Why Independent Physician Practices Are Essential for American Healthcare

Independent specialty practices have stood as pillars of personalized care and community involvement. They are symbols of dedication, passion, and the sacred doctor-patient relationship that forms the very foundation of healthcare in America. However, the last few decades have seen an unparalleled transformation in healthcare economics, with independent practices at the epicenter of this upheaval.

The radical transformation of healthcare that many feared has come. Not from a single stroke of legislation but from a thousand cuts of public and private decisions that have whittled away independent physician practices and pushed us toward mass consolidation.

By the Numbers: The Current State of Independent Physician Practices

Advocates argue that consolidation makes healthcare more sustainable and efficient. In reality, it makes near-monopolies more profitable at the expense of patients, payers, and clinicians.

• The percentage of physicians practicing alone fell from 41% to just 17% between 1983 and 2014—and at the same time, the percentage of physicians in practices with 25 or more doctors quadrupled from 5% to 20%.
• 2020 was a turning point as the first year that a majority of physicians worked outside physician-owned medical practices.
• Between 2012 and 2022, the share of physicians working in private practices dropped from 60.1% to 46.7%.

According to the American Medical Association, changes in practice size and ownership between 2018 and 2020 reflected ongoing trends, but changes were more significant than in the past.

Consolidation Is the Biggest Threat to Independent Physician Practices and Medicine as a Whole

The evolution of healthcare is causing widespread systematic change. Unfortunately, these changes have put private practices in the crosshairs and forced them to defend their independence on multiple fronts.

Private equity (PE) has dollar signs in their eyes.

Private equity firms are determined to use the heft of their capital to create monopolies for short-term financial gain. Once they have pushed the majority of private practices within a region into entities they control, these firms can escalate prices while restricting salaries. The results are monumental profits for the private equity firms (with costs up to 32% higher) and worse conditions for patients. Providers who partner with PE firms are then bombarded with additional administrative and reporting responsibilities, taking time away from important clinical work.

Health systems hide behind their nonprofit status.

These groups hide behind this protected status while also acting as monopolies. The same combination of staffing cuts and inflated prices used by PE firms funds suspiciously high executive compensations and limits physician independence. Clinicians are forced to play the system, potentially modifying care for the sake of profits over patients.

Payers have to deal with it all.

Payers are dealing with these monopolies with two vastly different approaches. Some arecreating their own integrated systems with employed physicians. Others are investing in independent practices in various ways. At the end of the day, Medicare is the largest payer in the US. They’re in the driver’s seat, and their regulations ultimately drive the behaviors of private payers.

Independent Physician Practices Are Foundational to Healthcare

Even though there are many pessimistic views on the future of independent physician practices, the fact is there is still hope. But beyond just hope, there is a foundational need for independent physician practices to continue to exist and thrive to support the modern American healthcare system.

• For healthcare as a whole: While consolidation is touted as a benefit for efficiency, numbers show a different story. Consolidation is driving higher healthcare prices, worse patient outcomes, and significant workforce burnout—all through the increased market power and decreased competition of larger healthcare systems. American healthcare needs independent physician practices focused on prioritizing patient care over corporate goals.
• For patients who deserve better care: Patients are facing the brunt of consolidation right alongside independent physicians. They’re getting shortchanged as healthcare costs are increasing and the quality of care is decreasing. When independent physician practices are protected, patients have more access to care and greater choice of where they receive care—often at significantly lower prices.
• For doctors who put medicine first: Doctors forced into PE and hospital system contracts have to see more patients at less favorable rates. Those who are able to maintain their independence enjoy more autonomy with higher rates of job satisfaction and lower rates of burnout. With more control over how they practice, independent clinicians have improved doctor-patient relationships—and, of course, more control over how much money they make.
• For employers facing rising costs: Employers must deal with healthcare costs, whether directly or indirectly, and are forced to pay higher premiums or direct costs. At the same time, the cost of living creeps up, which means employees demand higher salaries to keep up with basic needs—including healthcare costs that aren’t covered by insurance.

According to the American Medical Association, changes in practice size and ownership between 2018 and 2020 reflected ongoing trends, but changes were more significant than in the past.