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- Big businesses such as hospital systems, insurers, and PE firms are gobbling up medical clinics.
- Some doctors and industry experts fear corporate owners could prioritize profits ahead of patients.
- The federal government is dialing up scrutiny of PE firms and other corporate owners in healthcare.
Independent doctors are almost a thing of the past.
UnitedHealth Group struck a deal in March to buy the nine-state doctor group of the struggling hospital system Steward Health Care. The same month, the powerful healthcare conglomerate, which owns the nation's largest health insurer, got the green light to take over a decades-old independent Oregon medical practice, adding another 100 healthcare providers to its roster. It picked up a 400-doctor group in New York about a year before.
These are just the purchases we know about; there could be many more. Physician practice deals often go unannounced and get little attention from regulators, but they add up. Near the end of 2023, UnitedHealth's Optum, the business unit housing its clinics and surgery centers, said it employed or was affiliated with 90,000 doctors. That's a whopping 10% of all doctors in the US.
Though it's the hungriest, UnitedHealth is just one buyer in the market for physicians. Little by little, big businesses have taken over healthcare in the US.
Hospitals have been scooping up medical practices for decades to create giant health systems. Insurance companies fought back with their own clinic purchases. Private equity firms increasingly staked claims to nursing homes and groups of specialists such as emergency physicians and dermatologists.
And in the last few years, tech companies and retailers like Amazon, CVS Health, and Walgreens added thousands of doctors to their payrolls when they bought primary-care chains.
Nearly 78% of US doctors are employed by hospitals or other corporate entities, such as insurers and PE firms, according to research from consultancy Avalere and the Physicians Advocacy Institute. For the first time, more medical practices were owned by corporate entities (30%) than hospitals (28%) as of January 2024, the research found.
There's mounting evidence that this trend toward corporatization could harm patients. Research has found that prices go up when hospitals and private-equity firms buy medical groups. Sometimes, care gets worse, but there's still much unknown about how corporate ownership affects medical care, especially when it's a giant like UnitedHealth or CVS doing the buying.
Some doctors and experts in the industry fear corporate owners could prioritize their investors and profits ahead of patients, and doctors could lose the ability to make their own decisions about what's best for a patient.
"The big guys aren't cheaper. They don't deliver better customer service, they aren't more timely, none of that. They're just able to negotiate higher prices," said Farzad Mostashari, the CEO of Aledade, a company that aims to help primary care practices stay independent.
The federal government is starting to pay attention. In March, it launched an inquiry into PE firms and other corporate owners' "increasing control over healthcare" and how this might threaten patients' access to affordable and quality care.
The feds also zeroed in on UnitedHealth, reportedly facing an antitrust investigation by the US Justice Department into how its medical group acquisitions affect consumers and competitors. News of the probe surfaced before a cyberattack on UnitedHealth's technology business, Change Healthcare, caused hospitals and clinics nationwide to forgo billions in payments — raising more questions about UnitedHealth's chokehold on the healthcare industry.
Doctors are hot commodities
It's tough to lump the many buyers of medical practices together, as they're pursuing different strategies. But, in essence, they're all hiring doctors for their relationships with patients, who bring opportunities for more profits. US healthcare spending reached $4.5 trillion in 2022, representing almost a fifth of the national GDP.
Hospitals rely on doctors — especially those who provide primary care — to refer patients for lucrative procedures or surgeries. Insurers like UnitedHealthcare and CVS' Aetna are required by federal law to spend most of the money they collect in premiums on medical care. Still, they can pocket more of those premiums by sending patients to clinics they own.
Pharmacies hope that buying medical practices will give more prescriptions to fill and get more customers to buy over-the-counter products at the front of the store.
"They all realize that patients will follow what their doctors tell them to do or where their doctors tell them to go," said Chas Roades, a longtime healthcare consultant. "So it allows them to both drive traffic to a downstream profit model that they're interested in growing, and I think it also is a way to get consumers to trust them."
