Over the past five years, 100,000 doctors left private practice. Many of them have reluctantly become employees of hospital systems or corporate medical groups. Now, those remaining on their own are asking Congress for help.
The family physician was once a combination of community caregiver and entrepreneur, but now they are likely to be just another corporate employee, according to testimony given during a recent Congressional Health Subcommittee meeting. The hearing examined why physician-owned practices are shuttering at an alarming rate.
Private Medical Practices in Crisis
Facing the pressure of rising costs on everything from staffing to supplies to rent, an endless sea of paperwork and compliance costs that “wreak havoc on patient care,” private physicians feel pressure to sell their practices to larger conglomerates with more negotiating power and greater ability to spread shared costs.
The number of physicians practicing independently has declined 30% in the past decade, reflecting in large part the effect of heavy regulatory and administrative burden of managing a small practice.
Complying with Medicare and other insurers’ red tape and bureaucratic requirements can cost tens of thousands of dollars and hundreds of staff hours, which small practices simply cannot afford to absorb. Medical liability premiums also continue to climb and low reimbursement rates keep profit margins small.
The Decline of Independent Physicians
Amid mounting business pressure, doctors’ autonomy and face-to-face time with patients has plummeted. The collective effect is that doctors are dissolving small practices in favor of working for big health care groups or hospital systems.
As a result, the crucial contribution of physician-owned practices to the American health care system is declining despite proof that independent doctors often provide superior care at lower per patient prices.
How Private Equity is Changing Medical Practices
Studies have shown that hospital systems owned by private equity firms invest heavily in operational changes aimed at increasing profitability. But they may not evaluate the resulting patient care or health outcomes as closely.
Vertical integration further muddies the incentives, as system-paid physicians can provide referrals to system-owned hospitals or require patients to use a system-preferred pharmacy.
Some evidence indicates private equity acquisition “may accelerate insolvency” for struggling rural hospitals. In one in four local markets – especially in the south where such buyouts are most common – a single private equity firm owns more than 30% of practices. In some markets, a single firm may employ half of the specialists. These larger medical groups can charge higher prices than individual practices when competing with one another.
Given the confluence of factors that are making private practice unsustainable, Congress is right to take a closer look at how to shore up this fleeting segment of America’s health care system – a decline that’s not for the betterment of patient care.