The Decline of Independent Medical Practices and Corporate Influence
The American Economic Liberties Project recently released a report exploring the decline of independently owned medical practices amid the growing influence of large healthcare organizations and investors. Titled "Out of Practice: How Capital Costs and Corporate Power Are Destroying Independent Medicine," the report examines the financial pressures forcing small practices to sell to corporate entities.
Olivia Webb Kosloff, Senior Fellow at Economic Liberties and the report's lead author, argues that the decline of independent practices isn't a result of inferior care. Instead, challenges like high capital costs and uneven reimbursement rates make it difficult for these practices to remain viable without corporate backing. Co-author Alice Qin stresses that without changes in credit accessibility and reimbursement structures, physician-led ownership will continue its downward trend.
In the early 1980s, over 75% of U.S. physicians owned their practices. However, by 2024, that number is projected to decrease to just one-third. Rural areas have been particularly hit hard, with more than 40% of independent practices closing or being acquired between 2019 and 2024.
The Impact of Managed Care and Legislative Changes
The shift away from independent ownership gained traction during the 1990s "managed care revolution," which emphasized cost containment and led to increased consolidation. The Affordable Care Act further accelerated this trend. In the 2010s, private equity firms significantly ramped up acquisition activities, from 75 deals in 2012 to several hundred by 2021.
Financial hurdles also deter physician ownership. High medical school debt discourages young doctors from investing in practice ownership. Additionally, the reduced availability of small business loans and pandemic-related impacts have exacerbated credit accessibility issues. Compliance and technology-related costs add further strain on independent operations.
Large healthcare systems have exploited their market positions post-pandemic, often acquiring struggling practices through strategic financing mechanisms. These entities frequently impose lower reimbursement rates on independent practices, creating economic pressure that threatens their survival. Optum-affiliated providers, for instance, reportedly receive higher reimbursements than their independent peers in certain markets.
The report calls on policymakers to address consolidation by reforming credit access and reimbursement models to better support independent practices. More solutions and detailed findings are accessible through the American Economic Liberties Project's online resources.