Coronavirus Pandemic Driving Increase in Healthcare Consolidation

A new report shows an increase in acquisitions of independent physician practices during the pandemic.

During the coronavirus pandemic, there have been upticks in independent physicians becoming employees and acquisitions of independent physician practices, a new report shows.

The trends of physicians leaving private practice for employment at corporate entities such as hospitals and acquisitions of independent physician practices by corporate entities have been going on for years. These trends have raised concerns, including a loss of autonomy in clinical practice and increased costs associated with physician practice consolidation.

The new report was prepared for the Washington, DC-based Physicians Advocacy Institute by Avalere Health. The study examined data from January 1, 2019, to January 1, 2021.

The report features several key data points:

• 18,600 physicians left independent practice to become employees at health systems or hospitals, with 11,400 of those physicians changing employment after the start of the coronavirus pandemic
   
• Health systems and hospitals acquired 3,200 independent physician practices during the study period, representing an 8% increase
   
• 29,800 physicians left independent practice to become employees of other corporate entities such as health plans and venture capital firms, with 11,300 of those physicians changing employment after the start of the pandemic
   
• The percentage of physicians employed at other corporate entities increased 31% during the study period
   
• Other corporate entities acquired 17,700 independent physician practices during the study period, representing a 32% increase
   
• There was a 3.1% increase in the growth rate of physicians employed at health systems and hospitals after the start of the pandemic
   
• There was a 3.9% increase in the growth rate of physicians employed at other corporate entities after the start of the pandemic
   
• As of January 2021, 69.3% of physicians were employed at health systems, hospitals, or other corporate entities

"These trends are part of a greater shift towards consolidation within the healthcare marketplace, which has dramatically reshaped the practice landscape for physicians. Understanding the extent and impact of these trends is important for all healthcare system stakeholders, given the implications on healthcare spending and, in many cases, the continuity of the patient-physician relationship," the report says.

Interpreting the data

Although the report does not have data for 2021, the pandemic appears to have accelerated the pace of physicians leaving independent practice and physician practice acquisitions, Kelly Kenney, JD, CEO of the Physicians Advocacy Institute, told HealthLeaders.

"You cannot dispute the fact that there was a bump up nationally. There were 48,400 additional physicians who left independent practice during the two-year study period and became employees. And 22,700 of those physicians left independent practice in the last six months of 2020. That is a significant increase during the pandemic. We saw this upward trend reflected in both the physician employment and the practice acquisitions analysis. So, it appears to be a consistent upward trend," she says.

The report provides insights into the acquisition of independent physician practices by corporate entities such as health plans and venture capital firms, Kenney says.

"The trend of health system and hospital acquisition of practices has been going on for more than a decade, but this is the first time we have been able to look at acquisitions by other corporate entities such as private equity entities and health insurers. Given the financial model of some of these corporate entities, there are some inherent concerns that we should look at. We need to pay close attention to how these other corporate entities approach key patient issues such as access to a personal physician and access to clinically indicated care. These other corporate entities have different financial incentives than independent physician practices," she says.

Transparency is a concern related to practice acquisitions by other corporate entities, Kenney says.

"We need to look at the level of transparency around other corporate entities that are purchasing independent physician practices. We need to make sure there is enough transparency and regulatory oversight to ensure that onerous or restrictive policies are not in place. There is not a lot of scrutiny for these other corporate entities, and we need to make sure there are safeguards in place. There are patients attached to these practices, and we need to make sure those patients are not in worst shape than they were pre-acquisition," she says.

The report's data reflects the difficulty of operating an independent physician practice, Kenney says.

"It is difficult to maintain an independent physician practice, and a conversation needs to occur about whether that is something we are ready to give up as a nation. Many of us feel that we want the choice of having a physician in a practice that is run independently. We need to continue to push for that and need to support physicians who choose to remain independent. Physician practices that are independent need to be viable from a financial perspective, and they should not be overloaded with regulatory and administrative burdens that make it impossible to practice independently," she says.

Easing regulatory burdens is crucial to the future of independent physician practices, Richele Taylor, JD, CEO and chief legal officer of the South Carolina Medical Association, told HealthLeaders. "The regulatory burdens are important because it is hard for a new physician to start a practice, and you want to keep independent practices viable especially in rural and underserved areas. It has got to be something they can do. They have got to be able to run a practice while practicing medicine."

New policies such as lifting the moratorium on physician-owned hospitals need to be adopted to ensure independent physician practices do not become a relic of the past, Kenney says. "We certainly hope we are not seeing the end of independent practice. We think there are commonsense policies to put into place to protect that option for physicians and patients."

It is unlikely that independent physician practices will disappear, Taylor says. "Physicians are service-oriented, and they will always look for where they can serve. So, the independent physician practice model will always be around because physicians are going to gravitate to it. But it is our job to help protect independent physician practices to make sure that when physicians look for those kinds of opportunities, they will be available."

Related: Coronavirus Pandemic Influencing Physician Practice Acquisition Market