The gap between what employed and independent physicians take home is narrowing in some places, inverting in others, and obscured by overhead, ancillary revenue and the compounding cost of running an independent practice.
The headline numbers favor independence. Self-employed physicians reported average annual compensation of $374,000, compared with $344,000 for employed physicians, according to Medscape’s 2023 Physician Compensation Report, a $30,000 gap. But that figure does not account for the costs of staying independent.
The overhead problem
The gross income advantage of independent practice is less meaningful at the operational level. More than half of independent practice leaders rated administrative workload as very or extremely challenging in a March 2026 survey of 360 independent practice leaders by Veradigm. Sixty-five percent of physicians report spending at least one hour per day completing documentation outside of scheduled patient visits, and 26% report spending two or more hours daily.
The opportunity cost of that administrative time spent on billing, prior authorization and compliance is time that could be spent generating revenue.
Only 24% of independent physician practices report high or complete visibility into where they’re losing revenue, according to the same Veradigm report. This blind spot likely compounds the income gap in ways that never show up in compensation surveys.
The productivity squeeze
Employed physicians face a different version of the same problem. Provider productivity — measured by work relative value units per full-time equivalent — has increased by 7% since 2023, according to Kaufman Hall. Over the same period, provider compensation rose by only 6%, while reimbursement declined 1%, as measured by net patient revenue per provider wRVU. The median investment per physician reached $315,358 in the fourth quarter of 2025, a 4% increase since 2023.
This means employed physicians are producing more and earning marginally more, but the system absorbing their labor is losing money on them at an accelerating rate. That dynamic raises long-term questions about whether current employed compensation levels are sustainable.
The ancillary revenue gap
The income comparison changes significantly when ancillary revenue is included.
“Ancillary service revenue can reflect up to 50% to 60% of a private practicing physician’s income, which, unfortunately, short of gain-sharing opportunities or partial ASC ownership, is usually unavailable in large healthcare system-employed practice situations,” Jack Bert, MD, orthopedic surgeon at Woodbury, Minn.-based Bone & Joint, told Becker’s in 2022.
ASC ownership is the clearest example. An independent orthopedic surgeon with an ownership stake in an ASC captures facility fees on every case they perform there. An employed orthopedic surgeon at a hospital system captures none of that revenue. Over a career, that difference can dwarf the base salary gap between the two employment models.
“If you’re a total joint surgeon or doing endoscopic spine — you can take your case to a surgery center you own, instead of doing it at the hospital,” Marc Greenberg, MD, an orthopedic surgeon in Baltimore, told Becker’s. “From the hospital’s perspective, that means a loss of revenue.”
The satisfaction gap compounds the financial one
Forty percent of independent physicians reported a reduction in income in 2023, according to the 2024 Survey of America’s Current and Future Physicians. Only 10% of independent physicians reported an increase in income, compared to 25% of their employed counterparts.
Those numbers reflect a moment of acute pressure on independent practice economics, as overhead skyrockets, reimbursement declines and the administrative burden that comes with running a business without health system infrastructure rises. But the satisfaction data cuts the other way, as 81% of physicians working in physician-led organizations reported satisfaction with their involvement in strategic decision-making, compared with just 50% in hospital-led practices, according to a 2024 Bain survey.
The consolidation context
Since 2024, 48,100 physicians left independent practice and 13,900 additional practices were acquired, according to a new report from the Physicians Advocacy Institute and Avalere Health tracking eight years of consolidation data. 29,600 physicians became hospital employees in 2025 alone. Hospitals and corporate entities acquired 85,000 physician practices between 2018 and 2026.
As independent practice becomes harder to sustain financially, the pool of physicians able to capture ancillary revenue, ASC ownership stakes and the full upside of self-employment shrinks.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.