Less Than Half of Physicians Work in a Private Practice, AMA Finds

The shift away from private practice and toward large, hospital-owned practices has accelerated, according to a new analysis from the American Medical Association (AMA).

AMA reported that less than half (49.1 percent) of its 3,500 national survey physician respondents worked in a physician-owned practice by 2020, down from 54 percent in 2018.

The nearly five percentage point drop is the largest two-year change measure by the AMA since it started polling physicians about their practice arrangements in 2012. This is also the first time in the analysis’ history that the share of physicians in private practices has dropped below 50 percent.

AMA also observed an unprecedented change in the number of physicians working in large practices, with the share of physicians in large practices with at least 50 doctors increasing to 17.2 percent from 14.7 percent in 2018.

“There are several contributing factors to the ongoing shifts in practice size and ownership that include mergers and acquisitions, practice closures, physician job changes, and the different practice settings chosen by younger physicians compared to those of retiring physicians,” Susan R. Bailey, MD, AMA president, said in a press release.

Another factor that may be contributing to the accelerated shift away from private practice: COVID-19. Although to what extent the pandemic had on the larger-than-usual changes in physician practice arrangements in 2020 is still unclear since the analysis only collected data during the first six months of COVID-19, Bailey said.

“Physician practices were hit hard by the economic impact of the early pandemic as patient volume and revenues shrank while medical supply expenses spiked. The impact of these economic forces on physician practice arrangements is ongoing and may not be fully realized for some time,” she stated.

For now, the analysis showed that 50.2 percent of physicians were employees in 2020 compared to 47.4 percent in 2018 and 41.8 percent in 2012. Additionally, just 44 percent of physicians had an ownership stake in their practice (down from 45.9 percent two years prior) and 5.8 percent were independent contractors (in line with previous percentages).

Women physicians and younger physicians were also more likely than their older, male peers to be employed. Employment status also ranged by specialty, with a low of less than 40 percent among surgical subspecialists and radiologists to around 58 percent of pediatricians and family medicine physicians.

Almost 40 percent of physicians also worked either directly for a hospital or in a practice with at least partial hospital or health system ownership in 2020, according to the analysis. This is down from 34.7 percent in 2018 and just 29 percent in 2012.

Additionally, 4 percent of physicians worked in practices owned by private equity firms—the first time AMA has collected this physician practice arrangement since kicking off the analysis.

AMA also asked about practice business structure for the first time. Over half of physicians were either limited liability companies (27.8 percent) and S corporations (24.7 percent), while 15 percent of physicians in private practice indicated that their business was a C corporation. The percentages of physicians in partnerships and in sole proprietorships each around 10 percent.

The accelerated shift toward large, hospital-owned practices could spell trouble for an industry struggling to keep healthcare costs in check.

Two studies in the most recent edition of Health Affairs found that hospital-employed physicians made out more referrals for hospital-based services compared to their counterparts in private practices, resulting in higher costs and more low-value diagnostic care.

Previous Research has also found that healthcare costs were nearly 6 percent higher for patients treated by physicians in hospital-owned practices versus those owned by physicians.

But the strain from COVID-19 could push more physicians into larger, hospital-owned practices, as well as out of the workforce entirely, despite these pitfalls. A recent survey found that over 70 percent of over 400 physician respondents are actively disengaging from their employers. Thirty-six percent said they are considering early retirement or leaving the practice of medicine altogether.