Corporate Acquisitions Accelerating Surge in Employed Physicians

New research from the Physicians Advocacy Institute (PAI), a nonprofit physician advocacy organization, in conjunction with the healthcare consultancy Avalere Health, indicates almost three quarters (73.9%) of all U.S. physicians were employed by a hospital, health system or other corporate entity as of Jan. 1, 2022,  up from 69% at the same point last year.

Hospitals, health systems and other corporate entities have been steadily acquiring physician practices for years, but researchers found the trend accelerated drastically after the onset of the COVID-19 pandemic. The PAI study found 108,700 physicians have transitioned from independent practice to employment since January 2019. Of those, 76% (83,000) shifted to employment since March 2020.

“COVID-19 drove physicians to leave private practice for employment at an even more rapid pace than we’ve seen in recent years, and these trends continued to accelerate in 2021,” said Kelly Kenney, PAI chief executive officer. “This study underscores the fact that physicians across the nation are facing severe burnout and strain. The pressures of the pandemic forced many independent physicians to make difficult decisions to sell their practices to hospitals, health insurers or other corporate entities.”

The continued acceleration of the employed-physician trend carries implications for the medical professional liability insurance industry, as employed physicians typically receive medical malpractice coverage as an employment benefit. Hospitals, health systems and other corporate entities tend to self-insure these risks or indemnify them via some other alternative risk transfer vehicle.

Independent Physicians Continue to Dwindle

The new report, COVID-19’s Impact on Acquisitions of Physician Practices & Physician Employment 2019-2021, continues PAI’s documentation of the physician migration from independent practice to employment. The organization published similar reports in 2019 and 2021.

Researchers collected data from Jan. 1, 2019, to Jan. 1, 2022, in order to assess the growth rate in employed physicians. They looked at two key related consolidation trends at both the national and regional levels: 1. The acquisition of physician practices by hospitals, health systems or other corporate entities, and 2. Physicians leaving independent medical practice for employment with hospitals, health systems or other corporate entities.

PAI-collected data indicate a nationwide  acceleration in both the acquisition of physician practices and the employment of physicians by hospitals, health systems and corporate entities during the three-year study period. 

According to the report, the 108,700 physicians nationwide who became employees of larger health organizations or other corporate entities during the study period represent a 19% increase in the percentage of employed physicians (see graph below). During the same period, hospitals and other corporate entities acquired 36,200 physician practices, resulting in a 38% increase in practices owned by a hospital, health system or other corporate entity.

All regions of the United States experienced continued growth in employed physicians and practice acquisitions. The percentage of practices owned by a hospital, health system or other corporate entity increased between 28% and 44%, depending on the region, and the percentage of physicians employed by a hospital, health system or other corporate entity increased between 13% and 24%, depending on the region.

Corporate Entities Outpacing Hospitals in Practice Acquisitions

According to the PAI study, “other” corporate entities — which are defined as health insurers, private equity firms, umbrella corporations that own multiple physician practices and other organizations not part of an integrated healthcare delivery network — have been the driving force behind the employed physician trend during the last three years. These corporate entities purchased 31,300 physician practices during the study period, representing an 84% increase in the number of corporate-owned physician practices, and corporate employment increased by 50,500 physicians, a 43% increase in the percentage of corporate-employed physicians. In 2021 alone, corporate entities acquired 13,600 physician practices. By comparison, hospitals purchased 4,800 physician practices, an increase of 9%, and employed an additional 58,200 physicians, an 11% increase, during the three-year period.

COVID-19 Supercharged the Employment Trend

Of the 108,700 physicians who transitioned from independent practice to employment at a larger health organization or corporate entity between 2019 and 2022, around 83,000 (76%) did so after COVID-19 reached the United States. There was an average 8.8% increase in the growth rate of physicians employed by a hospital, health system or corporate entity during the study period.