‘Death by a thousand pinpricks’

Travis Singleton, senior vice president at physician recruiting firm Merritt Hawkins, said it is hard to finger one or two culprits for the declining number of physician practices.

“It’s death by a thousand pinpricks. It’s the movement to accountable care organizations and patient-centered medical homes. It’s the changes in the delivery of care. It’s compliance pressures. You have to hire consultants for electronic medical records (implementation). That costs money,” he said.

Singleton said the pressures and difficult economics of solo physician practices foreclose that option for medical students, most of whom face large student-loan debts when they are looking for jobs.

“It’s easy to say they (medical students) don’t want to be a solo practitioner. That’s not reality. They may like the autonomy and generational medicine. But they will never have the chance to do it. There are so many challenges facing that delivery model. And that’s a shame,” he said.


  • The percentage of U.S. physicians who practice outside a hospital, clinic or large group fell to 39 percent in 2012, down from 57 percent in 2000. Of those who abandoned their independent practice, 87 percent cited the cost of doing business, 61 percent blamed managed care and more than half mentioned electronic health records. Of those who expect to remain independent, 1 out of 3 said they plan to turn to a subscription-based care model, such as concierge and direct-pay practices. Accenture, which conducted the survey, predicted that subscription-based models would double annually for the next three years.
  • According to a poll by Sermo, a website for physicians, more than 1 out of 4 physicians admitted they had been forced to close, or were considering closing, their solo practices. They cited high overhead costs, high malpractice-insurance costs and low reimbursement rates.
  • According to QuantiaMD, another website for physicians, more than 1 out of 4 primary-care physicians reported poor financial health. Among those feeling financial pressure, 81 percent saw profits fall in 2011 and nearly half had trouble covering costs. Like Jordan, most cited falling reimbursement and the rising costs of practice.
  • One out of 3 physicians say they plan to quit their practice in the next decade, according to a survey by Atlanta-based physician recruiter Jackson Healthcare. Of those who said they plan to quit, a majority cited economic factors and health reform as major reasons.
  • More than 75 percent of newly hired physicians will be hospital employees within two years, compared with 11 percent eight years ago, according to Merritt Hawkins. Of its 2,700 searches in 2011 and early 2012, only 2 percent were to fill positions in solo practices, compared with 42 percent in 2004.
  • The share of physicians who own their firms dropped from 57 percent in 2000 to 43 percent in 2009, and was expected to fall to 33 percent by 2013, according to Accenture.

Only 1 out of 4 physicians say they plan to continue practicing as they are, while half said they plan to exit the traditional full-time independent private-practice model. One of the demographic imperatives driving this is the fact that 1 out of 4 U.S. physicians are 60 or older.

However, more than half of physicians said they changed their retirement plans since the 2007-09 recession. About 7 out of 10 of that group said they planned to work longer than they had anticipated because of decimated personal savings. Conversely, some said they were leaving full-time practice for other reasons: the uncertainty of health reform, the rising cost of doing business or that they simply no longer enjoyed their life’s work.

The percentage of physicians in independent practice has been declining by 2 percentage points annually, a reduction that was expected to accelerate to 5 percentage points annually by 2013, according to the AMA. In a 2011 survey of health-care organization executives, 2 out of 3 said they were receiving more employment requests from physicians and they planned to increase their physician hiring over the next three years.

Moreover, third-year medical residents increasingly are bypassing independent physician practices to work as salaried employees in hospitals and larger medical organizations. About half said they were ill prepared to handle the business side of medicine because they received no formal instruction in medical school on how to negotiate contracts or manage reimbursement. It is especially disheartening that 3 out of 10 third-year medical residents said they would choose another career if they had the opportunity – compared with about 1 out of 10 in 2008.

Insurance reimbursements are inadequate to cover rising practice expenses. According to the Medical Group Management Association (MGMA), practice expenses per physician have risen more than 50 percent in the past decade, compared with a 28 percent rise in the Consumer Price Index and a 3 percent increase in Medicare reimbursement.

Physicians’ search for safe harbor is not the only factor driving consolidation in health care. A weak U.S. economy, capital investment needs and the desire for more market power fueled and acquisitions (M&A).

There were more than 1,000 M&A deals in health care in 2012. That year was one of the most active in the past decade. On the other hand, the aggregate dollar value of those transactions was nearly the lowest in a decade, suggesting that smaller organizations were likelier acquisition targets.

Physician practices were among those with the largest growth in mergers from 2011 to 2012, with transactions valued at $4.4 billion in 2012.


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