More and more doctors are trading their independence for a hospital paycheck. Some 55% of doctors now work for hospitals or health systems. That share has more than doubled in the last 12 years.Doctors aren’t always abandoning independent private practice by choice. Medicare pays hospitals more than physicians for delivering the same services. And over the past quarter-century, that gap has widened. Medicare reimbursement for hospitals has increased even as reimbursement has declined roughly 30% for physicians, after adjusting for inflation.Lawmakers need to correct this structural imbalance. If they don’t, then many hospitals will continue to consolidate the health care market — to the detriment of privately practicing doctors. More importantly, patients’ and taxpayers’ hard-earned dollars will foot the bill.The data tells the story. In the past five years, hospitals have acquired 7,600 physician practices and added more than 74,000 doctors to their employment rolls.
According to a study published last month by the health care consulting firm Avalere, the share of unaffiliated physicians treating Medicare beneficiaries in private practice across five specialties — cardiology, gastroenterology, medical oncology, orthopedics and urology — declined by 8 to 25 percentage points between 2019 and 2022.The share of hospital-affiliated physicians increased over that period. In three of the five specialties Avalere investigated, hospital-affiliated doctors represented a majority or plurality of the physicians who see Medicare beneficiaries as of 2022.Hospitals’ interest in buying physician practices makes financial sense. Physician practices can be a lucrative source of referrals for procedures and other services such as diagnostic imaging.Consolidating a market can also give a health system more pricing power. After hospitals buy private practices, prices rise by an average of 14.1%. Health system-based physician services cost an average of 12% to 26% more than those delivered by independent physicians. At the same time, preventable hospital admissions increase 13% — which further elevates overall health care costs.Independent practices offer patients an alternative to hospital-based care. And they provide necessary competition to the health systems that dominate many markets.Our health care system needs these independent practices.Lawmakers can help ensure that independent practices stick around by indexing physician reimbursement rates under Medicare to inflation and implementing “site-neutral” policies that pay physicians and hospitals the same for identical services.But legislative relief is no sure thing. Many independent practices cannot wait for salvation from Congress. The hospitals’ financial advantage is threatening their survival now.Some independent practices are responding by teaming up with entities called management services organizations to secure the operational and financial support they need to effectively compete against large health systems.The capital that MSOs provide can enable independent practices to expand access to care — say, by bringing additional fellowship-trained physicians on board, participating in clinical trials for novel therapies, or opening clinics in underserved communities.Some MSOs are backed by private equity. That has led some politicians and regulators to worry that independent practices affiliated with MSOs will put profit before patients.Those worries are misplaced. In its study last month, Avalere looked at what happened in the 12 months after unaffiliated physicians in the five specialties moved to a private practice affiliated with private equity. It found that the doctors’ total Medicare expenditures per beneficiary actually decreased by anywhere from $231 to $1,423.By contrast, total per-beneficiary Medicare expenditures went up in the 12 months after unaffiliated physicians in those same five specialties moved to corporate or hospital affiliations — by anywhere from $852 to $2,562.
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Medicare beneficiaries in private equity-affiliated practices also go to the emergency department less and spend fewer days as inpatients than those in hospital-affiliated practices, Avalere reported.Together, these data points suggest that PE-affiliated private practices deliver care that is at the very least on par with what is delivered by hospital-affiliated practices — and at lower cost.Further, the focus on private equity is out of step with its share of the physician market. Just 6% of Medicare-billing physicians across the five specialties examined by Avalere are affiliated with private equity. Hospital-affiliated, corporate-affiliated and unaffiliated physicians all account for a much greater share of the physician workforce.Independent physician practices are disappearing. That’s not a phenomenon many patients or doctors are enthusiastic about. Rather than letting hospitals and health systems continue to consolidate local health care markets, policymakers should ensure that independent practices can compete on equal footing with them.Hospitals are a vital part of our health care system, and we applaud them for the lifesaving services they provide. This area of consolidation and physician acquisition is mostly unnecessary and a detriment to an affordable and accessible health care system. We encourage hospitals to work with privately practicing physicians to improve health care, not unfairly compete with private practice to its extinction.Dr. Jack Feltz, a practicing OB/GYN in New Jersey, is chief medical executive officer at Unified Women’s Healthcare and chair of the Federal Health Policy Committee of the American Independent Medical Practice Association (aimpa.us).
