Doctors are leveraging a competitive market as more leave their private practices behind.
Health systems, insurers, private equity firms, large physician groups and growing for-profit primary-care practices are making their best pitch to lure physicians and their referral networks.
"We have to think about all of the choices they have and be competitive," said Renee Buckingham, segment president of Humana's care delivery division. "Most of the doctors expect compensation to be competitive; it is the clinical culture and support capabilities inside our practice that resonates—salary is kind of a given."
Many of the pitches look similar. They promise a better work-life balance, the flexibility to pursue alternative payment models as well as the autonomy and tools to practice how they prefer. But depending on the market, industry observers are concerned that unrivaled size and power could drive up costs.
"We are losing independent practices," said Dr. Gerald Harmon, president of the American Medical Association. "We would argue that the less expensive source of quality care appears to be in an independent practice."
Almost 7 in 10 U.S. physicians are employed by hospitals or other corporations, according to a new study from Avalere Health. More than 48,000 physicians quit private practice from 2019 through 2020 to take jobs at hospitals or other companies, a 12% increase. Fewer doctors—49.1%—own their own practice than ever before.
More than 18,000 of those doctors joined a hospital over that span, representing a 5% increase, the study found, which was commissioned by the Physician Advocacy Institute, a not-for-profit group that advocates for fair and transparent payment policies. The majority joined hospitals after the onset of COVID-19.
That trend shows no sign of abating based on Modern Healthcare's 45th annual Hospital Systems Survey, which revealed that 80% of 40 health systems surveyed said they planned on hiring more doctors next year.
Building out an IT infrastructure to transition to new payment models featuring downside risk, efficiently manage electronic health records, keep tabs on revenue cycles and roll out a telehealth platform can be daunting. The pandemic's throttling of non-urgent procedures pushed doctors who were already learning toward retirement.
"Doctors didn't go to medical school to figure out payer contracting, a tech stack and reimbursement changes," said Parth Mehrotra, president and chief operating officer of Privia Health, which helps manage physician groups. "Many independent practices don't have the scale."
Hospitals can relieve that administrative burden, but they are essentially locked into the system, said Glenn Melnick, a health finance professor at the University of Southern California.
"If dominant systems get control of local physician markets or dominant specialty groups, then doctors face a very concentrated monopsony market that they are selling their time and services to," he said. "In theory, dominant companies can raise prices while keeping payments to doctors low since they have market power on the selling side and on the input side."