Physicians on the Move

The number of physicians employed by hospitals and health systems is growing, according to a recent study.

August 2022 – The Journal of Healthcare Contracting

By Pete Mercer

With all the challenges healthcare has faced in the last couple of years, it’s no surprise that the industry as whole is constantly shifting and changing. The latest trend signifies a greater shift towards consolidation in the healthcare marketplace, which completely changes the practice landscape for physicians.

A recent study by Avalere Health and the Physicians Advocacy Institute shows that, as of January 2022, 74% of physicians in the United States are employed by hospitals or corporate entities, growing from 62% in January 2019.

Results of the study

In the study, Avalere looked at two consolidation trends occurring on the national and regional levels of healthcare:

  1. Acquisitions of physician practices by hospitals/health systems and corporate entities like insurers and private equity firms
  2. Physicians leaving independent medical practices for employment with hospitals/health systems and corporate entities.

Researchers cited the pandemic as a contributing factor to this shift, finding that 108,700 additional physicians became employees of hospitals or corporations since January 2019, with 83,000 of them making the change after the onset of the pandemic.

“COVID-19 drove physicians to leave private practice for employment at an even more rapid pace than we’ve seen in recent years, and these trends continued to accelerate in 2021,” Physicians Advocacy Institute CEO Kelly Kenney said in a news release. “This study underscores the fact that physicians across the nation are facing severe burnout and strain. The pressures of the pandemic forced many independent physicians to make difficult decisions to sell their practices to hospitals, health insurers or other corporate entities.”

In addition to the pandemic, researchers found that acquisitions by hospitals and other corporate entities, like health insurers and private equity firms, are other contributing factors. According to the study, Avalere found that hospitals and other corporate entities acquired 36,200 additional physician practices from 2019 to 2022.

Effects of consolidation

As healthcare continues to shift towards consolidation, many have argued for the benefits that consolidation can bring to the industry, citing things like reduced costs, improved care coordination, increased efficiency and enhanced patient access. Others have argued that consolidation will in turn increase patient care costs.

John McCracken, PhD and Clinical Professor of Healthcare Management at the Jindal School of Management at the University of Texas at Dallas, wrote an article in 2019 about the effects of consolidation in healthcare. In the piece he said, “There are many studies of the effect of hospital mergers, and they generally find resultant price increases on the order of 20% – 30% to be common. Overall, these studies show that the primary effect of consolidation between market competitors is to increase prices, and by substantial amounts as market concentration rises.”

As the study indicated, the shift towards healthcare consolidation is already happening and will continue to happen. There is likely no preventing consolidation, so it comes down to working with markets that are already consolidated. McCracken wrote, “An approach that is likely to come to the fore in the run-up to the next election is some form of Medicare buy-in or public insurance plan option, for which provider reimbursement would be based on Medicare rates and total spending controlled by global budgets.”

While this isn’t likely the end of independent physician practices, it does raise alarming questions about the future costs of healthcare. There will always be a need for physicians, especially in rural areas where consolidation is less likely. It’s just a matter of ensuring that the physicians who are looking for communities to serve have those options.

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