The Progressive Policy Institute’s new study unpacks ongoing hospital acquisitions of independent physician practices in the U.S. This vertical integration reduces vital competition in critical health care markets. The result is reduced access to health care for Americans, through higher prices and spending, less choice in health care delivery models, and the erosion of physician decision-making autonomy in patient care.
The loss of independent physician practices (IPPs) from hospital and health system acquisitions is a major component of the broader absorption of physician practices into corporate owners such as commercial health insurers, private equity firms, and retail conglomerates such as pharmacy chains. Between 2019 and 2023, the percentage of IPPs owned by hospitals/ health systems and other corporate entities increased from 39% to 59%, while the percentage of physicians employed by these same entities increased from 62% to 78%.
American consumers are already struggling with less access to health care, including what they pay, how easily they can obtain health care services, whether they have choice in facilities and providers, and the overall stability and resiliency of the health care system. The looming disappearance of the IPP compounds this formidable problem.
A review of 70 economic studies shows that hospital acquisitions of IPPs have myriad adverse effects. This includes higher prices and health care spending and the loss of decision-making autonomy for physicians because of changed corporate financial objectives. The elimination of the IPP as a vital health care delivery model has also reduced access to health care by eliminating an important source of choice for consumers.
PPI’s study advances the state of policy analysis regarding the impact of consolidation by tracking the recent decline in IPPs in the U.S., against the backdrop of economic evidence that acquisitions by hospitals harms consumers. PPI looked at the decline in IPPs across nine major medical specialties at the national, state, regional, and rural vs. urban levels in 2017 and 2024. The results of PPI’s study highlight several major takeaways:
When considered in light of evidence from existing economic studies showing that hospital acquisitions of There is mounting economic evidence that vertical integration of hospitals and IPPs increases prices and spending, policy approaches to addressing the precipitous decline in IPPs in the U.S. takes on new urgency. For example, studies show average price increases of about 14%, with some increases as high as 33%, and higher increases in markets where a hospital has a dominant position. Evidence also shows that approximately 45% of price increases are due to exploitation of Medicare site-of-service reimbursement rules. The majority of studies also show that hospital acquisitions of IPPs result in increased spending.
PPI’s study concludes that better policies, achieved through comprehensive policy reform, are needed to address the loss of IPPs in the U.S. In framing this approach, PPI unpacks the multiple, flawed policies that bear directly on the anticompetitive effects of hospital acquisitions of physician practices. These policies have collectively failed to rein in consolidation and, in some cases, even incentivize it.
Major policy areas that bear directly on hospital acquisitions of IPPs and their outcomes include: (1) Medicare reimbursement rules that incentivize vertical integration, (2) below average merger enforcement, (3) state regulations that limit market entry, immunize hospitals from antitrust liability, and encourage gaming of the rules and exceptions to facilitate consolidation; (4) the absence of coherent policy to address a loss of physician autonomy that results from selling an IPP to a hospital; and (5) the need for a policy on health care access for rural areas.
Because of the lightning speed at which hospitals have acquired IPPs over the last two decades — and especially in the last eight years covered by PPI’s study — policymakers are now working against the clock. PPI’s “call to action” is for policy reform to protect American consumers and physicians, and improve access to the health care system. This effort should garner broad, bipartisan support from Congressional sponsors of site-neutral payment reform, state lawmakers, and federal and state antitrust enforcers. PPI recommends a five-part plan to address rampant hospital acquisitions of IPPs.
