Maybe you’ve heard the philosophy joke about the fish in water, but it’s a good one and relevant for today’s interview, so I’ll repeat it here:
There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says "Morning, boys. How's the water?" And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes "What the hell is water?”
Unless you’ve been unfortunate enough to experience the health care system in another country while on vacation, you might not spend much time thinking about why things are the way they are in the United States. But you probably know the statistics:
The United States ranks number one in the OECD for health spending as a percentage of GDP:
But we have fewer doctors per 1000 people, lower life expectancies, and higher infant mortality rates than a lot of our peer countries. In short, pretty poor value for money.
Another unique aspect of our health care system is the degree to which our doctors are employed by medical groups and health systems. The single largest employer of physicians in the country is OptumCare, a division of UnitedHealth Group, which employs roughly 10% of all physicians in the United States. If you have chronic kidney disease, it’s likely your dialysis provider is either Davita or Fresenius. The Physicians Advocacy Institute published its annual report showing that 77.6% of physicians are now employed by either a hospital or corporate entity:
This level of concentration is a policy choice. But because it’s the water we’re swimming in, it’s hard to conceptualize what it means for us as patients, or for the people employed by these behemoths to provide care, or for entrepreneurs trying to solve problems in innovative ways.
So today I’m speaking with Olivia Kosloff, a senior fellow at the American Economic Liberties Project and author of Acute Condition, to talk about the consequences of bigness and what a smaller, more independent-friendly health care system might mean.
Questions
Q1: We are at a low point for physician independence in the U.S., with the most recent figure from the Physicians Advocacy Institute putting it at 22.4% of physicians not employed by hospitals or corporate entities, down from 37.8% in 2019. How did we get here? Can you help give us a sense for what’s driving doctors into these employer/employee relationships? Is there any evidence that this is a nadir and the trend will reverse, or do you think it will continue to accelerate?
Q6: There’s been some discussion of a potential Stark Law waiver in Medicare Advantage given the dynamics of that market (see this testimony from Brian Miller to the Ways and Means Committee earlier this summer), and how this could potentially support more independent practices. How do you think about the pros and cons of such a change?
Interview
Q1: We are at a low point for physician independence in the U.S., with the most recent figure from the Physicians Advocacy Institute putting it at 22.4% of physicians not employed by hospitals or corporate entities, down from 37.8% in 2019. How did we get here? Can you help give us a sense for what’s driving doctors into these employer/employee relationships? Is there any evidence that this is a nadir and the trend will reverse, or do you think it will continue to accelerate?
Without going too deep into the history, there have been a few pieces of legislation that encourage physicians to consolidate over the last few decades. The Affordable Care Act did a lot to increase insurance coverage, but one of the explicit goals was also encouraging consolidation in the name of greater efficiencies. Then other pieces of legislation like the HITECH Act, which required “meaningful use” of electronic health records, added additional regulatory and administrative burden to independent practices, which contributed to the appeal of consolidation.
I would also say that very large corporations — UnitedHealth’s Optum being the canonical one — saw leverage in rolling up physician practices under the Optum umbrella. Physicians who are employed by Optum get higher reimbursements than those who are not, so there’s incentive there.
And finally I would call out the rise of private equity in healthcare. I think a lot of doctors thought of private equity as an enterprise that would invest in their practices and make it easier for them to focus on actual patient care rather than running the business side, but they quickly learned that PE is there to flip a profit as quickly as possible. My organization recently hosted the 2025 Anti-Monopoly Summit in DC and I moderated a panel on the topic of consolidation in healthcare. Our first speaker was an orthopedic surgeon who built her practice and then essentially got pushed out by private equity 20 years later (it’s worth watching — the panel starts at minute 54 at this link)
I think we’ve hit a turning point in terms of physicians not wanting to be in an employer/employee relationship, but I don’t think it’s yet affirmatively appealing to be in independent practice — all of the administrative and regulatory burden is still there, the insurers are paying their own doctors better, and it’s an impossible arms race for independent doctors. The more consolidated the industry gets, the more difficult it is for independent practices to negotiate for competitive rates, which contributes even more to consolidation.
Now we need policies that would make it more viable for independent docs to survive (or for newly minted docs to hang their own shingle!).
Q2: There’s a sort of knee-jerk response I have where I associate independent physicians better in some hard-to-describe way, and the rising rates of corporate or hospital employment of physicians as bad. But this feeling isn’t very satisfying or a coherent policy argument. From your perspective, what are the consequences of more employed physicians versus independent ones for the patients and the physicians themselves? Where do the ill effects of this consolidation show up?
For the physicians, the trade-off was that being employed would mean they got to spend more time with their patients and less time on administrative work and the day-to-day of running the small business of their practice. But many are finding that the reality is that the extra room in their schedule is dedicated to seeing ever-more patients in ever-shorter periods of time. Burnout rates and dissatisfaction is higher among employed than independent physicians. Not to mention that insurer- and PE-driven rollups of practices often result in hospital or practice closures, meaning that doctors lose their place of employment and their ability to care for the community in which they live — The Atlantic wrote about this dynamic recently, in a hospital in Wyoming.
