Physician group acquisitions are changing the workforce. Here's how

The presence of independent physician groups in healthcare has been a symbol of independence, clinical autonomy and managerial flexibility to providers, allowing for competition, variation and variety in medicine. However, as more and more of the healthcare workforce moves toward employment, will independent physicians sink or swim?

There are many unique benefits of private practice, such as higher compensation and increased autonomy, however, staffing shortages, increasing supply costs and declining reimbursement have put continuous pressure on independent groups. Around 108,700 physicians left private practice for employment between 2019 and 2021, according to a report from Avalere. Further, a report from VMG Health found that more than 75% of the physician workforce is either employed by health systems, private equity groups or industry mega-groups such as Optum or CVS — leaving only around 25% of physicians as independent practitioners. 

The state of healthcare has left independent practices increasingly strained. An American Hospital Association survey found that 94% of physicians surveyed reported it has become too difficult to operate a practice in recent years, making it a driving force behind physician practice acquisition.

In the same survey, 79.5% of physicians said the need to negotiate higher payment rates with payers was the leading reason behind physicians selling their practices to hospitals. However, if the upward trend of consolidation continues, care delivery could be affected, according to Michael Davis, MD, surgical director and chief of urology at the University of New Mexico Health Sciences Center in Albuquerque. 

"The issues with consolidation are that it decreases competition in healthcare markets, potentially causing loss of revenue for smaller community hospitals," Dr. Davis told Becker's

"This decreases access to care in these areas. Decreased competition allows large healthcare organizations to increase reimbursement rates from payers. This can increase healthcare costs for patients and payers. Staffing challenges in large organizations can lead to strategies to cut costs which can adversely affect care. This can cause issues with patient satisfaction and experience."

However, Christopher Casstevens, MD, an orthopedic Surgeon at Baylor Scott & White Health in Lakeway, Texas, told Becker's the consolidation and acquisitions may face their own headwinds in 2024.

"Consolidation is likely to continue in this direction unless proposed policy changes such as a noncompete ban, repeal of the ACA ban on physician-owned hospitals, or re-evaluation of the nonprofit status of some healthcare organizations allow more fair competition and entrepreneurship within healthcare."

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