Almost seven in 10 U.S. physicians are now employed by hospitals or corporations like private equity firms and health insurers as the COVID-19 pandemic drove doctors away from independent practice, a new report finds.
Between Jan. 1 2019 and Jan. 1, 2021, 48,000 physicians quit private practice to take jobs at hospitals or other companies, Avalere Health researchers concluded in the study. These employers now own almost half of the country's medical practices.
The Physicians Advocacy Institute, a not-for-profit group that advocates for fair and transparent payment policies, commissioned the study. The organization is not necessarily opposed to the trend, said CEO Kelly Kenney. But its members, who include leaders of state medical associations, are concerned about the loss of physician autonomy and about the rising costs associated with companies that employ physicians, she said.
"Physicians really need to maintain that independence and preserve that aspect of the patient-physician relationship," Kenney said.
Cost is a demonstrable concern. A recent pair of Health Affairs studies found that doctors employed by hospitals were more likely to order inappropriate magnetic resonance imaging tests and that overall testing volume spiked after hospitals acquired physician practices.
More physicians flocked to corporate entities like private equity groups and health insurers than to hospitals over the two-year period Avalere Health studied. During that time, 29,800 more physicians became employees of those kinds of companies, 11,300 of which made the transition after the beginning of the COVID-19 pandemic. That represents a 31% increase in the percentage of corporate-employed physicians over the years examined, Avalere Health found.
Hospitals scooped up 18,600 more physicians during the study period, leading to a 5% increase in the share of doctors employed by hospitals. Hospitals also acquired 3,200 more physician practices during that time, an 8% increase.
Hospitals employed more doctors than other kinds of companies prior to the past two years, so there may have been less room to grow, Kenney said.
"We were at a fairly high level at the beginning of the study period, meaning that hospitals had already acquired lots of physician practices," she said.
Hospitals employed 283,000 doctors in January 2019, or 46.9% of all U.S. physicians at the time, and 301,600 by January 2021, or 49.3% of all U.S. physicians, the Avalere Health data shows. The uptick became sharper after July 2020.
Corporate entities, meanwhile, employed 92,400 physicians in January 2019, or 15% of all U.S. physicians, and the total increased to 122,200, or 20%, by January 2021.
Avalere's report did not break down what proportion of those physicians were private equity employed versus employed by health insurers or other types of companies.
That could be because private equity firms tend to be less transparent than other businesses. Private equity companies generally don't report to antitrust or financial regulators under current law, instead largely flying under the public and regulatory radar, according to a recent report from researchers at the University of California, Berkeley and the American Antitrust Institute (AAI).
"Even where transactions are reportable, the complex structure of private equity funds obscures the competitive impact of those deals," the report said. "As a result, private equity companies operate in healthcare without any effective oversight."
Private equity investments in healthcare have been getting bigger over time. In 2010, these firms spent $41.5 billion on healthcare. In 2019, they invested $119.9 billion. Cumulatively, private equity companies pumped about $750 billion into the sector between 2010 and 2019.
The private equity business model is "fundamentally incompatible" with sound healthcare that serves patients, the UC Berkeley-AAI authors argue. Private equity is concerned with short-term revenue generation and consolidation, and its business tactics undermine competition and destabilize healthcare markets, the report says.
The American Medical Association also highlighted growing physician employment at hospitals and other companies when it declared that, for the first time, the majority of doctors worked outside of physician-owned practices as of last year. A May report on the group's biennial physician survey, which included responses from 3,500 doctors, found that 49.1% of patient-care physicians worked in doctor-owned practices in 2020.
COVID-19 exacerbated a number of ongoing trends pushing doctors away from independent practice, Kenney said. Burnout is growing among healthcare workers of all kinds, studies show. And not all private practices could survive the revenue declines they suffered during the worst of the pandemic, she said.
"There were efforts to support physicians and other healthcare providers financially during the pandemic," she said. "But we all know that didn't fully replace the revenues they lost."
This article has been updated to correct the spelling of Kelly Kenney's name.