Meanwhile, independent doctors have a tough time going it alone. Reimbursement is shrinking, and small practices don't have the ability to negotiate higher rates as big hospital systems do. Plus, running a modern medical practice is expensive, requiring investments in staffing, technology, and electronic health records. The pandemic made things even more challenging, spurring many doctors to sell their private practices.
The quiet takeover of physician practices
Much of the takeover of physician practices has slid under the radar. That's because acquisitions valued below $119.5 million don't have to be reported to federal regulators, and many practice purchases don't meet that threshold. Publicly traded UnitedHealth, for instance, rarely announces its purchases of medical groups and surgery centers.
"We're really flying blind here with respect to understanding how many acquisitions by which entities and what geographies and what specialties," said Yashaswini Singh, an assistant professor at Brown University who studies healthcare consolidation.
This lack of disclosure has made consolidating doctor practices difficult to study. Research into private equity's effects on healthcare is just emerging, and there's little to no academic, peer-reviewed research on how other corporate owners' acquisitions affect healthcare prices and quality, Singh said.
Studies, including Singh's research, have shown, however, that PE ownership leads to steeper prices and more utilization, meaning patients may have more frequent doctor's appointments. Together, that drives healthcare costs higher. Research also suggests that PE ownership of nursing homes and hospitals worsens the quality of care. One paper found that patients who went to nursing homes owned by private equity firms had a 10% greater chance of dying.
And yet, private equity companies are rapidly expanding their presence in healthcare. A 2023 study found that one private equity firm owned 30% of the market share for physician practices in over a quarter of metropolitan areas across the US. A single PE firm owned over half the market share in some areas.
'An unsatisfying way of practicing medicine'
Acquisitions by other corporate giants might not produce the same outcomes as PE firms, said Zirui Song, an associate professor of healthcare policy and medicine at Harvard Medical School who studies private equity in healthcare. PE firms are unique in holding on to their acquisitions for only a few years and saddling their acquired companies with debt and fees. Owners who hang on to their medical groups might be more motivated to improve services, he said.
Anecdotally, though, many doctors don't like working for corporate overlords, Roades said. Older physicians who own equity in their medical practice get a nice payday when they sell, but the younger ones left behind are closely managed and measured in terms of cost and productivity, he added.
It's "an unsatisfying way of practicing medicine. We're seeing a growing number of disgruntled early and mid-career physicians in these groups who find themselves suddenly working for large corporations, and this is not what they wanted to do with their lives," he said.
After a few years working at Optum-owned Oregon Medical Group, Dr. Nick Jones opened a direct primary care practice, a type of clinic that charges a monthly fee instead of billing insurance. He said there's a sense of powerlessness for primary-care doctors in the traditional healthcare system — whether they're employed by Optum, a large hospital system, a private-equity firm, or a nonprofit clinic.
With thousands of patients to treat, they face a mountain of administrative paperwork and have no control over their schedules. These problems stem from the fact that primary-care doctors are underpaid in the traditional "fee-for-service" healthcare system, in which doctors are paid for every visit, he said.
While he felt supported at his previous Optum-owned clinic because of his office manager, "the financial underpinnings and the economics of medicine" made it unsustainable and stressful, Jones said. "There was a three or four month wait for patients to see me. There was still too much on our plate to do, and [during the pandemic] there weren't enough medical assistants or case managers or nutritionists or other support to make 20 patients a day feel like the right thing to do."
Doctors worry corporate giants put profits over patients
The insurers and retailers say care is better and cheaper when integrated under one roof, connected to the health plan, pharmacy, or other provider organizations.
For its part, Optum says it wants to improve the health and well-being of people and lower the cost of care with integrated care teams and better technology. It says it's helping clinics transition to providing "value-based" or "accountable" care, which means that its doctors get paid fixed fees upfront that, in theory, encourages them to keep patients healthy and order fewer unnecessary tests.
