Hospitals, corporations own nearly half of medical practices, spurred by COVID-19 disruption: report

Hospitals and corporate entities acquiring independent practices and hiring away physicians were able to ramp up their efforts during 2020’s COVID-19 pandemic, according to a report from the Physicians Advocacy Institute (PAI).

Between Jan. 1, 2019, and Jan. 1, 2021, hospitals and other corporate entities (e.g., payers or private equity) acquired 20,900 physician practices, per data collected by Avalere on behalf of the PAI.

During that same time, 48,400 physicians left independent practice to work for a larger employer, the group found.

These numbers represented a nationwide 25% bump in hospital and corporate-owned practices and a 12% increase in total employed physicians over the two-year period.

However, about half of those increases occurred during the six-month window of July 1, 2020, to Jan. 1, 2021, when 11,300 practices fell under hospital or corporate ownership and 22,700 clinicians departed independent practice.

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“COVID-19 exacerbated financial vulnerabilities of physician practices and forced them to make difficult decisions,” Kelly Kenney, CEO of the PAI, said in a statement. “The practice acquisition trend has potentially serious implications for competition and health care costs, which have been shown to increase with this type of marketplace consolidation.”

By the end of the study period, 120,000 practices—just over 48% of all U.S. physician practices—were owned by hospitals or corporate entities, according to the PAI’s report. Hospitals claimed 65,100 of these practices while other corporate entities owned the remaining 54,900.

Meanwhile, 423,800 physicians—nearly 70% of the U.S. physician workforce—were employed by a hospital or corporate entity as of Jan. 1, 2021. About half the nationwide total was working for a hospital or health system, while 1 in 5 were employed by a corporate entity.

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These ownership and employment increases were seen across each major geographic region of the country, but overall were greatest in the Midwest U.S., the PAI said. There, hospital or corporate practice ownership approached 60%, as 77% of all the region’s physicians were employed by one of these organizations.

Physician practices were hit hard by COVID-19, with Kaufman Hall recently noting a pandemic-driven decline in revenues, productivity and compensation that’s only somewhat on the mend. This has led analysts from Moody’s Investors Service to maintain their predictions of continued consolidation among independent groups well through the end of 2021.

PAI’s data also back up the American Medical Association’s latest national survey that highlighted the largest shift in physician employment the professional group has seen since kicking off the biennial poll in 2012. Susan R. Bailey, M.D., president of the organization at the time, pointed to a handful of potential factors in the shift ranging from a new crop of young physicians entering the workforce to COVID-19 disruption.