Physician consolidation has been on the rise and, at least for those brought under a hospital system, drives higher Medicare spending and commercial prices, according to a sweeping review released Monday by the Government Accountability Office (GAO).
The analysis was requested by lawmakers a few years back and appears to be among the most comprehensive seeking to answer the extent and effects of physician consolidation on areas like spending, pricing, care quality and access.
“While consolidation has the potential to improve efficiency, it also has the potential to impede competition and contribute to increased costs to patients, employers, health insurers, and federal health care programs, such as Medicare and Medicaid,” the GAO wrote in its report. “Further, questions have arisen about the effects of consolidation on quality and access to care.”
The government watchdog said it consulted peer-reviewed studies and other reports identified in a research database search and recommended by stakeholder groups that included data from 2014 and later. It also consulted a prior literature review from RAND Health Care with a further lookback period for informational background and reviewed a nonrandom sample of public comments submitted to a 2024 request for information on healthcare consolidation (plus the resulting report published earlier this year).
Further, the office interviewed 14 stakeholder associations and groups representing different corners of the industry, such as physicians, hospitals, health insurers, private equity firms, retail companies and employers; individuals from four groups that collect and analyze physician employment data specifically, including the American Medical Association (AMA) and IQVIA; government officials from the Department of Health and Human Services, the Federal Trade Commission and the Department of Justice; and relevant researchers and actuaries “to gather additional background information and an understanding of the published literature.”
Hospital systems lead on physician consolidation
The result of that effort was evidence that fewer physicians are working in physician-owned independent or private practices, with private equity, insurers, retailers, management service organizations and, most prominently, hospital systems claiming much of the workforce.
Though specific estimates of consolidation differed between the sources due to differing methodologies, the GAO’s report highlighted an estimate from the AMA that the share of physicians working in private practice shrunk from 60% in 2012 to 42% in 2024.
Estimates of hospital-physician consolidation included the AMA’s estimate of 47% by 2024 (up from 29% in 2012) and 55% in 2024 from the Physician’s Advocacy Institute (up from 26% in 2012), though it also noted the American Hospital Association’s (AHA’s) more conservative analysis suggesting hospital systems represented a minority of practice acquisitions occurring between 2019 and 2023.
“Variation in the magnitude of these estimates is likely due to how researchers defined and measured hospital-physician consolidation,” the GAO wrote.
Physician consolidation by insurers and other corporate entities were less uniform, “but some evidence suggests an increase in recent years,” the GAO wrote.
It noted that all 10 of the country’s largest health insurers had acquired a physician practice or management service organization in recent years, “suggesting an increase in this type of vertical consolidation.” That includes a May 2024 estimate that UnitedHealth Group’s Optum subsidiary employed or affiliated nearly 100,000 physicians, or about 10% of the national supply.
The GAO didn’t come across any estimates of physician consolidation by retailers or other large healthcare corporations such as distributors, but similarly noted high-profile deals while adding that some of these companies have since sought to divest, as was the case with Walgreens and VillageMD.
As for private equity, the GAO said the firms are “a small but growing share” of physician ownership, based on numbers from the AMA and the AHA.
At the same time, some specialties like retina specialists had outsized nationwide private equity representation, and, in certain geographic markets, a single specialty could see the investors reaching more than 30% or even 50% of the local supply.
“In addition, private equity stakeholders told us that private equity firms are increasingly collaborating with health insurance companies to invest in physician practices,” the GAO wrote.
Physician-hospital consolidation brought higher spending, prices
The GAO’s findings on the impacts of such consolidation were largely centered on hospital ownership and primarily on the issues of spending and prices.
Here, reviewed studies “generally found” increased spending for traditional Medicare due to more services in hospital-based settings with greater reimbursement rates. For commercial insurance, the GAO found two studies with conflicting takes on consolidation-fueled total per patient spending, but much more evidence of price increases.
Conversations with insurers and physician groups pointed to potential drivers such as higher on-site pay rates and expectations of integrated patient referrals, while hospital industry representatives said the increases stem from increased utilization and costs incurred stabilizing the acquired practice’s finances.
The GAO wrote that it didn’t find any studies that “sufficiently examined” spending and price increases stemming from physician consolidation with insurers or other corporate entities.
Studies involving private equity “were limited, but found some evidence of increases for commercial insurance.”
Limited evidence split on quality
Studies on physician consolidation and quality were, again, largely available for hospital system relationships rather than other types of ownership. These studies, which were limited to claims data analyses and “do not account for the full range of possible quality effects,” were split between findings of no change or a decline in quality, the GAO wrote.
Stakeholder interviews on health system consolidation with hospital stakeholders pointed to potential quality improvements due to standardized clinical operations, stronger care coordination and streamlined systemwide quality initiatives. Physician group stakeholder interviews were more conflicting, highlighting the potential for better equipment and technology investments but an expectation to see more patients at the possible risk of shorter appointments.
Though there were no sufficient studies on private equity consolidation, stakeholders from these firms as well as some independent firms they supported said the investments gave practices more resources and paved the way for technology investments.
On the other hand, a physician association said their members had “reported in an internal survey that private equity-backed physician staffing companies may staff fewer physicians and more nurse practitioners and physician assistants in emergency rooms, which they believed could create a potential for patient harm because, among other factors, those clinicians have less education and training than physicians,” the GAO wrote.
Data lacking on consolidation and care access
The office said it was unable to find any studies focused on physician consolidation’s effect on care access that met its standards, and that the prior RAND literature review it consulted had come to a similar conclusion. Interviews with stakeholders on the issue “aligned with their roles and members’ interests,” the GAO wrote.