1 in 4 physician practices now hospital-owned

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Hospital ownership of physician practices is on the rise, with 38 percent of U.S. physicians now employed by hospitals and health systems, according to a new analysis released by the Physicians Advocacy Institute (PAI).

As of mid-2015, one in four medical practices was hospital-owned, according to the study (.pdf), prepared for the nonprofit advocacy group by Avalere Health. The healthcare consulting firm compiled the report based on a database from SK&A that included physician and practice location information on hospital/health system ownership. Each record in the database corresponds to a unique physician in a specific practice location.

Hospitals acquired 31,000 physician practices, a 50 percent increase, from 2012 to 2015, according to the report. The research provides further evidence of a nationwide shift in the number of physicians leaving private practice to join hospitals and health systems as employees. Indeed, the most recent data shows that there were more than 140,000 employed physicians in 2015.

The report notes that hospital acquisitions of practices occurred in every region of the country. These acquisitions typically involve the purchase of the services of multiple physicians through employment contracts, as well as the practice’s physical building and equipment.

But the share of hospital-employed physicians is greatest in the Midwest, according to the report. Researchers found almost half of all doctors in the Midwest are employed by hospitals. Rates of employment are lowest in Alaska, Hawaii and in the South, where one-third of physicians are employed by hospitals.

“Regardless of where they live, physicians who want to remain in private practice are under tremendous pressure,” Robert Seligson, PAI president and CEO of the North Carolina Medical Society, said in an announcement (.pdf) of the findings.

“Payment policies from governmental agencies and health insurance companies heavily favor large health systems and make it challenging for independent physician practices, especially smaller practices, to survive,” he said. “Just like what’s happened with local book stores and corner grocers, it is increasingly hard for local physicians to own their practice. The incentives are stacked against them.”

Although hospital-employment may take the pressure off doctors, it may not be good for the health system as a whole, said Kelly Kenney, PAI executive vice president, in the announcement.

“The shift toward more physicians employed by hospitals could mean higher costs for the entire healthcare system,” Kenney said. “For patients, it impacts both where they receive and how much they pay for care.”