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Coronavirus Pandemic Influencing Physician Practice Acquisition Market

Analysis  |  By Christopher Cheney  
   August 07, 2020

Financial struggles of physician practices present opportunity to health systems.

The coronavirus disease 2019 (COVID-19) pandemic is impacting the market for health systems and hospitals acquiring physician practices, a recent report says.

The COVID-19 pandemic has had a profound impact on independent physician practices. In the early stage of the pandemic, patient volume at physician practices plummeted, financial losses mounted, and practices boosted telemedicine capabilities to offer services in a safe manner.

The recent report, which was published by New York-based McKinsey & Company, is based on a national survey of general and specialty physicians conducted in 2019 and repeated six weeks into the pandemic.

"New financial pressures resulting from the COVID-19 pandemic may increase physician practice acquisition and consolidation. However, results from McKinsey physician surveys both before and during the COVID-19 pandemic suggest that these partner­ships may benefit from an updated approach. … While autonomy has remained a priority for physicians, respon­dents indicated that they will consider partnerships or joining a health system as a result of financial uncertainty resulting from the COVID-19 pandemic," the report says.

The report includes five key data points about health system and hospital acquisitions of physician practices:

  • Compared to small independent physician practice clinicians, employed physicians were more likely to cite financial stability as a top factor in their current practice model decision (53% of employed physicians vs. 38% of small independent physician practice clinicians)
  • About 40% of employed physicians cited personal and practice finances as factors in their decision to become employed
  • Six weeks into the COVID-19 pandemic, 53% of independent physicians said they were worried that their practice would not survive the pandemic
  • At large independent physician practices, 58% of survey respondents said they would prefer to remain independent
  • At small independent physician practices, 71% of survey respondents said they would prefer to remain independent

"In light of these survey findings, health systems and other stakeholders may consider strategies to optimize the mutual benefits of physician practice acquisition," the report says.

Gauging the physician practice acquisition market

The survey data collected during the COVID-19 pandemic indicates a bullish market for physician practice acquisitions by health systems and hospitals, Rupal Malani, MD, MS, MA, a partner at McKinsey & Company, told HealthLeaders.

"In our survey, conducted six weeks into COVID-19, 53% of all independent physician respondents shared that they were worried about their practices surviving, and that roughly 20% to 40% were considering partnering with a larger entity, selling their practice, or becoming employed. This means we have a sizeable number of physicians potentially seeking out new opportunities, and health systems in turn are scrambling to determine how (and if) to acquire this new surge of talent," she said.

However, the appetite for physician practice acquisition is finite, Malani said. "What we also heard in last year's survey is that 26% of physicians who joined a health system or larger entity reported buyer's remorse, indicating that physicians aren't always satisfied with employment. And, anecdotally, we have observed that health systems are also not always achieving their desired outcomes from the employed physician base, whether it is regarding cooperation to reduce supply expense or care coordination to reduce total cost of care."

Based on the survey data, there are significant implications for how health systems and physicians should approach physician practice acquisitions, she said.

"There may be an opportunity for health systems to define and effectively communicate the value proposition to physicians, as well as the expectations of physician employment. Similarly, physicians could benefit from being thoughtful and candid about their expectations of employment and understand what flexibility might exist to meet their needs."

Long-term impact of pandemic on physician practice acquisitions

As health systems and hospitals ponder rebuilding their enterprises after the COVID-19 pandemic crisis passes, now is a good time for them to consider what they really want out of the physician practices they are acquiring, Malani said.

"It's a true moment of reflection for health systems to consider their own value proposition, but they shouldn't reflect too long. There are other entities out there looking to acquire these practices, and health systems have to be prepared to act with alacrity."

In this decision-making process, local market concerns are crucial for health systems, hospitals, and physician practices, she said.

"Our survey is a great way to get an aggregate voice of physicians, but the ultimate decision for the acquisition of a practice will depend on myriad local market factors and the health system's approach to individual physician needs. That is where communication is paramount, and the more upfront each side can be about their own goals and expectations, the better chance all parties have for success."

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.


In a recent McKinsey & Company survey, more than half of independent physicians said they were worried that their practice would not survive the coronavirus pandemic.

About a third of the physicians surveyed said they were considering partnering with a larger entity, selling their practice, or becoming employed.

For health systems and physician practices, local market concerns should be paramount in any acquisition deal, a McKinsey & Company executive says.

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