Private practice physicians are facing mounting challenges threatening financial stability and ability to provide care.
As more physicians consider leaving private practice for corporate employment, the future of independent medicine hangs in the balance.
Here are five major challenges facing private practice physicians:
Reimbursement declines
Physicians are growing increasingly frustrated with the continuing decline in pay. According to a new study from the Harvey L. Neiman Health Policy Institute, reimbursement amounts per Medicare patient decreased around 2.3% between 2005 and 2021 when accounting for inflation.
CMS have further cut overall physician pay by 1.25% for 2024. The rule updates the Medicare conversion factor to $32.74, a 3.4% decrease from 2023. Some physicians may also face additional cuts due to the cost-performance category of the merit-based incentive payment system, which could reduce Medicare payments by up to 9%.
Physician pay cuts show no signs of slowing. CMS released its annual proposed changes to the physician fee schedule for 2025 in July, which includes a proposed 2.8% conversion factor decrease from 2024. The proposed conversion factor for 2025 is $32.36, down from $33.29 in 2024.
"Continued cuts in the face of unprecedented consolidation while at the same time facing high inflation will lead to a continual collapse of private practice," Adam Bruggeman, MD, CEO and surgeon of San Antonio-based Texas Spine Care Center told Becker's. "This leads to reduced access, increased costs and lower quality. Physicians are rapidly leaving independent practice and this will only accelerate the run to the exits. Congress must stop putting the thumb on the scale of corporatized medicine."
Some specialties are hurt worse than others. Sixteen specialties saw reimbursement declines in 2024, with 13 of those seeing cuts despite higher volumes per beneficiary. These included psychiatrists, cardiologists, urologists, OB-GYN, internal medicine, internists, pulmonologists, radiologists, gastroenterologists and anesthesiologists.
Rising practice costs
The cost of practicing medicine continues to rise, driven by inflation, especially within healthcare. The Medicare Economic Index, which measures medical practice cost inflation, increased 4.6% in 2023, the highest in the last 23 years.
Additionally, medical and surgical supply costs per full-time physician increased by 82% from 2022 to 2023, according to a report released in May by the Medical Group Management Association.
"Many physicians face the challenge of effectively managing their practice’s financial aspects," David Rosenfield, MD, anesthesiologist and interventional pain specialist at Peachtree City, Ga.-based Alliance Spine & Pain, told Becker's. "This includes dealing with insurance reimbursements, understanding complex billing codes, and controlling operational costs. Every year many of us find ourselves working harder and longer hours just to maintain our incomes. The costs of practicing medicine (rent, equipment, employee costs) continue to rise, while reimbursement often declines year over year."
Loss of leverage
A report from the Physicians Advocacy Institute and Avalere Health found that as of 2023, 58.5% of practices are owned by either health systems or corporations. Corporations own slightly more practices than health systems, accounting for 30% of ownership.
Additionally, 78% of physicians are now employed by hospitals, health systems and other corporate entities as of 2023, according to the Physician Advocacy Institute report.
As healthcare continues to consolidate, it becomes increasingly difficult for physician practices to benefit from economies of scale. This, in turn, makes it more challenging to secure favorable payer contracts.
About 80% of physicians who own their practices said the ability to negotiate higher payment rates with insurance companies influenced their decision to sell their practice, according to an American Medical Association report.
Shrinking patient base
Patient bases have also consolidated as hospitals and health systems vertically integrate.
"Private practice physicians have lost their power in healthcare because their patient bases have dried up. … As the hospital systems have gobbled up the patients through their extensive network of non-physician practitioners, the few physicians who have remained in private practice have been gobbled up," Thomas Pliura, MD, a physician and attorney in Le Roy, Ill., told Becker's.
Hospital network referral systems are particularly strong in some markets, redirecting patients away from private practices and into hospital networks.
"Those who hold out find a shrinking referral base, as those formerly loyal to them are being compelled to exclusively refer within the system," Kenneth Candido, MD, CEO and president of Chicago Anesthesia Associates, told Becker's. "It is a dirty business and a dirty, underhanded game that administrators are playing to monopolize their business models."
Regulatory challenges
Regulatory obstacles, such as prior authorizations and other payer-imposed burdens, also continue to hinder physicians.
Around 88% of physicians reported that prior authorizations put a high or extremely high burden on their practice, according to a 2022 American Medical Association survey, with practices completing an average of 45 authorizations per physician each week.
"Without a doubt the most dangerous trend in spine-adjacent fields is the minefield of prior authorization (which consumes endless time and phone calls with no guarantee of payment) and the dubious medical literature the insurance companies cite to justify harming their customers," pain management speciality Eric Mehlberg, MD, told Becker's.