Hospitals scoop up physician practices, driving prices up

Axios

21-07-2025

Hospitals are steadily buying small physician practices and, in the process, driving up the price of care, a new National Bureau of Economic Research study shows.
Why it matters: It's the latest evidence of consolidation in health care that's left more than three-quarters of U.S. doctors employed by health systems or corporations.
The pace has quickened in recent years, driven by factors like declining reimbursements for some specialties and expenses like electronic health record systems that have left small independent practices struggling.
But that's brought a decline in competition that raises antitrust concerns.
"These are thousands and thousands of very small transactions and the question is: What do you do about them?" said Yale economist and study co-author Zack Cooper.
"[The Federal Trade Commission] clearly do not have the resources to block every acquisition of three physicians."
By the numbers: Between 2008 and 2016, the researchers found the the share of private physician practices acquired by a hospital in the U.S. rose by 71.5%.
By 2016, roughly half (47.2%) of physician practices were owned by a hospital.
Within two years of physician groups being acquired, the study found, physician prices increased an average of 15.1%.
Two years after buying an OB-GYN practice, prices for labor and delivery were up by $475, an increase of 3.3%.
Virtually all of the estimated deal valuations of physician-hospital mergers the researchers tracked fell below Hart-Scott-Rodino merger reporting thresholds.
The big picture: Health systems see opportunities to achieve more clinical integration and expand referral networks by snapping up independent physician practices.
The acquisitions aren't limited to hospitals: Private equity and insurers, and businesses like Amazon, are also scooping up medical practices from doctors fed up with declining pay and high overhead costs.
The pandemic and its financial pressures also factored in many physicians' decision to sell: By the start of 2022, 73.9% of physicians were working for someone else, including 52.1% by hospitals and health systems, an Avalere study last year found.
Cooper said his research shows prices go up as the hospital acquirers achieve more market dominance, without a corresponding increase in quality of care.
"When you buy these physicians, it starves other hospitals of physicians and their patients," Cooper said.
The other side: The American Hospital Association said the study relies on data from more than a decade ago gathered from an insurer that itself has become a major acquirer of physician practices.
"Hospital partnerships for physicians and their practices can offer stability and resources, including upfront investments, infrastructure improvements, electronic health records alignment and facility upgrades, allowing for the continuation of access to care, especially in rural communities," said Aaron Wesolowski, vice president of research strategy and policy communications at the AHA.
He said researchers should focus on corporate insurers and other entities that he said have been the main drivers of physician acquisitions.
What to watch: How regulators figure out how to address such a large number of small deals. "We need to start thinking critically about what do you do when an industry composed of three to four people but collectively is 2% to 3% of GDP is getting transformed in the ways that we see them getting transformed," Cooper said.
He suggests site-neutral payments, or paying the same rate for services regardless of setting, would stop incentivizing hospitals to gobble up so many small practices.
But he believes state policies, such as making merging parties demonstrate benefit before a deal is allowed to go through, would also help.