Share of Physicians Working in Private Practice Dropped by 13 Points During Past Decade

side note: Our view on the healthcare system is that care provided by doctors is typically better when the doctor is affiliated with a private practice….rather than with a hospital system. How do we get back to this world of better care?

A new Policy Research Perspective from the American Medical Association (AMA) indicates the share of physicians working in a practice wholly owned by physicians dropped by 13 percentage points during the past decade — from 61.4% in 2012 to 46.7% in 2022. In contrast, the share of physicians directly employed by — or contracted directly with — a hospital during that period increased from 5.6% to 9.6%, and the number working in a hospital-owned practice jumped from 23.4% to 31.3%.

For most physician specialties, the share of physicians in private practice was similar, ranging from 41.2% among general surgeons to 49.7% among radiologists. Outliers included emergency medicine physicians and surgical subspecialists, with 37% and 63.3%, respectively, working in private practice.

According to physician responses to the AMA’s survey, the most commonly cited reason for selling an independent practice to a hospital or health system centered on reimbursement. Eighty percent of responding physicians indicated that the ability to better negotiate higher reimbursement rates with payers was a very important (46.1%) or important (33.4%) reason their practice was sold to — or acquired by — a hospital or health system. After reimbursement, the second most common responses were the need to better manage payers’ regulatory and administrative requirements and the need to improve access to costly resources. Each was flagged by about 70% of physicians as a very important or important reason.

During the 2012 to 2022 period, the percentage of physicians working in practices with 10 or fewer physicians fell from 61.4% to 51.8%. By contrast, the percentage of practices with 50 or more physicians grew from 12.2% to 18.3% during the 10-year period.

Changes in practice type occurred during the past decade as 42% of physicians were working in a single-specialty practice and 26.7% in a multi-specialty practice in 2022, which reflects a shift of about 4 percentage points since 2012 from the former practice type to the latter.

The share of physicians who own their practice also dropped from 53.2% in 2012 to 44% in 2022. Women physicians were less likely to be owners than men in 2022, 35.7% compared to 48.6%, and more likely to be employees, 56.9% compared to 45.6%.

In 2012, 44.3% of physicians under the age of 45 owned the practice where they worked, but only 31.7% of physicians under the age of 45 were owners a decade later. According to the perspective’s authors, “this suggests that a smaller percentage of each successive class of physicians has started their post-residency career in an ownership position.”

More than half (51.3%) of physicians aged 55 and older owned the practice where they work, compared to 31.7% of physicians under the age of 45. The authors report this indicates that when physicians retire, those who are owners are not replaced in the workforce on a one-to-one basis. Rather, they tend to be replaced by physicians who are employees.