State efforts to tighten corporate practice of medicine rules may be unintentionally accelerating consolidation by making it harder for independent physicians to compete with hospitals, according to a new issue brief from the Pacific Research Institute.
The U.S. physician market has continued to consolidate in recent years. Between 2019 and 2023, the share of independent physician practices owned by hospitals, health systems or other corporate entities jumped from 39% to 59%. Over the same period, physician employment by these entities rose from 62% to 78%, according to a December 2025 report from the Progressive Policy Institute.
The brief also cites a 2021 study published by the journal Inquiry linking greater hospital-physician vertical integration to higher prices, including a 1% increase in primary care prices associated with a 10–percentage point rise in vertical integration, as well as increases in orthopedics and cardiology.
As consolidation pressures grow, many independent practices have partnered with management services organizations to access capital and operational support while keeping physicians in control of clinical decision-making. Under many MSO arrangements, the practice maintains physician governance while the MSO handles administrative, financial and operational functions. Becker’s has reported on at least 13 ASC development companies or physician MSOs that aim to keep physicians independent while offering scale.
However, the brief argues that states concerned about consolidation have moved to expand or more aggressively enforce CPOM bans in ways that restrict or discourage MSO-practice partnerships.
“These bans do the opposite of what they purport to do, ironically encouraging greater healthcare consolidation,” Wayne Winegarden, pHD, author of the issue brief and director of the Center for Medical Economics and Innovation at the Pacific Research Institute, said in a Feb. 11 news release. “They almost exclusively attack independent physicians and put them at a competitive disadvantage relative to hospitals. The result is less competition among providers — and higher prices for patients.”
According to the brief, 33 states limit corporate ownership of medical practices to varying degrees. But the researchers argue that these rules often target independent practices while hospitals are typically exempt, even though hospital-employed physicians may face some of the same incentive concerns CPOM laws are intended to address. For example, hospital-employed physicians may be encouraged or required to refer within a system.
The brief points to Oregon as one example. In June, the state passed a law prohibiting MSOs from owning or controlling shares in, or managing or participating in managing, contracted medical entities. Lawmakers in Washington, Vermont and North Carolina have also contemplated similar legislation.
More broadly, the brief argues that restricting MSO partnerships can make it harder for independent practices to access capital, scale services and build the infrastructure needed to remain viable. In Oregon’s case, the law also bars physicians in contracted medical entities from investing in or serving as employees, officers or directors of their affiliated MSO, according to the brief.
“Payment distortions, regulatory favoritism and uneven enforcement — not physician ownership structures — are pushing independent practices out of the market,” Dr. Winegarden said. “Efforts to restrict the corporate practice of medicine should strengthen competition — not unintentionally extinguish it.”
Researchers contrast these policies with California’s approach. In October, Gov. Gavin Newsom signed legislation that bars private equity groups from interfering with physicians’ professional judgment or exercising ultimate control over clinically related matters such as coding, medical record content and physician hiring and firing. Under the law, practices are free to remain unaffiliated or affiliated with an MSO, hospital or insurance company.
The brief also calls for federal policy changes, including reforming Medicare reimbursement. Indexing Medicare physician payment updates to inflation, it argues, is critical to preserving the viability of independent practice. It also urges tighter oversight of the 340B program, arguing that cracking down on potential abuses would enable independent physician practices to compete more effectively and generate savings elsewhere in the healthcare system.
