Independent practices have been in steady decline over the last two decades, as hospitals and health systems have grown in size and market influence and the cost of operations whittles away at physicians’ bottom lines.
In 2024, 42.2% of physicians were working in private practice, a significant drop from 60.1% in 2012, according to the American Medical Association’s “Physician Practice Benchmark Report,” published May 29. Private practice now represents less than half of physicians in most medical specialties, with participation ranging from 30.7% in cardiology to 46.9% in radiology.
Conversely, the share of physicians working in hospital-owned practices rose to 34.5% in 2024 — an 11-percentage point increase from 23.4% in 2012.
According to the AMA, the top reasons that physicians decided to sell their practices included a lack of negotiation power over payer contracts, the cost of necessary resources and managing administrative requirements.
“I’m concerned about the model and the fact that the playing field is tilted towards physicians becoming employees, rather than being able to stay competitive and independent,” Paul Berggreen, MD, president of the American Independent Medical Practice Association, told Becker’s.
Dr. Berggreen, based in Phoenix, is also chief strategy officer of GI Alliance, a nationwide network of independent GI practices. Dr. Berggreen is a gastroenterologist of more than 30 years who began his practice, Arizona Digestive Health, with four other physicians. Now, the practice comprises 60 physicians, and joined GI Alliance’s network in 2019, alongside practices in Dallas and Chicago.
Two years later, he formed AIMPA with leaders of other independence-forward specialty groups around the U.S. AIMPA began with approximately 3,700 members, and has since grown to about 11,000.
A study published by Avalere in September 2024 that examined the cost differentials associated with different types of physician practice affiliations and sites of care: those led by hospitals and health systems, payers and corporate entities and management services organizations, some of which were backed by private equity groups.
The study found that when an independent group joined another MSO, or other independent practices with a financial partner — but remained independent — costs per Medicare beneficiary went down $960 over 12 months, a “remarkable” finding, Dr. Berggreen said.
“That probably points to a lot of efficiencies gained by getting in with a group of other independent physicians who are more efficient and can deliver care more efficiently,” he said.
The study revealed that when that same independent group joined an insurance company-backed corporation, such as Optum, cost per Medicare beneficiary went up $1,100 in 12 months. When an independent group joined a hospital system, costs rose by $1,350.
“All for no improvement in quality,” Dr. Berggreen said. “In fact, when we measured hospital inpatient days and hospital ER days, quality actually went down. Quality went up in the independent model, but went down in the other two models.”
When evaluating site-of-care differentials, including what little data is accessible for commercial payers, Dr. Berggreen and the other researchers came to a similar conclusion.
“What we know, and what has been published many, many times, is that costs are higher in the hospital setting because of the site-of-care differential payment model that basically pays hospitals significantly more for doing the exact same service in one of their facilities versus an independent facility,” he said.
They found that when a physician became an employee of a hospital, physicians had a dramatically higher utilization of that hospital system’s facilities.
“Which obviously makes perfect sense,” Dr. Berggreen added. “The problem, of course, is that those facilities are not delivering any better quality of care. They are simply charging dramatically more for the exact same service … when physician groups are employed by hospital systems, those physician groups utilize hospital facilities much more than any other care delivery model, resulting in significantly, significantly higher costs to the system.”
Despite these findings, the reality of independent practices remains a challenging one. The level of investment required to support a physician practice — measured as median investment per physician full-time equivalent, rose to $322,490 in the second quarter of 2025, according to data from Strata. Total expense per physician FTE rose to nearly $1.2 million in the second quarter, an 11.4% jump compared to the same time period in 2024.
“Twenty-five years ago, I thought the risk was terrifying,” Dr. Berggreen said regarding the financial reality of going into private practice. “But now the risk is almost unacceptable.”
The fault does not fall on individual physicians, he added. Rather, they’re making decisions within the system available to them — a system that has become deeply unbalanced.
“If the playing field is tilted against us from the government payment standpoint and then the commercial market standpoint, we’re not going to survive,” said Dr. Berggreen. “And, I would predict that within five to 10 years … independent private practice is going to become a niche because there’s going to be such financial pressures on independent physicians.”
But there is a way forward, Dr. Berggreen said. A key finding of another study, published in July in the Journal of Market Access & Policy, was that costs of care went down when independent practices formed networks or joined MSOs — including those backed by private equity.
When his group first joined GI Alliance in 2019, it was private equity-backed. In 2022, physicians bought back a majority stake in the company. In November 2024, Cardinal Health acquired a majority stake in GI Alliance for $2.8 billion, one of the largest transactions in the GI space in recent years.
But unlike traditional private equity-backed acquirers, the Cardinal acquisition reflects a new wave of financial backing that aims to support physician practices’ long term sustainability and independence, with an emphasis on operational synergy.
“And many other groups have done the same because that’s a method to move forward with some capital to allow that to happen,” he said. “It’s a neutral financing mechanism. As long as the groups are physician-led, physician-run and patient-centric, then it’s a formula that works. It’s been shown to work in MSOs around the country. We were able to make that work really nicely, but we have physicians that are making the decisions for the group.”
Becker’s has also reported on several MSOs and ASC development companies that are private equity backed, but steer away from traditional acquire-and-sell methods that have resulted in negative perceptions of private equity in recent years.
But Dr. Berggreen reiterated that with physicians at the helm, this method of financial backing may be the lifeline that private practice needs in 2025.
“I’m here to defend private practice,” he said. “And that’s the decision a lot of physicians have made.”
