Shift to hospital-owned and larger practices
In a striking reflection of the transforming healthcare landscape, a new study reveals a significant shift in physician practice arrangements over the past decade. The findings indicate a notable decrease in private practice ownership, with physicians increasingly opting for alternative models such as employment by hospitals or health systems.
The study, conducted by the American Medical Association (AMA), highlights the changing dynamics of
the healthcare industry and sheds light on the motivations behind these significant shifts.
Physicians in private practice are disappearing
According to the study, between 2012 and 2022, the percentage of physicians working in private practices witnessed a remarkable decline, falling from 60.1 percent to 46.7 percent. Concurrently, the percentage of physicians directly employed by or contracting with hospitals grew, reaching 9.6 percent.
Furthermore, there was an increase in physicians working in hospital-owned practices, rising from 23.4 percent to 31.3 percent.
Specialties within the medical field have also experienced varying degrees of change in practice ownership. While some specialties exhibited similar percentages of physicians in private practice, a few stood out. For instance, emergency medicine physicians and surgical subspecialists had 37.0 percent and 63.3 percent of physicians respectively in private practice.
Seeking better payment rates
The study delves into the reasons driving this significant transition. The primary motive cited for practice acquisition by hospitals and health systems is the negotiation of favorable payment rates with payers. Approximately 80 percent of physicians identified this as a key factor, indicating the need to secure higher payments.
Other prominent reasons included the necessity to handle payers’ regulatory and administrative requirements more effectively, as well as the desire to improve access to costly resources.
In addition to the decline in private practice ownership, the study highlights a redistribution of physicians from small to large practices.
Shifting to larger practices
The percentage of physicians in practices with 10 or fewer physicians decreased from 61.4 percent in 2012 to 51.8 percent in 2022. In contrast, the percentage of physicians in practices with 50 or more physicians grew from 12.2 percent to 18.3 percent. This suggests a trend towards consolidation and the formation of larger, more integrated healthcare organizations.
Moreover, there has been a shift in practice type. In 2022, 42 percent of physicians worked in single specialty practices, while 26.7 percent worked in multi-specialty practices. This reflects a shift of about 4 percentage points from single specialty practices to multi-specialty practices since 2012.
This shift may be attributed to the increased focus on team-based care and the benefits of a diverse range of specialties within a practice
Adapting to the changes
These findings provide critical insights into the changing landscape of physician practice arrangements and hold considerable implications for healthcare stakeholders. As physicians increasingly move away from private practice, it becomes imperative for healthcare providers, administrators, and policymakers to adapt to these evolving trends.
By understanding the motivations behind these shifts and their impact on the provision of healthcare services, stakeholders can navigate the changing healthcare environment effectively and ensure the continued delivery of high-quality care.
It is evident that the landscape of healthcare will continue to evolve, challenging stakeholders to embrace innovative approaches and adapt to the changing needs of physicians and patients alike.
Sol Schwartz & Associates has been helping physicians handle their financial situations since 1980. We work with practices of all sizes and would be glad to help you with tax planning, purchase or sale of a practice, asset protection and much more.
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