The steady migration of physicians away from independent practice is often framed as a hospital consolidation story.
Thomas Balcezak, MD, executive vice president and chief clinical officer of New Haven, Conn.-based Yale New Haven Health, sees another force driving much of that shift: physicians themselves.
A recent study published in JAMA Network Open supports that view. Researchers interviewed 37 hospital leaders and physicians across three nonprofit health systems and found that most physician practice acquisitions were initiated by physicians, largely because of concerns about the financial viability of remaining independent.
More than half of active U.S. physicians worked for hospital systems as of 2024, up from 20% in 2010, and hospital systems have acquired more than 20,000 physician practices since 2015, according to the study.
For Dr. Balcezak, who spent 17 years practicing part time as a community-based internist while working full time at Yale New Haven Health, the pressures behind that transition are familiar.
He recalled being part of a four-physician independent practice in the early 2000s as it attempted to finance an EHR. The practice’s partners had previously been able to use receivables as collateral for loans, but the bank wanted personal assets put up for the EHR investment.
“They said, ‘We’re not going to put up our house. We’re not putting our personal assets on the line for an electronic medical record,'” Dr. Balcezak told Becker’s.
That experience illustrates what he sees as a fundamental challenge for smaller independent practices: keeping pace with the capital, technology and infrastructure demands of modern healthcare.
“We don’t go to medical school to deal with the structured financing for capital equipment,” he said. “We go to medical school to take care of patients.”
Why physicians are seeking partners
Physicians surveyed in the study cited rising operating costs and declining reimbursement from government and commercial payers as key threats to practice viability. Many also wanted to shed the financial and administrative responsibilities of running a business and devote more attention to patient care.
Dr. Balcezak said the pressures vary by specialty but often involve a combination of reimbursement, technology, capital and infrastructure.
Certain specialists can supplement professional revenue through ownership in ASCs or similar ventures, while physicians across specialties increasingly see value in gaining access to sophisticated EHRs and IT support through larger organizations.
“They don’t want the hassles of having to go through the upgrades, maintain the hardware and all that,” he said.
For health systems, acquiring practices does not necessarily mean those physicians become profitable assets on their own, according to Dr. Balcezak. Systems frequently have to invest in employed physicians — particularly primary care providers — but maintaining a strong physician base is essential to ensuring patients can access care.
“Without those physicians being part of our ecosystem in our communities, we simply don’t have a patient base to care for,” he said.
That makes the issue larger than whether a physician ultimately chooses employment by a hospital system, private equity-backed organization, management services organization or another model.
“Physicians exiting our geographies is simply not acceptable,” Dr. Balcezak said. “We need to have the physicians to take care of patients.”
What health systems can get wrong
The study also complicates the narrative that hospitals are systematically driving physician consolidation. Researchers found hospital leaders rarely made physician practice acquisitions a central component of strategic planning and instead generally considered opportunities as they emerged. Preserving access — particularly in rural communities — was among the strategic considerations leaders cited.
Dr. Balcezak said one of the biggest mistakes health systems can make is assuming employment is the right answer for every physician.
“You’ve got to listen to the doctors,” he said. “They will choose the employment vehicle that they want or the independence that they want. You can’t force anything on them.”
Yale New Haven Health’s market illustrates that approach. The system has a nonprofit physician foundation employing community-based primary care physicians, while independent physician groups also operate in the region and have affiliations with the system. Yale New Haven has worked with independent groups to develop a clinically integrated network.
The goal should not necessarily be employing every physician, according to Dr. Balcezak. In some cases, maintaining independent physicians can be a lower-cost way of preserving primary care capacity.
“What they can get wrong is not listening to what the physicians are asking or not meeting them where they want to be,” he said.
The productivity challenge
Acquisition is only the first hurdle. Integrating physicians into a health system presents another set of challenges.
Hospital leaders interviewed for the JAMA Network Open study generally reported lower productivity among employed physicians compared with independent physicians on their medical staffs. On the other hand, physicians raised concerns about losing influence over staffing and scheduling decisions.
Compensation design can play a significant role.
“If someone is a straight salaried physician, they may not have the motivation — the financial motivation at least — to see as many patients if they’re on an RVU or productivity-based model,” he said.
Health systems should design compensation structures around the outcomes they want, balancing productivity with patient experience and quality, he said.
“If you’re not seeing productivity, then you need to tweak your model in order to drive that,” Dr. Balcezak said.
Independent physicians operate under a fundamentally different incentive structure.
“If you’re an independent private practice and you so-called ‘eat what you treat,’ you are going to build your schedule around something that is going to maximize your individual productivity,” he said.
The study found incentive design remains a work in progress. Nearly all employed physicians at the participating systems had performance incentives beyond base compensation, but hospital leaders and physicians reported continued challenges structuring those incentives in ways acceptable to both sides.
Independence becomes harder to sustain
Dr. Balcezak expects physician consolidation to accelerate over the coming years.
Truly independent physicians who are not affiliated with an MSO, IPA, private equity-backed organization, multispecialty group or health system will face an increasingly difficult path.
“It’s going to be very difficult, and there’s only a few kinds of specialties that are going to be truly independent,” he said, pointing to potential exceptions such as concierge medicine and some cash-based dermatology or psychiatry practices.
For many other physicians, access to sophisticated technology, capital and predictable income will increasingly require scale.
“The rest of physicians are looking for some stability and predictability in income and ability to get access to the highest-edge technology and capital equipment and electronic medical record,” Dr. Balcezak said. “You simply have to have a partner in order to have that access.”
For health systems, he said, the imperative is ultimately less about owning physician practices than ensuring communities retain the clinical workforce they need.
“We need to take steps to secure the physician workforce that is needed to care for our communities,” Dr. Balcezak said. “We have to maintain those physicians and that physician workforce in order to make sure that our communities have access to care.”
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