A funding bill recently passed by the House of Representatives locks in a 2.8% Medicare physician pay cut for 2025, perpetuating long-held concerns about the sustainability of independent practice and the future of patient care.
“As reimbursement rates fail to keep pace with rising practice costs, how can physician practices sustain themselves long-term?” John Donovan, MD, an otolaryngologist at ENT Salem (Oregon), told Becker’s. “Private practices cannot sustain themselves indefinitely given these conditions.”
In addition to reimbursement rates, there are other areas of concern and potential avenues of relief for independent practices and their patients:
Staffing
The 2024 survey by McKinsey found that the U.S. could see a shortage of 86,000 physicians by 2036. Of those surveyed, 35% of physicians indicate they are likely to leave their current roles in the next five years. Of these, 60% expect to leave clinical practice entirely.
While the aging population is one factor to the physician shortage, it’s not the only thing exacerbating the issue. Among surveyed physicians under age 54, 37% were leaning toward early retirement or leaving clinical work and 14% expressed a preference for administrative roles.
According to the survey, 58% of physicians have a stronger desire to change jobs this year, up from 43% in the prior survey. Physicians are facing more offers to leave their current positions as well – 72% of physicians are approached with alternative job offers at least monthly. Becker’s also reported on 20 deals in the last two years involving physician practice and group acquisitions.
“As costs increase and income remains static, there is an inflection point where providers in small practices either take a pay cut as a sacrifice for independence, exit the workforce (such as early retirement or alternate non clinical employment) or join a larger entity,” Surinder Devgun, MD, a managing partner of Rochester (N.Y.) Gastroenterology Associates told Becker’s. “Therefore, joining a larger entity is the most likely outcome in order to remain in clinical practice.”
Operational costs
Recent data from Strata Decision Technology found that the median per-physician expense for practices is up more than 20% from two years ago. The median investment per physician full-time equivalent rose to $335,195 for November 2024 through January 2025, annualized. That represents a 1.9% increase compared with 2024 and 16.9% versus two years ago in 2023. The Consumer Price Index, also known as inflation, increased 2.8% over the last 12 months according to the most recently available data from the Bureau of Labor Statistics.
“As reimbursement rates fail to keep pace with rising practice costs, how can physician practices sustain themselves, long-term?” Dr. Donovan said.
Signs of hope
While many factors point to a decline in private practice, other factors indicate momentum for physicians looking to remain independent.
According to a survey from consulting firm Bain & Co., nearly 25% of physicians in health system-led organizations are contemplating a change in employers, compared to just 14% in physician-led practices. Notably, of those considering a switch, 37% are looking to move to physician-owned settings.
“We’ve seen this trend empirically,” Jeremy Shiner, founder and CEO of Myriad Systems, a provider of AI-driven healthcare practice management solutions, told Becker’s. “This shift is evident not only in direct primary care and physician-led concierge practices but also among providers who might not appear in the statistics — those working in hospitals while also running concierge practices on the side. The common assumption that private healthcare is disappearing in favor of hospital systems isn’t as clear-cut when we observe what’s happening in the field with our clients.”
The Bain & Co. survey found that 81% of physicians in physician-led organizations were satisfied with their involvement in strategic decision-making, compared to just 50% of those in health system-led practices.
A wave of independence-forward business models
Becker’s has reported on several emerging business models looking to subvert traditional practice acquisition and consolidation trends.
New York City-based Sapient Health, owned by Joseph Romano and Bill Ingram, has “the expertise of a large management company while maintaining a personalized, startup-like feel,” Mr. Romano told Becker’s. The company emphasizes regional representation, focusing on New York, New Jersey and Florida. They also operate a physician-driven model in which the firm enters deals as a minority partner, ensuring that physicians retain leadership while gaining business acumen for long-term success.
Matawan, N.J.-based management services organization Redefine Management utilizes a vertically integrated model to offer a full spectrum of tailored management solutions, empowering physician groups and healthcare providers with the infrastructure they need to succeed. Redefine’s CEO William Vanderveer recently told Becker’s that, through the company’s partnerships with medical groups, his company is able to deliver the benefits of traditional health system alliances, like more favorable payer contracts, while preserving physician autonomy and independence.
