The Death and Life of the “Private Practice Physician”

Is the “private-practice physician” life dead? Around three out of four physicians are now employed by a hospital, health system, or corporate entity (PE firm or health insurer). I’d answer, “dead.” For now…

The Deets

The percentage of hospital- or corporate-employed physicians increased 19% over the last three years from 62% to 74%, likely due to pandemic pressures. 83,000 of the now 109,000 hospital- or corporate-employed physicians became employed by these organizations during the pandemic. 

What’s particularly interesting is the difference between hospital and corporate entity acquisitions:

• Hospitals acquired 4,800 physician practices since January 2019, a 9% increase.

• Corporate entities, like PE firms or insurers, acquired 31,300 physician practices since 2019, an 86% increase.

To Be Acquired or Not to Be Acquired

Pandemic pressures and the current labor and supply shortages have stressed physician practices both financially and mentally (burnout). An acquisition is a quick and lucrative way for physicians to shift the responsibility of running a practice to someone else. The benefits of shifting such responsibilities include:

• Financial risk protection

• Less administrative burdens (billing, compliance)

• EHR implementation

• More routine scheduling.

It’s great to have the above items taken care of so the physician doesn’t have to worry about them. On the flip side, the acquisition of physician-owned practices by a health system is associated with a slight decrease in income. Additionally, if acquired by a PE firm, the physician is no longer in complete control: they now have to abide by the PE firm’s profit-driven motives, which may include increased diagnostic testing or increased procedures.

My Thoughts

The age of medical graduates wanting to “start their own practice” is dead—for now. Health systems, PE firms and insurers (e.g., Optum) are beasts to compete with, and any new physician starting their own practice would get eaten alive by these entities.

However, I think the entity-employed physician trend may be on a pendulum. Right now, we’ve swung all the way to the right, where a supermajority of physicians are now employed by some other entity. I predict in the next couple of decades, we’ll see the pendulum swing back to the left as physicians crave the autonomy they once had, or want to experience it for the first time.

This means my peers and I will likely start out as employed physicians who leave the “corporate world” to “startup” their own practices. So here’s my million-dollar idea. Let me know if you want in. (Note, this would be a physician-first business, not a profit-first business).