Once the seemingly endless years of medical training come to a close, the newly minted physician will find themselves deciding not just where they wish to practice, but in what setting. Nowadays there are a variety of practice settings, from hospital-employed to physician-groups to solo practice. However, the number of physicians in private practices has been steadily declining. In 2012, about 60% of physicians worked in their own practice. By 2018, that number dropped to 54%. In 2020, it lowered further to 49%. And in 2022, after the worst of the pandemic, it reached 47%. But what caused these trends, and is there any sign of a course reversal?
The pandemic undoubtedly played a massive role in shifting physicians out of private practice and into the hospital or corporate-employed space. In the past 3 years, the percentage of hospital or corporate employed physicians increased 19%, and it’s easy to see why. The pressures of the pandemic, whether it be economic with increased labor shortages or personal with the increased mental strain of navigating an entire practice through such a difficult time, forced many physicians to shift their responsibilities to larger hospital or corporate spaces that could bear the weight of such change. The benefits of incorporating into larger systems include but are not limited to financial risk protection, decreased administrative burdens, and EHR implementation. However, there are slight pay cuts to be expected in the process. One study assessed differences in physician income pre and post integration from 2014 to 2018 and found that integration led to a ~$3,000 reduction in overall physician income, with that number jumping to ~$10,000 for nonsurgical specialists.
There are many other factors other than the pandemic that continue to affect private practice physicians, with declining reimbursements, increased regulatory burden, and difficulties with insurance companies being the most irritable factors.
In the past, physicians were able to negotiate their fees with insurance companies, and while the process was often arduous, a compromise was typically found. Nowadays, insurance companies dictate the fee, and physicians are forced to accept it if they wish to continue to be in-contract with that insurance company. As one would expect, reimbursement rates for those in private practice are on the decline, disincentivizing current private practice physicians to stay out on their own.
Increased regulations by state and federal government agencies are forcing physicians to spend more time completing paperwork in the form of metrics reporting, data collection, and form completion, rather than treating patients. This in combination with the already decreasing reimbursement rates only worsens the problem.
The daily battle physicians and their staff must endure with insurance companies regarding prior authorizations for their services is incredibly taxing, both physically and mentally. Physicians must prove to the insurance company that a patient needs a given service for the patient to get the service and for the physician to be reimbursed. Insurance companies are free to reject these requests under the guise of “making coverage determinations”. This not only leaves patients unable to receive the care they need, but makes the physician frustrated on the restrictions of their ability to deliver said care.
Lastly, as with any business, physician owners of private practices must contend with the ebb and flow of the market. If large hospital systems can hire staff at the same or higher salary with the inclusion of benefits, it can be hard to compete.
Currently, there seems to be no signs of peace for private practices. The market continues to be harsh, and many practice owners are still recovering from the effects of the pandemic. However, many private practice physicians have decided to integrate themselves into fellow physician-owned groups, forming small local coalitions that help disseminate the challenges faced by any single practice across many. While it may be harder to establish or maintain a private practice today than ever before, it should not deter those wishing to do so from trying.
Works Cited
Girgis, Linda. “ From the Physician Editor-in-Chief: Is Private Practice Doomed?” Physician’s Weekly, 22 Sept. 2023, www.physiciansweekly.com/from-the-physician-editor-in-chief-is-private-practice-doomed/.
Workweek. “The Death and Life of the ‘Private Practice Physician.’” The Death and Life of the “Private Practice Physician,” 18 July 2022, workweek.com/2022/04/24/the-death-and-life-of-the-private-practice-physician-2/.
Whaley CM, Arnold DR, Gross N, Jena AB. Physician Compensation In Physician-Owned And Hospital-Owned Practices. Health Aff (Millwood). 2021 Dec;40(12):1865-1874, https://pubmed.ncbi.nlm.nih.gov/34871086/.
Stempniak, Marty. “Nearly 80% of Physicians Now Work for Hospitals or Other Corporate Entities as Private Practice Dwindles.” Radiology Business, 12 Apr. 2024, radiologybusiness.com/topics/healthcare-management/healthcare-economics/nearly-80-physicians-now-work-hospitals-or-other-corporate-entities-private-practice-dwindles.
Alec Simoni is a medical student of the Class of 2026 at The University of Arizona College of Medicine – Phoenix. He graduated from UCLA majoring in Psychobiology and minoring in Classical Civilization. When he's not spending his time skating around the streets of Downtown Phoenix in search of a new lunch spot, Alec enjoys reading classical Roman and Greek literature and working out at the gym. Feel free to contact him at @alecsimoni on Instagram or alecsimoni@arizona.edu