The move away from doctors working in practices wholly owned by physicians has been underway in the U.S. for a while, but a new analysis of physician practice arrangements shows just how dramatic this shift has been, as well as how it is playing out among different age groups.
The AMA Policy Research Perspective—“Recent Changes in Physician Practice Arrangements: Shifts Away From Private Practice and Towards Larger Practice Size Continue Through 2022” (PDF)—found that between 2012 and 2022 the share of physicians who work in private practices dropped 13 percentage points, from 60.1% to 46.7%.
“Importantly, those percentages include physicians who have an ownership share in the practice, as well as those who are employed in the practice (typically younger physicians) or contract with the practice,” says the report, written by Carol K. Kane, PhD, director of economic and health policy research at the AMA.
The analysis was based on data collected over that time period by the AMA through the nationally representative Physician Practice Benchmark Survey, which explores the changes in the ownership and organization of physician practices, as well as the reasons that private practices are sold to hospitals or health systems.
Meanwhile, the share of physicians directly employed by or contracted with a hospital increased from 5.6% to 9.6%, and those who worked in a hospital-owned practice rose from 23.4% to 31.3%. Practice size has also changed. The percentage of physicians in practices with 10 or fewer physicians dipped from 61.4% to 51.8%, while those in practices with 50 or more physicians grew from 12.2% to 18.3%.
Younger physicians forgo ownership
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The analysis found 44% of physicians were owners, 49.7% were employees and 6.4% were independent contractors in 2022.
“This is in great contrast to 2012, when 53.2% of physicians were owners and, even more so, to the early and mid-2000s, when around 61% of physicians were owners, and the early 1980s, when the ownership share was around 76%,” says the AMA report.
But just as notable is the shift in behaviors by age group.
“When you look at young physicians today and compare them with young physicians from just 10 years ago, you see a dramatic change in behavior,” Kane said in an interview, noting that the number of physicians under 45 who were owners dropped more than 12 percentage points from 2012 to 2022, from 44.3% to 31.7%.
Established physicians, meanwhile, were much less likely to embrace employment as they moved through their careers.
“In 2012, 54% of physicians 45–54 were owners, and 10 years later, the ownership share of that cohort was 49.7%, only 4 percentage points lower,” she said. “Fewer of them were in private practice, but it was not as big a difference. So, there is some stickiness there.”
Why physicians are selling
The survey’s data shows that, “by far, the most cited reason for hospital and health system acquisition had to do with payment,” Kane wrote. Eight in 10 physicians surveyed said the need to negotiate higher payment rates was a very important or important “reason as to why their practice was sold to or acquired by a hospital or health system.”
Also cited were the need to better manage payers’ regulatory and administrative requirements and the need to improve access to costly resources, each of which was flagged by some 70% of respondents as either very important or important to their decision.
“The AMA analysis shows that the shift away from independent practices is emblematic of the fiscal uncertainty and economic stress many physicians face due to statutory payment cuts in Medicare, rising practice costs, and intrusive administrative burdens,” said AMA President Jesse M. Ehrenfeld, MD, MPH. “Practice viability requires fiscal stability, and the AMA’s Recovery Plan for America’s Physicians is explicit in calling for reform to our Medicare payment system that has failed to keep up with the costs of running a medical practice.”
It takes astute clinical judgment as well as a commitment to collaboration and solving challenging problems to succeed in independent settings that are often fluid, and the AMA offers the resources and support physicians need to both start and sustain success in private practice.
