The traditional image of the independent physician, running their own practice, is rapidly becoming a relic of the past. A recent analysis by the American Medical Association (AMA) paints a clear picture: physicians are increasingly opting out of private practice in favor of employment by hospitals or private equity groups. This significant shift isn't just a matter of preference; it's a direct response to a challenging and often unsustainable environment for independent healthcare providers.
The numbers tell a compelling story. In 2024, only 42.2% of physicians were working in private practices, a stark decline from 60.1% just over a decade ago in 2012. This trend means that for many medical specialties, fewer than half of all doctors are now in independent settings.
Conversely, the presence of hospital-owned practices has expanded considerably. In 2024, over one-third of physicians (34.5%) were employed by hospital systems, marking an 11 percentage point increase from 23.4% in 2012. Furthermore, the share of physicians directly employed by a hospital has doubled since 2012, now standing at 12%. Private equity's footprint in healthcare is also growing, with 6.5% of physicians now working in private equity-owned practices in 2024, up from around 4.5% in 2020 and 2022.
The Pressures Driving the Shift
So, what's behind this dramatic transformation? Physicians point to a combination of factors, but financial pressures are undoubtedly at the top of the list. The most significant reason cited by physicians who sold their practices in the last decade was inadequate payment rates, with a striking 70.8% rating this as important or very important.
As AMA President Bruce A. Scott, M.D., aptly puts it, 'The share of doctors working in practices wholly owned by physicians is unraveling under compounding pressures.' He emphasized that the cumulative impact of 'burdensome regulations, rising financial strain, and relentless cuts in payment poses a dire threat to the sustainability of private practices.' Dr. Scott specifically highlighted that after adjusting for inflation in practice costs, Medicare physician payment has plummeted by 33% over the past quarter century, severely destabilizing private practices and potentially jeopardizing patients' access to care. He stressed that payment updates are crucial to ensure physicians can continue to practice independently.
Beyond payment concerns, physicians also cited the need to improve access to costly resources (64.9%) and better manage payers’ regulatory and administrative requirements (63.6%) as key reasons for selling their practices. Running an independent medical practice in today's healthcare environment often means navigating complex administrative hurdles and bearing the brunt of rising operational costs, from technology to staffing. Joining a larger organization, whether a hospital or a private equity group, can offer relief from these burdens, providing access to shared resources, administrative support, and potentially more favorable negotiating power with insurers.
This ongoing shift in physician practice arrangements has significant implications for the future of healthcare. As fewer physicians remain in independent settings, it raises questions about patient choice, personalized care, and the overall accessibility of medical services.
Source: American Medical Association | May 29, 2025