Corporate owners put profits ahead of patients and doctors, physician group says

© Federal Trade Commission

Corporate and consolidated ownership of health care is creating anticompetitive pricing and business practices with bad outcomes for physicians and patients across the industry, according to the Physicians Advocacy Institute (PAI).

June 5 marked the end of the extended public comment period on a request for information about consolidation in health care markets. The U.S. Departments of Justice and Health and Human Services, with the Federal Trade Commission, have stated they “believe that robust competition in health care markets promotes lower health care costs and improved working conditions, while fostering high-quality patient care and driving innovation across the health care system.”

Many physicians agree. But PAI’s 28-page letter outlines the new nature of competition in health care: Private equity firms, health systems, hospitals, private payer and health insurer-affiliated entities, and retail chains all are in a race to hire doctors and acquire practices as part of their growth strategies.

“Unlike physicians, who have a primary ethical duty to their patients, corporations have a primary fiduciary duty to maximize profits for their shareholders,” said the letter from PAI CEO Kelly C. Kenney.

The new owners control medical care for patients, but often have a fundamental conflict of interest with the patients, Kenney said.

“This ‘corporatization’ of health care runs squarely against the widely accepted goals for improving our nation’s health care system – often referred to as the ‘triple aim’ – of reducing costs, improving quality through innovation and promoting patient-centered care,” Kenney’s letter said. “Corporations are intrinsically profit-centered, not patient-centered.”

The new owners claim consolidation will improve quality while lowering costs through improved efficiencies and scale. Instead, physicians and patients face restrictions on care, rising costs, frustration and barriers to doctors leading innovative delivery initiatives, Kenney said.

By the numbers

PAI has worked with health care consulting firm Avalere and research firm NORC to study trends in consolidation. They quantified recent trends that many primary care physicians have witnessed or experienced in the last 10 to 15 years. In 2012, hospitals and health systems employed about 26% of physicians and owned 14% of physician practices. By the start of 2024, almost 80% of doctors were employed by hospitals, health systems, and the other corporate entities.

A changing dynamic

PAI noted physicians first began growing from single or small independent practices because larger medical groups could better handle the administrative and technological complexities of modern health care. It also boosted their bargaining power.

Over the last 10 years, the dynamic shifted as federal payments created incentives for hospitals to offer outpatient services. Value-based payment and accountable care added to the mix and hospitals hired more and more doctors. The other corporate entities dove in, setting up vertical acquisitions usually weren’t large enough to trigger federal or state review.

Meanwhile, physicians became more vulnerable financially due to lower reimbursement rates from private insurers and Medicare, as costs go up for workers and technology, particularly electronic medical records, Kenney said. The COVID-19 pandemic caused a loss of revenue, with one survey finding 81% of doctors reporting revenues lower than pandemic levels, with an average drop of 32%.

Federal action needed

Is there hope for a market shift? “The likelihood that the health care marketplace will course-correct to reverse consolidation in the near term is slim to none,” Kenney wrote. That means federal and state lawmakers must consider appropriate policies and take action to enforce them.

“Congress and the Administration have a responsibility to protect patients from the dangerous effects of health care consolidation,” said Kenney. “Federal intervention is vital to protect patients from health care becoming increasingly inaccessible and unaffordable.”