Hospitals now own 1 in 4 physician practices

Between 2012 and 2015, the number of physician practices owned by hospitals or health systems rose by 86 percent, resulting in a quarter of all medical practices being hospital-owned.

The analysis from Avalere Health and the Physicians Advocacy Institute (PAI) also found by 2015, 38 percent of all physicians were employed by a hospital or system after their numbers rose from about 95,000 in 2012 to 140,000 in 2015.

Overall, hospitals acquired about 31,000 physician practices in the three-year span. The PAI said the shrinking number of independent practices and doctors could have a negative impact on costs.

“Medicare spends less when patients receive treatment in a physician’s office, yet the number of physician-owned medical practices is rapidly shrinking,” PAI Executive Vice President Kelly Kenney, said in a statement. “The shift toward more physicians employed by hospitals could mean higher costs for the entire health care system. For patients, it impacts both where they receive and how much they pay for care.”

Split between regions, the Midwest had the greatest share of hospital-employed physicians at 49 percent. Alaska and Hawaii had the lowest at 27 percent, but those states had the greatest increase in hospital ownership of practice, which more than doubled between 2012 and 2015.

“Payment policies from governmental agencies and health insurance companies heavily favor large health systems and make it challenging for independent physician practices, especially smaller practices, to survive,” PAI President and North Carolina Medical Society CEO Robert Seligson said in a statement. “Just like what’s happened with local book stores and corner grocers, it is increasingly hard for local physicians to own their practice. The incentives are stacked against them.”

While more research will be released in 2017 on the implications of this trend, an earlier Avalere study referenced in the report would back up fears of increasing Medicare costs. Comparing the price of the same services performed at physician-owned offices and hospital outpatient departments (HOPDs), Medicare paid more at hospital-owned facilities.

In one example, for cardiac imaging, Medicare paid $5,148 at an HOPD and $2,862 at a physician office.