Physician Practice Acquisitions Accelerated During COVID-19

Hospitals and corporations now own nearly half of physician practices in the US, underscoring a long-standing trend of physician practice acquisitions by hospitals and other corporate entities, reveals a new study emailed to RevCycleIntelligence.

The study conducted by Avalere on behalf of Physicians Advocacy Institute (PAI) examined physician practice acquisitions between January 1, 2019, and January 1, 2021. Researchers found that hospitals and other corporate entities acquired 20,900 physician practices over the two-year period, representing a 25 percent increase in corporate-owned practices overall.

Additionally, 12 percent more physicians were employed by hospitals and other corporations during the period, with 48,400 physicians leaving independent practice to become employees of hospitals and corporate entities.

What’s more, about 22,700 of that shift from independent practice occurred at the start of the COVID-19 pandemic in early 2020.

“COVID-19 exacerbated financial vulnerabilities of physician practices and forced them to make difficult decisions,” Kelly Kenney, chief executive officer of PAI, said following the study’s release. “The practice acquisition trend has potentially serious implications for competition and [healthcare] costs, which have been shown to increase with this type of marketplace consolidation.”

Hospital acquisitions of physician practices and physician employment made up a solid portion of practice changes during the period. Researchers reported that hospitals specifically acquired 3,200 physician practices in the two-year span, accounting for an 8 percent increase in hospital-owned practices.

About 18,600 additional physicians also left independent practices to become hospital employees. Again, the majority of that shift (11,400 physicians) occurred after COVID-19 hit the US in early 2020.

But corporate acquisitions of physician practices increased substantially from 2019 to 2020, the study showed. Corporate entities, such as private equity firms and payers, acquired 17,700 physician practices during the study’s period. That was a 32 percent increase in corporate-owned practices.

The study also showed a 31 percent boost in the percentage of corporate-employed physicians. About 29,800 physicians shifted from independent practice to become employees of corporate entities. A sizable portion of the shift (11,300 physicians) also occurred after COVID-19.

Every region in the US experienced the trend in physician employment and physician practice acquisitions, researchers also pointed out.

However, the trend could spell trouble for the healthcare industry as a whole, Kenney stated.

“Regardless of the practice setting, physicians must retain autonomy to make clinical decisions, free from interference by corporate entities motivated primarily by profits,” Kenney said in the press release.

PAI believes that physicians “physicians should be in the driver’s seat when it comes to managing their patients’ medical care.” The group is working with Congress and state policymakers to support physician-led organizations and independent physician practices as they face increased competition from larger corporate entities.

Being acquired by a hospital or corporate entity makes a lot of sense for struggling practices, especially those seeking financial sustainability after the dramatic volume and revenue losses at the start of the COVID-19 pandemic last spring. An acquisition can give practices access to more capital and resources, such as technology and administrative staff.

But Research has shown that healthcare industry consolidation can result in higher prices for patients, and not always because of better care quality following an acquisition or merger. Prices tend to be higher for services delivered in hospital outpatient settings, so much so that Medicare has implemented site-neutral payment rates to lower spending on services that can be delivered just as safely and efficiently in an independent physician’s office.

Healthcare stakeholders have also started to examine the role of private equity firms in healthcare. Initial research has shown that private equity-acquired providers may charge patients more for common services while quality of care suffers.