- U.S. physician practices are rapidly consolidating, with hospital employment/affiliation reaching at least 47% in 2024 as private practice shrinks.
- Private equity and corporate roll-ups are expanding in physician services, now touching about 6.5% of physicians overall and far more in some specialties and markets.
- Research links consolidation to higher Medicare and commercial spending—often via shifts to hospital outpatient settings and increased bargaining leverage—with little consistent evidence of quality or access gains.
- Federal agencies (FTC, DOJ, HHS) are escalating scrutiny through a cross-agency inquiry into health care consolidation, including deals below traditional reporting thresholds.
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The health care sector in the U.S. is experiencing significant consolidation across providers, especially physician practices, propelled by hospital systems, investor-backed corporate entities, and private equity. Data from a recent GAO report and other studies indicate that the proportion of physicians employed by or affiliated with hospitals rose dramatically to at least 47 % in 2024, while private practice participation dropped below half. Private equity now owns or invests in roughly 6.5 % of physician practices nationally, a number that varies by specialty and geography.
Evidence points to consolidation producing higher spending and prices. Hospital-physician consolidation appears to elevate Medicare spending through increased use of hospital outpatient departments (where facility fees apply), with one study showing per-beneficiary spending rising by 5 % for elective surgeries due to site-of-service shifts. Commercial insurance markets also reflect higher office visit fees (≈ 17 %), increased costs for hospital inpatient stays (3-5 %), and specialty-specific price gains (≈ 15 % in OB/GYN services).
Quality of care and access remain dubious in terms of improvement. Studies reviewed generally find no measurable enhancement in quality post-consolidation, and in some cases small declines. The effects on access are mixed and often understudied—while hospital acquisitions can help preserve struggling practices, patients may face longer waits or narrower referral networks once consolidation occurs.
Regulators are responding. The federal government has issued a tri-agency RFI (FTC, DOJ, HHS) soliciting comments on the scope and impact of consolidation, including deals not covered under traditional antitrust review thresholds. Also, advocacy groups like the Center for American Progress have submitted policy recommendations, warning that unchecked vertical integration, private equity involvement, and roll-ups threaten competition, affordability, Medicare/Medicaid budget integrity, and patient wellbeing.
Strategic implications:
- Provider systems should assess risks from regulatory pressure and potential antitrust actions—when scaling, hospitals and PE-backed firms need to anticipate scrutiny over pricing, referral patterns, and site-neutral payments.
- Payers and large employers may increasingly explore alternative models—including direct contracting or narrower networks—to fight back against rising costs linked to consolidation.
- Policy reform options, such as site-neutral payment rates, clearer disclosure of ownership, and stronger merger thresholds, are likely to gain traction.
- Investment opportunities remain in outpatient care, ambulatory surgery centers, and tech/telehealth segments that offer cost efficiencies in a highly consolidated provider landscape. But emergence depends on regulatory developments and reimbursement reforms affecting where care is delivered.
- What are the causal effects of physician consolidation involving insurers or corporate entities (beyond hospital systems) on quality and access?
- How will different payment reforms (e.g., site-neutral payments) affect the financial incentives that currently drive shifting to high-cost settings?
- To what extent will the incoming regulatory environment under Congress and federal agencies curb or enable further consolidation?
- Are there market-segment or specialty-specific thresholds or dynamics that merit differentiated policy responses?
Open questions:
Supporting Notes
- At least 47 % of U.S. physicians were employed by or affiliated with hospital systems in 2024, up from under 30 % in 2012; private practice share dropped from ~60 % to ~42 % in the same period.
- Private equity ownership/investment in physician practices rose to about 6.5 % in 2024, from about 4.5 % in 2022. High exposure in specialties: up to 30 % or more in gastroenterology, dermatology, ophthalmology in some MSAs.
- Physician consolidation with hospital systems is linked to increased Medicare spending—e.g., a study showing elective surgeries spending rose ~5 % due to site-of-service shifts; imaging and lab spending increased by tens of millions in specific studies.
- For commercial insurers, office visit prices increased roughly 17 % post consolidation; inpatient hospital stay prices 3-5 %; childbirth service costs in OB/GYN showed ~15 % increase for physician services and ~3 % for hospital services.
- Quality outcomes generally flat or declining post-consolidation; limited evidence of benefits in care quality or access; no strong evidence on insurer consolidation effects.
- FTC, DOJ, HHS launched a cross-agency public inquiry RFI to collect information on health care transactions including those not reportable under HSR thresholds, focusing on private equity roll-ups and corporate ownership.
- The Center for American Progress warned that growing consolidation, vertical integration, and private equity influence are undermining competition, raising health care prices, and threatening quality and access.