A number of factors have fed into the growing tide of consolidation among physicians, including sinking reimbursement rates, soaring inflation and staffing challenges. Financial unsustainability and uncertainty is the throughline between those weighing the question of independence versus employment.
“Independent practices often struggle with the increasing costs of running a business, such as administrative costs, insurance, technology and compliance with regulations like HIPAA,” Sean Gipson, CEO and ASC division president of Remedy Surgery Center in Houston. “Larger healthcare systems can absorb these costs more easily and provide financial stability to physicians.”
While the overall level of investment needed to support a physician practice was down in fourth quarter of 2024 at $290,465, 0.9% lower than the same time in 2023, per-physician expenses continued to climb according to data from Stata Decision Technologies. The median total direct expense per physician was about $1.1 million for the fourth quarter of 2024, a 1.4% increase from the third quarter 2024and a 6.8% jump from the year prior.
Additionally, the Consumer Price Index increase, also known as inflation, hit 2.9% in December 2024, the most recent available data by the Bureau of Labor Statistics. This cuts directly into pay increases for specialties that saw pay increases of 3% or less, which includes cardiology, gastroenterology and urology, among other specialties.
“We’re just having to fight more every day for the same dollar,” Andrew Lovewell, CEO of Columbia (Mo.) Orthopaedic Group. “It’s definitely not sustainable to continue to see Medicare force pay cuts on physicians.”
At the same time, some data point to early signs of interest in a transition to independent practice from employment.
Consulting firm Bain & Co. recently released its “Frontline of Health Survey” in an October blog post, which highlighted that nearly 25% of physicians in health system-led organizations are debating a change in employers, compared to 14% in physician-led practices.
The study highlighted several professional factors in hospital-led settings — including compensation, staffing levels, workload and autonomy — as having “disproportionately high potential to disappoint or delight.”
This leaves many weighing the desire for increased autonomy against the challenging reality of financing independent practice, resulting in a growing field of innovative financial strategies for physicians looking to take their practice independent.
New York City-based Sapient Health, owned by Joseph Romano and Bill Ingram, has “the expertise of a large management company while maintaining a personalized, startup-like feel,” Mr. Romano told Becker’s. The company emphasizes regional representation, particularly in New York, New Jersey and Florida. It also operates a physician-driven model in which the firm enters deals as a minority partner, ensuring that physicians retain leadership while gaining business acumen for long-term success.
Another organization, Ker Leader Medical, an ASC development company, promotes physician autonomy and practice independence by creating a network of independent ASCs as more akin to a farming co-op than a corporate, Wall Street-backed entity. This model prioritizes local physician leadership and autonomy, fostering an environment where they can thrive through creative, low-cost financing solutions.
What sets these groups and similar organizations apart from other management companies is their emphasis on partnership as opposed to traditional acquisition models. This new era of physician financing presents an opportunity for physicians to maintain their autonomy while getting the resources they need to succeed.
“Physicians immediately recognize the value because they maintain control over their practice while gaining access to unparalleled management expertise,” Shawn Bannon, CEO of Matawan, N.J.-based Redefine Management, told Becker’s. “Meanwhile, payers and medical group partners appreciate our ability to reduce the overall cost of care—creating a win-win for all stakeholders.”
