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Pandemic Acceleration of Consolidation of the Health Care Industry | Fox Rothschild LLP

Almost 3 of 4 physicians are now employed by hospitals, health systems and other corporate entities (i.e., private equity firms and health insurers).  

According to an article published by the nonprofit Physicians Advocacy Institute (PAI) and report by consulting firm Avalere, approximately 108,700 physicians have shifted to employment (e.g., leaving private practice) since January 2019.  This growth is almost evenly split between hospitals (58,200 physicians) and corporate entities (50,500 physicians).  Of these physicians shifting to employment, about 76% (83,000 physicians) did so since the COVID-19 pandemic began.

Hospitals and corporate entities now own over half of physician practices, with hospitals owning approximately 26.4% and corporate entities owning approximately 27.2%.  Of note, the percentage of corporate-owned practices (i.e., private equity firms) has increased 86% over the past 3 years.

Many factors are driving this physician employment consolidation including, but not limited to, the following –

  • High costs of maintaining a private practice.
  • Downward pressure on reimbursement.
  • Administrative and organizational burdens.
  • Business challenges for professionals trained to focus on delivering patient care.
  • Mounting financial pressures.
  • Changes to technology (including electronic health records systems).
  • Mental health, burnout and stress.

The forgoing factors have been exacerbated by the COVID-19 pandemic.  For some independent physicians, the pandemic-induced challenges, coupled with the already existing challenges, appear to have provided the final push to seek employment elsewhere, or to close or sell the private practice altogether.

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