Physicians are increasingly choosing to be employed instead of running their own small practices. Though a far higher percentage of physicians remain in private practice than the overall rate of self-employment in the U.S. (42% of physicians versus 10% of all workers), the decline in private physician practice is consistent with broader economic trends as jobs and the demographics of the workforce have changed. However, policymakers, academics and other stakeholders have homed in on the downward trend in private physician practices to explore the implications for consumers and payers.

Recently, the U.S. Government Accountability Office published a report surveying the literature on physician consolidation and certain effects on the health care landscape. The report primarily considers the impact of physician acquisitions on health care prices and quality. Given the current literature scope and its focus on price effects specifically, this isn’t altogether surprising. These observations don’t fully acknowledge or explain the current health care landscape, however. The shift away from solo physician practices toward employment ought to prompt a different set of questions: what is driving physicians toward employment, and are there differences in how different entities, like hospitals and commercial insurers, make decisions about employing physicians and acquiring practices?

Physicians' Employment Trends Reflect Systemic Challenges

The reality is that managing a solo or small group physician practice in today’s health care environment is not particularly attractive for physicians and, in some cases, is nearly impossible. Without support from a larger organization, many of these practices would fail due to rising administrative and infrastructure demands, cultural changes in the expectations of both providers and patients, and growing reimbursement constraints.

Disturbingly, many communities are at risk of losing access to physician services if these practices do not survive, and the risk is particularly high for primary care and certain specialist services that generally operate closer to breakeven. Physicians are struggling to stay afloat amidst the ever-increasing demands placed on them. Administrative burdens, higher input costs, changing consumer preferences on access to care, and changing physician preferences in terms of work-life balance all contribute to 94% of physicians saying it has become more financially and administratively difficult to operate a solo practice.

Compounding these pressures are inadequate payment levels. After adjusting for inflation, Medicare physician payment has effectively fallen by 29% from 2001 to 2024. In highly concentrated, increasingly vertically integrated markets — where large payers also own physician groups — small, unaffiliated practices face asymmetric bargaining power and credible out-of-network threats.

It's not surprising that many physicians are seeking employment arrangements. In a 2021 survey of medical residents, more than two-thirds said hospital employment was their first or second choice of setting, compared to just 6% who favored operating a solo practice. They cited predictable income, team-based support and reduced administrative stress.

Physician Employment Trends Are Reshaping Access to Care

These threats to physician practices are ultimately threats to patient access to care. This is where larger entities offering employment relationships can serve as a lifeline to struggling practices, and hospitals and health systems play a unique role in safeguarding access to care. This is particularly true for vulnerable rural and urban communities that are not attractive to other acquirers of physician practices, namely insurance companies.

Despite the focus of much of the literature on hospital acquisitions, other entities have been acquiring physician practices at scale for years. These include both larger physician groups and insurers. For example, UnitedHealth Group now boasts an arsenal of over 90,000 doctors (10% of all doctors in the U.S.). In fact, commercial health insurers acquired roughly 40% more physicians than hospitals over the last five years. In addition to focusing acquisitions on more profitable provider specialties, there is increasing evidence that some insurers strategically structure provider acquisitions in ways that allow them to more favorably manage medical loss ratio requirements.

A new resource from the AHA highlights this trend. Compared to other entities that are increasingly acquiring physician practices, when hospitals acquire practices, they are more likely to acquire less profitable specialties like family and pediatric medicine and primary care. This builds on prior research highlighting how hospitals prioritize access to care for rural and low-income Americans.

These issues are particularly timely to explore as physician shortages grow and care needs intensify. And the goal should be to build a health system that attracts and retains clinicians, supports patient access and delivers high-value care. To do so will require a much more fulsome analysis of the complex and intersecting factors impacting access to physician services.