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Consolidation Impacts Physician Practice and Employment

A look at the incredibly rapid shift away from private practice to employment by corporate entities
by Kelly Kenney, JD

THE PAST two decades have witnessed a remarkable transformation in the nation’s healthcare marketplace, which has undergone a sustained period of consolidation that has reshaped virtually every sector of the industry. Health insurers, hospitals and health systems, pharmacies, nursing homes, and hospices have combined at a dizzying pace, with larger entities acquiring smaller ones and similar sized entities integrating through mergers. More recently, the market has undergone a significant wave of “vertical” integration, where entities combine with those in different, but connected, sectors (like insurers or pharmacies acquiring pharmacy benefit managers). This has further concentrated market power into larger, multi- industry corporate organizations that often exert their market dominance in anticompetitive ways.

The market for physician services has not escaped these trends. In fact, over the past decade, consolidation has profoundly altered how physicians practice medicine in the United States.

For many years, this consolidation trend was limited to physician-owned medical groups growing larger, as smaller group practices joined together and newly trained physicians accepted positions with existing practices. These larger single and multi-specialty group practices were better equipped to handle the complex administrative and technological requirements and challenges of today’s healthcare system than solo or small physician practices. Their larger size allowed these medical groups to negotiate for more favorable reimbursement with insurers and participate more effectively in emerging value-based care and payment programs.

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