Primary care physicians are moving to hospitals and private equity, raising healthcare costs, study finds

Almost half of all primary care physicians are affiliated with hospitals, and an increasing number of physician practices are being acquired and consolidated by private equity firms, according to a recent study by Brown researchers. Compared to independent firms, these consolidated firms may lead to increased costs and limit access to primary care providers for patients.

Between 2009 and 2022, the percentage of PCPs employed by hospitals rose from 25.2% to 47.9%, while 1.5% of PCPs “became affiliated with PE firms,” the study found.

Costs for hospital-affiliated PCPs and private-equity affiliated PCPs analyzed in the study were 10.7% and 7.8% higher, respectively, compared to independent primary care physician practices, according to Yashaswini Singh, the study’s lead author and an assistant professor of health services, policy and practice. 

“These might seem like small numbers, but when you add them up, they amount to overpayments of billions of dollars,” Singh said.

In their study, Singh and other researchers examined PCP employment trends using a commercial database to analyze the employee affiliation of a total of 198,097 PCPs. The researchers relied on a collection of hand-compiled data, including press releases and websites, to verify the private equity affiliation status of physicians. 

The presence of private equity firms in healthcare markets have risen over the last decade due to the high profitability of the market, Singh said. Firms primarily use a “platform and add-on” consolidation approach, she explained, which involves buying out a physician practice and gradually adding smaller practices on top of it — over the course of a few years, this can generate high profits. 

But such approaches often result in increased costs without improvements in quality, Singh noted.

“Private equity has a very strong incentive to exit investments in a short-term period, and so the long term trends of that particular investment strategy will be even more important to monitor,” Singh said. 

The team of researchers also analyzed over 226 million negotiated prices to determine healthcare costs associated with acquired primary care practices. In general, prices of services are set by negotiations between insurers and hospitals or physician groups, so larger insurer groups usually have more advantages to negotiate lower prices for patients, Singh said.

But Singh noted cost differences were found even in large national insurers, suggesting that they may not be using their leverage in negotiations to lower prices. 

“One reason they may not be using it is because insurers can just pass on any high prices they are paying to consumers in the form of higher premiums and copayments,” she added.

Andrew Ryan, professor of health services, policy and practice and director of the Center for Advancing Health Policy through Research, voiced his concern about cost increases due to hospital facility fees — additional charges imposed by hospitals when services are provided in hospital-owned outpatient clinics. 

“A hospital-owned practice would generate a hospital facility fee, even for something that doesn’t directly involve hospital care,” Ryan said, adding that fees can “double the price of a visit.”

Rather than improving patient care and access or increasing physician incomes, these increased costs often translate into benefiting the insurers and corporate investors, Singh added.  

Tom Bledsoe MD’88, a primary care physician at East Providence Primary Care and former president of the Rhode Island Medical Society, warned of the dangers of consolidation in a for-profit healthcare system for patients in Rhode Island. 

Bledsoe, who has worked in primary care for 34 years, explained that for some time, hospitals were “gobbling up primary care practices primarily to protect the revenue stream for their more expensive services.”

“That runs the risk of a monopoly and raising prices in other markets,” he added.

These concerns are amplified by the already low number of doctors entering primary care, Bledsoe said. He noted that even fewer doctors want to operate a private practice due to the administrative burden, driving more physicians to partner with hospitals or private equity firms. 

“Trying to be a doctor and take care of patients and run a small business — that is just not attractive to medical students and residents anymore,” Bledsoe said.