As costs rise and the industry increasingly consolidates, physician practices are increasingly looking to hospitals, health systems and commercial groups for financial security, according to a report published June 7 by the American Hospital Association.
Here are five major reasons physicians are looking to hospitals amid consolidation:
1. Managing a practice is increasingly difficult
Ninety-four percent of physicians said it has become more financially and administratively difficult to operate a practice, according to a recent survey conducted on behalf of the AHA. Additionally, final-year medical students said hospital employment was the practice setting they were most open to pursuing.
As the healthcare industry consolidates, accessing economies of scale for physician practices is becoming increasingly difficult.
2. The administrative burden of private-payer policies
It is difficult for small practices to manage the complexity of payer policy — 84 percent of employed physicians said administrative burdens from commercial payers and government insurance programs had an effect on their employment decision, according to the AHA survey.
In the same survey, 81 percent of physicians said payer policies interfered with practicing medicine.
Additionally, 88 percent of physicians said the burden of prior authorizations was high or extremely high, according to a March survey by the American Medical Association.
3. The burden of public-payer regulations
Policies such as the Promoting Interoperability Program, which requires eligible professionals to demonstrate meaningful use of certified EHR technology to avoid payment penalties, are also burdensome.
The program requires physicians to provide electronic access to their health information, which is difficult for many practices, particularly smaller providers, the report said.
4. Escalating costs
Managing a physician practice includes more costs in the digital age, including maintaining EHR records, patient portal and billing and claims submissions. Additionally, staffing costs and rent are increasing.
According to the AMA survey, physicians and staff report spending an average of nearly two business days per week completing prior authorizations.
Additionally, 3 out of 4 physicians said low public reimbursement rates are affecting their ability to practice medicine.
5. Changing physician practice patterns
Physician practices are also being increasingly bought up by commercial groups over hospitals. In 2023, CVS Health acquired Oak Street Health and Signify Health in deals that were valued at nearly $20 billion combined, while Optum is the largest employer of physicians with a portfolio of 70,000 workers.
Commercial groups that purchase physician practices are subject to fewer regulatory requirements, according to the report.