
Significant changes are occurring in medical practice ownership, and the COVID-19 pandemic may have fueled some of the shift. The American Medical Association (AMA) has released a report showing that from 2012 to 2022 the share of physicians working in private practices fell 60.1% to 46.7%, a drop of 13 percentage points. In contrast, the proportion of physicians working in hospitals as direct employees or contractors increased from 5.6% in 2012 to 9.6% in 2022.
The analysis is part of the latest addition to the AMA’s Policy Research Perspective series that examines long–term changes in practice arrangements and payment methodologies. The AMA’s Physician Practice Benchmark Surveys are nationally representative surveys of post-residency physicians who provide at least 20 hours of patient care per week, are not employed by the federal government, and practice in the 50 states or the District of Columbia.
The latest survey was conducted from September to November 2022. Final data included 3,500 physicians with a response rate of 31%.
The survey showed that the share of physicians working in practices at least partially owned by a hospital or health system increased from 23.4% in 2012 to 31.3% in 2022.
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The proportion of physicians in small practices (10 or fewer physicians) shrank from 61.4 % in 2012 to 51.8% in 2022, the survey revealed. During that same period, the share of physicians in large practices (at least 50 physicians) grew from 12.2% to 18.3%. The proportion of physicians in midsized practices (11 to 49 physicians) remained relatively stable.
“In my opinion, the pandemic radically changed how physicians managed their practice because of the demands placed upon them by telemedicine, increased overhead costs, decreased reimbursement, and lack of staffing,” said Jason S. Greis, JD, a partner with the law firm of Benesch, Friedlander, Copland & Arnonoff LLP in Chicago, Illinois, where he is part of the firm’s Health Care & Life Sciences Practice Group. “Due to frustration, many physicians have accelerated the movement from privatized medicine to corporatized medicine backed by private equity and large hospital and health system acquirors.”
In 2022, single-specialty practices accounted for the largest share of physicians (41.8%), followed by multi-specialty group practices (26.7%), solo practices (12.9%), and a direct employment or contracting relationship with a hospital (9.6%). From 2012 to 2022, the number of physicians in multi-specialty practices and those with a direct employment or contracting relationship with a hospital grew by about 4%. The number of physicians in solo practices decreased 4%, and it was the same for single specialty group practices.
“I believe that physicians need to come together and merge into large multi-specialty practices to take advantage of cross-referrals in a way that complies with applicable federal and state fraud and abuse statutes,” Greis said.
Further, he said physicians should look for ways to reduce their overhead costs and expenses by uniting to consolidate back-office functions into centralized regional management service organizations. “Physicians are incredibly busy individuals who are deluged by patient demands, business challenges and regulation,” Greis said. “It is critically important for physicians to be able to rely upon trusted advisors for tax, accounting, and legal so that they can focus on patient care.”
Currently, physicians are being asked to do more with less and often are reluctant to engage professional advisors when helping to structure important transactions that can have significant business, tax and legal consequences down the line, according to Greis. Physician practices in some states must be organized as a professional entity (eg, professional association, professional corporation, professional limited liability company). Organizing a business as a general corporation can violate the corporate laws of that state, leading to fines and penalties and a potential loss of a business license and the ability to bill Medicare, Medicaid, and commercial insurers, Greis said.
The continued fluctuations in the health care and insurance landscape due to the pandemic, coupled with stringent regulatory requirements, have created a new playing field. Internist John Toussaint, MD, a former health care CEO and founder of the nonprofit education institute Catalysis, said the COVID-19 pandemic has created significant problems for maintaining a profitable medical practice. The historic magnitude of health care worker shortages and the skyrocketing of health care staff costs have created greater overhead.
Clinicians in the current health care work environment need to have a sophisticated management system that allows for staff ideas to generate improvements in cost and quality, Dr Toussaint said. “So, the increase in staffing costs is offset by the improvements in processes creating more efficient care delivery,” he said. “Most health care organizations do not have the management systems.”
Physicians are being encouraged to staff their practices with IT specialists and individuals with strong continuous improvement experience, Dr Toussiant observed. “These are actually the people who can help redesign care and administrative processes to improve financial performance,” he said. “Most health systems have hundreds of priorities on their plate, which will never get accomplished. Reducing them reduces costs.”
Physicians and hospitals are working with tighter margins and placing more emphasis on cost reduction and value-based care delivery, said Dorothy Hung, PhD, MPH, director of the Center for Lean Engagement & Research (CLEAR) in the Division of Health Policy and Management at the University of California, Berkeley School of Public Health. “Although some have seen their practice recover to near pre-pandemic levels, this is offset by ongoing staff shortages and new expenses required for operating in a post-pandemic world,” Dr Hung said. “On the other hand, the increase in telehealth and virtual medicine may be a net positive change in practice where appropriate.”
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