By Eliza Dailey  and Sarah Hostetter

In the past five years, private equity (PE) firms, physician groups, and health insurers were responsible for 90% of physician practice acquisitions, while hospitals and health systems were responsible for just 6%, according to an American Hospital Association (AHA) analysis. Advisory Board's Eliza Dailey and Sarah Hostetter outline what this means for shifting physician employment landscape — and those who work with doctors and medical groups.

The top buyers of physician practices

After years of change and instability, the physician landscape is entering a new era of employment. It's an era marked by a rise in corporate ownership, expanding practice opportunities, a new bar for autonomy, and an arms race for practice assets.

According to physician polling data, increased costs have led most physicians to opt out of opening their own practices. Instead, physicians are electing to become employed by health systems and other corporate entities.  

An AHA analysis of Levin Associates data found that hospitals and health systems were only responsible for 6% of physician acquisitions since 2019. "[O]ther entities have acquired far more individual physicians and physician practices than hospitals, and those acquisition deals have total dollar values that are far greater than those for hospitals," AHA stated.

Between 2019 and 2023, PE firms drove 65% of physician practice acquisition deals and involved the largest number of individual providers. Meanwhile, physician medical groups (14%) and health insurers (11%) were responsible for more physician acquisitions than hospitals and health systems (6%). 

On average, the number of physicians acquired by health insurers was over 10 times higher than for any other type of entity, including hospitals and health systems.

In the last five years, health insurers and their subsidiaries have invested billions purchasing physician practices. Currently, UnitedHealth Group* — and its subsidiary Optum* — is the largest employer of physicians in the United States, with more than 70,000 employed or affiliated physicians.

How physician employment is impacted, in 4 ways

According to Advisory Board's Eliza Dailey and Sarah Hostetter, the shift in physician practice ownership challenges the conventional assumptions about physician employment and has four implications for those who work with doctors and medical groups.

1. Physician turnover

While physician burnout and intent to leave have been on the rise for years, physicians today have more employment options than ever before. With more viable practice options available, physicians can finally act on their discontent and change employers. We expect this will result in higher and more sustained turnover rates. In other words, physician loyalty is no longer a given.

2. Clinical autonomy

Not only will physicians need to make tradeoffs to autonomy across employers, but value-based care and other market forces will require all practices make changes to clinical autonomy. As medical groups get bigger, scale care models, and integrate around shared goals, they will need to drive toward greater consistency. This means that all doctors, regardless of the practice they work in, will lose some degree of clinical autonomy.

3. Vertical ecosystems

Corporate buyers are focused on building vertical ecosystems — and they view physician ownership as the key to winning patient relationships and controlling utilization.

As these purchasers build and scale care delivery platforms, more and more physicians will be connected to those platforms through direct employment, contracts, or patient relationships. These vertical enterprises operate under different incentives and care models than traditional hospital-employed medical groups. This will require physicians to adapt to new practice models and other stakeholders to explore new approaches to partnership.

4. Integration

Integration is essential in today's physician landscape. As corporate employment and growth continues, it is imperative to invest time and resources prior to physician integration.

Data from both within and outside healthcare shows that integration yields financial benefits. But there is also an opportunity cost to failing to integrate.

We believe that successful integration will determine who best deploys physician assets to support strategic goals. Integration is what will differentiate holding companies from care delivery platforms with the potential to transform healthcare. (AHA infographic, 6/23)

* Advisory Board is a subsidiary of Optum, a division of UnitedHealth Group. All Advisory Board research, expert perspectives, and recommendations remain independent.  

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