From CFOs to ASCs, the pressure to meet margins as costs soar and reimbursements decline affects all of healthcare.
Independent physician practices are getting hit the hardest – only 44% of physicians owned their practice as of 2022, according to an American Medical Association report, compared with 76% in the early 1980s.
New data from consulting firm Avalere in a study sponsored by the Physicians Advocacy Institute estimated roughly 8,100 private practices were acquired by hospitals or corporations in 2022 and 2023, and 19,100 physicians became employees of hospitals or other corporate entities, up 5.1% since 2022.
Physicians aren't the only ones struggling to meet margins in healthcare. Walmart announced plans to shutter all 51 health center locations and discontinue its virtual-care services in April. According to The Wall Street Journal, the company was unable to establish a sustainable business model despite positive patient feedback.
CVS Health, who recently spent $11.5 billion acquiring Oak Street Health, is also facing headwinds. CVS was aiming to emulate the success of UnitedHealth Group, which owns Optum, the country's largest employer of physicians. But, according to the Journal, earnings have disappointed investors.
"When companies like Walmart and CVS, known for delivering products at a cost-effective price, look at healthcare, jump in and then jump out saying it's unsustainable, it raises concerns," Nari Heshmati, MD, chief physician executive of Fort Myers, Fla.-based Lee Health's Physician Group , told Becker's. "If Walmart can't do it with embedded clinics in their stores, how can the average physician practice survive?"
This will only get more difficult as the behemoths in healthcare exert greater pressure on physician pay, as evidenced by continued reimbursement reductions by CMS. On July 10, CMS proposed a 2.8% conversion factor reduction to its physician fee schedule. According to research from the American Medical Association, Medicare physician payment declined 29% from 2001 to 2024 without accounting for the most recent proposed cut.
"The proposed CMS pay cut for physicians can have significant implications across the healthcare system," Ernest Braxton, MD, spine and neurological surgery specialist at Vail-Summit Orthopaedics and Neurosurgery, told Becker's. "CMS efforts to control costs will have unintended consequences on physician workforce morale, patient care quality and healthcare access. This will be the last straw for many private practice physicians. We will see more early retirements and a large number of physicians opting out of Medicare in order to create private pay contracts with patients for non-urgent/emergency care — shifting the economic burden to healthcare consumers."
Many feel the pressure to remain financially feasible weighs on healthcare success.
"We should be talking about how to innovate healthcare, but instead, we're struggling to get enough med students into residency programs and enough physician leaders into positions," Dr. Heshmati said.