Physicians are steadily trading independence for employment as financial, regulatory and operational pressures mount across the healthcare landscape.
From shrinking reimbursement and rising overhead costs to growing administrative complexity, physicians say the business model of private practice is becoming increasingly difficult to sustain.
Those dynamics are showing up in the data: Between 2019 and 2023, the share of physician practices owned by hospitals, health systems or corporate entities climbed from 39% to 59%, while physician employment by those entities rose from 62% to 78%, according to a December 2025 report from the Progressive Policy Institute.
“Physicians’ abandonment of independent practices will continue and probably accelerate over the next decade, despite its undesirable impact on autonomy,” Shadi Jarjous, MD, chief of the division of hospital medicine at Allentown, Pa.-based Lehigh Valley Health Network, told Becker’s. “This is mainly due to the unsustainable increased demand on physicians regarding productivity, efficiency, and fiscal responsibility with less resources, which is driven by the continuous decline in payment and the increase in cost of overhead and supply chain. This disparity has a net negative impact on the work-life balance for physicians, a group that historically has always been asked to stretch their limits, to generate an adequate margin to sustain their business.”
Here are eight drivers of consolidation, according to the Bipartisan Policy Initiative’s “Health Care Provider Consolidation” report, published Jan. 29.
1. Bargaining power
Consolidation can be attractive to physicians because health systems and hospitals have better leverage rates for payer contracts.
“Hospitals and PE backed groups offer guaranteed salaries and benefits reducing financial risks for physicians and they have greater bargaining power with insurance companies to get better reimbursement rates,” Pradnya Mitroo, MD, president of Fresno (Calif.) Digestive Health, told Becker’s. “However, both of these models decrease physician autonomy.”
2. Facilitate integrated delivery systems and value-based care
According to the Bipartisan Policy report, some consolidation is viewed as a way to make integrated models — such as centers of excellence, accountable care organizations and other value-based arrangements — more viable by enabling systemwide alignment and infrastructure that can improve quality, access and patient satisfaction.
3. Improved clinical and administrative coordination
Consolidation can help align incentives across sites, standardize clinical protocols and integrate information systems, which may reduce fragmentation, improve handoffs and strengthen care management.
“The administrative load associated with insurance billing, electronic health records management and navigating complex regulations has become overwhelming for many independent practices,” Sean Gipson, CEO and ASC division president of Fort Worth, Texas-based Remedy Surgery Centers, told Becker’s. “Larger systems often have teams and infrastructure to manage these responsibilities, allowing physicians to focus more on patient care.”
4. Economies of scale
Larger organizations can spread fixed costs (technology, administration, compliance) across more patients, lower per-unit costs, strengthen purchasing power and improve access to capital.
“Running an independent practice has become brutally difficult. Insurance billing complexity, low reimbursements, electronic records mandates, regulatory requirements, staffing challenges — all of it favors scale,” Alvaro Andrés Macias, MD, associate professor of clinical anesthesia at the University of California San Diego, told Becker’s. “Large organizations negotiate better rates with insurers and spread administrative costs across more providers. It is a continuous loop that, for now, cannot be broken.”
5. Stabilize rural and financially distressed providers
Consolidation can provide struggling rural hospitals and economically pressured physician practices with capital, shared services, and system-level operational support to keep services running and stabilize finances.
The number of independent physicians in U.S. rural areas declined 43% over five years — from 21,956 in January 2019 to 12,467 in January 2024 — according to an Avalere study sponsored by the Physicians Advocacy Institute.
6. Medicare site-of-service incentives
Because hospitals can often bill Medicare at higher rates when services are provided in hospital outpatient departments rather than physician offices, the payment differential can encourage hospitals to acquire physician practices.
According to a study published July 25 in Science Direct, the vertical integration of physician groups and health systems is resulting in a push to procedures to HOPDs over ASCs, driving up Medicare and patient out-of-pocket costs.
7. Medicaid 340B incentives
The 340B drug pricing program can create incentives for 340B-eligible hospitals to acquire physician practices to increase patient volume, including commercially insured patients.
8. Rising practice and regulatory costs
Smaller practices and facilities face growing infrastructure needs and compliance burdens, and consolidation can help share or centralize those costs.
“Independent practices often struggle with the increasing costs of running a business, such as administrative costs, insurance, technology and compliance with regulations like HIPAA,” Mr. Gipson said. “Larger healthcare systems can absorb these costs more easily and provide financial stability to physicians.”