For patients, it’s more of a depersonalized, corporate experience that is linked to poorer care, higher mortality, and less overall satisfaction. Independent physicians provide better care at lower cost. And there’s a less quantifiable but — in my opinion — real loss, which is the loss of dynamic, community-based practices. A rural doctor might want to drive around to his patients instead of having a brick-and-mortar office. A group of suburban doctors might want to start their own practice to serve a specific community need they’ve found. Doctors in Texas might want to focus on diabetes, and doctors in New York City might want to work with long Covid patients. The corporatization of doctors flattens all of that and I think we’re losing the dynamism of the profession, which is harmful to both providers, patients, and would-be medical students who can’t see themselves working for Optum.
Q3: It feels like every few weeks, I see an announcement that another physician enablement tool that’s going to help doctors stay independent gets announced. Along with this, we’re living through what seems to be a golden age of SaaS and AI tools for back-office and administrative tasks. A story you could tell is that there’s never been a better time to be an independent doctor. Is there any truth to that?
I’ve wondered this too. I think the answer is that the countervailing forces are such that back office tools aren’t enough to keep doctors independent unless they already know they want to be and stay independent. At AELP, we’ve heard from physicians who thought consolidation would solve a lot of their problems, and by the time they realized otherwise, it was too late. And as I mentioned before, small practices still struggle to negotiate fair rates from consolidated payors. So yes, tools are great — but we also need policies more aligned with independent practice!
Q4: There’s quite a bit of research about the promised synergies of hospital consolidation failing to materialize, and mostly, prices just go up. But two pieces of anecdata data: First, I was recently talking to a doctor who commented, “I've been working shifts in a community hospital where it's now much more seamless to transfer patients who need subspecialty care to an academic mothership where they can get definitively treated. I have friends that work in more ‘independent’ hospitals (mostly underresourced ones, which skews my perspective), and it's a nightmare for them to get patients transferred to the care they need.” Second, I was living in France for the past three years, and the doctors are largely independent, and the care experience is just a lot more fragmented and low-tech. This makes sense to me because if you’re making an economic profit, you invest in things like building the network and technology, whereas if you’re an independent doctor, you’re maybe mostly covering your costs. Do you think there’s any trade-off between small and independent physician-owned practices and the patient experience? Is our health care system more resilient than it would be otherwise because larger medical groups and systems are more financially resilient than a lower-margin independent practice?
I do think it’s about resourcing, and about how systems are incentivized to spend their money. A lot of the biggest healthcare systems are for-profit, publicly traded enterprises that have a fiduciary duty to their stockholders. And other ones are notoriously in competition for international medical tourists, spending millions on infrastructure and development that’s not directly related to patient care (I’m thinking in particular of the 2017 Politico article describing Cleveland Clinic’s efforts to bring in international patients — in some ways, at the exclusion of local Clevelanders).
Regarding care coordination, seamless transfers are great! But I would argue that it’s not necessarily the result of consolidation. At the risk of making UnitedHealth sole enemy number 1 here (they’re not, they’re just emblematic of larger industry trends), Optum notoriously acquires businesses without fully integrating them. Relatedly: a recent meta analysis in the Journal of the American College of Surgeons found that studies describing consolidation as improving “quality,” tend to be describing better care processes — like staffing levels — rather than patient outcomes themselves. That’s not nothing, but I don’t think the cost-benefit nets out.
To be clear, I think it’s important that hospitals and practices are well-resourced and have tech and infrastructure. But I’m not sure this is mutually exclusive. I think the ideal is both well-resourced hospitals that serve their communities and independent providers that get to practice where and how they choose — and those are mutually reinforcing.
Q5: A strange thing about this political moment is that there’s some sort of bipartisan consensus, a sort of Liz Warren-Josh Hawley-Lina Khan school of thinking that there’s value in promoting more competitive markets in all aspects of American life. Practically, if there is interest from a coalition of regulators and legislators in promoting physician independence, what levers could they pull? Are you seeing anything happening in the states that provides a good framework for what this could look like?
Oregon recently passed a corporate practice of medicine law that makes it much more difficult for corporations to own practices, instead of doctors themselves. Ironically, the bill was helped along because corporate medicine directly impacted two Oregon state legislators. The hack of UHG-owned Change Healthcare exacerbated a cash flow crisis at the clinic, which Optum then purchased cheaply. Many of the primary care and specialist doctors ended up leaving because working conditions got much worse, and an Oregon legislator lost her physician in the middle of ongoing cancer care.
A lot of the action is happening at a state level right now. Indiana has started setting price caps for hospitals, which is something other states are also considering. And Arkansas recently banned ownership of retail pharmacies by PBMs, breaking up vertically consolidated pharmacy.
Q6: There’s been some discussion of a potential Stark Law waiver in Medicare Advantage given the dynamics of that market (see this testimony from Brian Miller to the Ways and Means Committee earlier this summer), and how this could potentially support more independent practices. How do you think about the pros and cons of such a change?
This is going to be a hot take in the world of Health Tech Nerds — but I’m increasingly convinced that value-based care isn’t working. And, going a step further, it might be the wrong direction for American healthcare altogether. Not that we shouldn’t be incentivizing value, but VBC as it currently exists seems like it’s merely adding additional regulatory and administrative burden to providers, encouraging consolidation, and forcing quality metrics that may or may not map onto actual quality.
All of that to say, yes, I want to support and incentivize independent practices. But I’m not sure tweaking Medicare Advantage is the way to go. I suspect the best path forward is one with more difficult, wider-ranging policy choices (i.e., site-neutral payments, price caps, and other incentives) for providers to be able to nurture independent practices that serve their communities.