Optum said in a statement it continues "to focus on supporting physicians, advance practice clinicians, and nurses in closing gaps in care and helping the health system perform better for everyone."
A spokesperson pointed to a study by Optum published in JAMA Network Open in December 2022 that found seniors in value-based care arrangements were less likely than seniors in traditional payment models to visit the emergency room, or be admitted at the hospital for COPD, asthma, stroke, or heart attack.
But there are potential dangers. Patients may end up with fewer choices as bigger companies edge out competitors.
California health system Emanate Health sued Optum in 2023 for anticompetitive behavior. It alleged that Optum canceled its contracts with Emanate hospitals and steered patients away after Emanate refused to agree to certain terms. Among the terms: Emanate primary-care doctors would serve only Optum patients, and Optum would get first dibs if Emanate decided to sell its primary-care practices.
Care might also feel less personal. Some One Medical patients complained that since the chain folded into Amazon, their appointments were shortened, and certain features for seniors, like having health coaches available during patient visits, went away, according to a report from The Washington Post.
Patients could end up spending less time with doctors and face higher costs
Dr. Mitch Li, an emergency physician who started Take Medicine Back, a group that opposes corporate owners pushing into healthcare, said patients will spend less time with their doctors and potentially face higher costs from predatory billing practices.
"The corporate practice of medicine is the reason why healthcare costs are out of control," Li said.
Above all, some doctors fear having to make decisions that benefit the owner's bottom line, even though they may not be the best option for a patient.
Dr. Michelle Cooke, a primary-care physician, previously practiced at an Atlanta clinic owned by a hospital system. Though the system was not-for-profit, it didn't operate like that, and over time, the job became unbearable, she said.
She had more than 3,000 patients assigned to her care — far more than typical — and appointments were too short, especially for the chronically ill, she said. The hospital system would prioritize lucrative physicals for Medicare patients rather than seeing patients with an urgent need.
"It really got to the point where I feel like I was working to feed the corporation," Cooke said. "It really wasn't incentivizing what the patients needed."
Cooke has since opened a direct primary care practice, where she sees just a few hundred patients and can spend more time with them. She said she's found that she prescribes less medication now because she has time to educate patients on lifestyle habits and nutrition.
The federal government and states are dialing up the scrutiny
The Federal Trade Commission, the US Department of Justice, and the Department of Health and Human Services are stepping up scrutiny of healthcare deals, particularly those backed by private-equity firms. The agencies also signaled that they want to look at smaller deals that typically wouldn't trigger an antitrust review.
Several states have also increased their oversight of local healthcare consolidation. Some state lawmakers are also trying to strengthen laws prohibiting corporations from practicing medicine. Most states have these bans on the books, but companies have found various ways around them.
It's unclear if any of these efforts will meaningfully slow the corporatization of healthcare. And, to be sure, some physician practices may not have survived without an infusion of capital from a corporate buyer.
A bill introduced by Oregon State Rep. Ben Bowman would have closed certain loopholes and put more distance between corporate entities and their medical practices. Bowman told Business Insider he wanted to prevent big businesses from eroding doctors' autonomy.
"A physician who went to medical school who took an oath — their highest ethical duty is to care for their patients. Whether it's a private equity firm or a large corporation, their highest ethical duty is to generate a return on investment for their shareholders. Those two incentives are fundamentally at odds," Bowman said.
The bill, opposed by Amazon and CVS, died in March, but Bowman said he plans to reintroduce it in 2025.
Around the same time the bill died, UnitedHealth's Optum and The Corvallis Clinic — the small Oregon medical practice that Optum struck a deal to buy — requested that their tie-up receive an emergency exemption from state review because of the Oregon clinic's deteriorating finances.
The proposed acquisition, first announced in December, had received plenty of pushback from state residents. The request also came as hospitals and clinics nationwide faced cash shortfalls because of the cyberattack on UnitedHealth's Change Healthcare.
A week later, Oregon's health authority approved the request.