22,700 did so after the onset of the coronavirus – representing a 12% increase in employment.

Insurers and private equity outfits drove the sharpest increases in acquisitions and employment during 2019 and 2020, at a rate of 32%. The COVID-19 pandemic, meanwhile, accelerated corporate ownership of physician practices and physician employment by health systems and other organizations in the last half of 2020. Corporate entities acquired 17,700 additional physician practices during that time – a 32% increase in corporate-owned practices.

Hospitals acquired 3,200 additional physician practices over the two-year period, resulting in an 8% increase in hospital-owned practices.

Overall, there’s 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.

Across regions, hospital ownership of practices grew between 6% and 11%, and corporate ownership grew between 44% and 59%. The Midwest leads other regions in hospital employment at just over 60%. The South has the highest percentage of corporate-employed physicians at more than 23%, and experienced the biggest increase in corporate-employment with more than 40% growth.

PAI took a stance on the findings, claiming that physicians should retain their autonomy to make clinical decisions, regardless of the practice setting, free from interference by profit-minded organizations. The group backs policies at the national level that would enable physician-led organizations and independent practices to compete with larger corporate players.

THE LARGER TREND

An annual Merrit Hawkins report tracking physician recruiting trends found in 2020 that COVID-19 had significantly altered the job market for physicians, leading to the temporary reduction of both starting salaries and practice options for doctors.

The soft job market for physicians is a result of the devastating economic impact COVID-19 has had on the healthcare industry. The American Hospital Association reported that hospitals and health systems lost $200 billion in the first quarter of 2020. The Medical Group Management Association indicates that physician-practice revenue has declined by an average of 55%.

ON THE RECORD

“COVID-19 exacerbated financial vulnerabilities of physician practices and forced them to make difficult decisions,” said Kelly Kenney, CEO of PAI. “The practice acquisition trend has potentially serious implications for competition and healthcare costs, which have been shown to increase with this type of marketplace consolidation.”