The physician power struggle

Independent physicians are increasingly opting to sell their practices to hospitals, health systems or other corporations.

In 2022, just 44% of physicians owned their practices, compared with 76% in the early 1980s, according to a report from the American Medical Association. Additionally, over the past decade, 77% of physicians have shifted away from independent practice to employment-based models.

This trend has led to a marked decrease in physician autonomy. Around 56% of employed physicians said what they like least about their job is less autonomy, according to the Medscape's "Employed Physicians Report 2023," a jump from 48% the previous year

"The main complaint from physicians is that by selling to an entity, they lose control of their practice," Evan Pollack, MD, an internist in West Chester, Pa., told Becker's, adding that physicians lose control over key aspects of their work, such as the number of patients they see each day, what they can order and how they can structure their schedules.

Additionally, around 61% of employed physicians said they have limited or no autonomy to make referrals outside of their practice or ownership system, and 47% said they adjust patients' treatment options to reduce costs based on practice policies or incentives, according to a survey from NORC at the University of Chicago. 

"Due to declining reimbursements and increasing regulatory and nonclinical burdens, more and more physicians decide to become employees of large organizations," Vladimir Sinkov, MD, founder and CEO of Sinkov Spine Center in Las Vegas, told Becker's. "Once they become employees, a significant amount of clinical and career autonomy is lost."

This loss of autonomy is concerning for many healthcare leaders, who argue that physician-led practices are essential to correcting what they call a power imbalance in healthcare.

"In order for physicians to regain their power, they would need to be in control of their own practices once again," Dr. Pollack said. 

Yet running an independent practice has become increasingly challenging. 

"The problem is that healthcare is expensive," Dr. Pollack said. Operating costs for practices have been rising for years. Inflation, specifically in healthcare, continues to rise. The Medicare Economic Index, which measures medical practice cost inflation, increased 4.6% in 2023, the highest in the last 23 years.

Consolidation within the healthcare sector exacerbates these challenges. Consolidation can also lead to increased costs for patients. Larger healthcare entities often charge higher rates, and the vertical integration of physician groups with health systems results in a shift of procedures to hospital outpatient departments over ASCs. This shift raises both Medicare and patient out-of-pocket costs, according to recent studies.

"It’s tough. No physician group wants to sell their practice if they can avoid it," Dr. Pollack said. "I know of groups that have been in danger of going under and were looking for buyers, but some sales were blocked." 

One strategy that could help empower physicians is to make it more economically feasible to run a private practice, said James Krantz, MD, a family medicine physician with Frederick, Md.-based Catoctin Medical Group. 

Facility fees have become a significant concern. Hospitals are allowed to charge these fees when services are provided in outpatient settings, even if they are far from the hospital's main campus. When health systems acquire physician-owned practices, they not only charge hospital-level rates but also add facility fees, which further increases patient costs.

"A change that could immediately affect this is to give physicians in private practice the same facility fee that hospital-owned practices routinely receive," Dr. Krantz said. 

A shift in the industry may be forthcoming. Some surgeons and physicians are opting to leave employed models to regain control over their practice. Benjamin Stein, MD, who co-founded and chairs the ASC development group Capital Surgical Solutions, pursued independence after observing changes in a former employer's organization following an acquisition by a larger company.

Several studies confirm this trend toward greater dissatisfaction among employed physicians. 

Physicians working in hospital-owned practices are nearly three times more likely to report dissatisfaction compared to those in physician-owned practices, according to consulting firm Bain & Company's "Frontline of Healthcare Survey," highlighted in an October blog post. Additionally, nearly 25% of physicians in health system-led organizations are contemplating a change in employers, compared to just 14% in physician-led practices.

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