Over the past decade, a significant percentage of the country’s physicians have shifted from working in private practices (defined as those owned wholly by physicians) to working in bigger, health system-owned practices. A key reason for this trend is that physicians gain negotiating power with payers when they work at larger organizations, according to a new report published by the American Medical Association.

Between 2012 and 2022, the share of physicians working in private practices decreased by 13 percentage points — from 60.1% to 46.7%.

During the same period, the percentage of physicians working in practices with 10 or fewer doctors fell from 61.4%in 2012 to 51.8%. As for the percentage of physicians working in practices with 50 or more doctors, that grew from 12.2% to 18.3%.

The AMA’s analysis pointed out that the number of physicians who own their own practice has been steadily declining since the early 1980s — during that era, about 76% of U.S. physicians were practice owners. In the early and mid-200s, about 61% of physicians were owners, and that percentage dwindled to 53.2% in 2012, the report said. In 2022, only 44% of physicians owned their own practice.

The report shows that the number one reason that physicians sell their practices to hospitals and health systems is related to payment concerns. A full 80% of physicians surveyed by the AMA said that the ability to negotiate higher payment rates with insurance companies was a crucial factor that influenced their decision to sell their practice. Following closely were the needs to efficiently handle the regulatory and administrative requirements imposed by payers, as well as to improve access to expensive resources.

“The AMA analysis shows that the shift away from independent practices is emblematic of the fiscal uncertainty and economic stress many physicians face due to statutory payment cuts in Medicare, rising practice costs and intrusive administrative burdens,” AMA President Jesse Ehrenfeld said in a statement.

He added that “practice viability requires fiscal stability.” Ehrenfeld also argued that the declining physician ownership trend will continue unless the Medicare payment system is reformed to consider the costs physicians have to keep up with to successfully run a medical practice.

Younger physicians experienced the biggest decrease in self-employment. From 2012 to 2022, the proportion of physicians under the age of 45 who were self-employed decreased by 13 percentage points, dropping from 44.3% to 31.7%. This indicates that a smaller portion of each subsequent group of physicians has begun their post-residency professional journey as independent owners.

The main reason for the drop in practice ownership seems to be the retirement of older physicians, who are typically owners, and the decreasing proportion of new physicians, who mostly decide not to be owners or feel they don’t have the option to become owners, according to the report. On the other hand, the impact of established physicians changing their employment status throughout their careers is a less significant factor, the analysis said.

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