Sally C. Pipes

Sally C. Pipes

Are independent medical practices becoming extinct?

By Sally C. Pipes

Facing declining revenue prospects, physicians are shuttering their private, independent practices to join larger hospitals that have near-monopolies on care in the regions they serve.

This trend is depressing news for Americans. Further concentration of market power in these health systems ultimately results in less personalized care for patients — and higher overall costs.

Over the past 20 years, Medicare physician pay has increased 11%. The overhead costs of operating an independent medical practice, on the other hand, has jumped nearly 40%. Factoring in inflation, Medicare physician pay has dropped roughly 20% in the past two decades. Clearly, those who remain in the sector aren’t in it for the money.

GSWNH SallyPipes 032522

Sally C. Pipes

For many independent physicians, not even a miracle could make this business model sustainable. Perhaps that’s why 2020 marked the first year independent physicians accounted for fewer than half of all practicing doctors in the U.S., according to a survey from the American Medical Association.

Physicians closing up shop short of retirement typically go to work at larger hospital systems, many of which enjoy a monopoly on healthcare services in their catchment area. According to the AMA report, the number of physicians employed at hospitals increased roughly 50% between 2012 and 2020.

In addition to poaching physicians, hospital systems are acquiring private practices outright. AMA data show that between 2012 and 2020, the share of doctors working at a private practice that was at least partially owned by a larger hospital system grew nearly 40%.

As the AMA survey notes, the majority of doctors employed by hospitals are under the age of 40. That suggests this trend “will continue over the long term.”

Many younger doctors prefer the more regular hours that hospitals offer, as well as a fixed salary. Private practice may be less predictable — in terms of both workload and pay.

Nevertheless, the shift away from private, independent care towards corporate mega-providers should alarm patients and policymakers.

For starters, care will become more expensive as hospitals expand their regional monopolies. As health systems grow, they gain undue leverage with insurance providers to propose service-price hikes. One study in the Journal of Health Economics found that prices for physician services rose nearly 15% at practices acquired by hospitals between 2007 and 2013.

Without competition from independent practices, hospitals have little need to keep a lid on prices. They can charge patients and their insurers effectively whatever they want to.

Diminishing quality of care is another concern. Physician pay within a hospital system is determined in part by how many patients each doctor can treat, assembly-line style. So much for patient-centered care.

We’re witnessing a historic shift in the practice of medicine in the United States. And it isn’t an edifying spectacle, especially if you’re a patient in need of medical care that is humane, attentive, and not delivered on a conveyor belt.

Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.

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