Hospitals and physician groups keep consolidating, squeezing independent practices

A new issue brief from the Bipartisan Policy Center says consolidation among hospitals and physician practices has become a defining force in U.S. health care; one that can help some organizations coordinate care and stay financially stable, but is also closely tied in research to higher prices and growing market power.

For practice administrators, the trend shows up in day-to-day decisions: tougher contract leverage in concentrated markets, higher overhead for staffing and technology, and more pressure to affiliate with larger systems to keep margins intact.

Hospital consolidation is now common across U.S. metro areas. The policy center points to a KFF analysis finding that one or two health systems controlled the entire market for inpatient hospital care in nearly half of metropolitan areas in 2022, and that in more than four out of five metro areas, one or two systems controlled more than 75% of the market.

Physician practices are consolidating, too; through hospital acquisition and corporate ownership models that include private equity-backed platforms. A recent GAO report found that at least 47% of physicians were employed by or affiliated with hospital systems in 2024, up from less than 30% in 2012, while noting research generally links this kind of consolidation to higher spending and prices, with mixed evidence on quality and unclear effects on access.

Meanwhile, the share of doctors in physician-owned private practice continues to fall. The American Medical Association reported that 42.2% of physicians were in private practice in 2024, down from 60.1% in 2012, a shift the AMA ties to payment pressure, rising practice costs, and administrative burdens.

The policy center brief frames the core trade-off as operational stability versus market power: consolidation can bring shared infrastructure, capital for IT upgrades, and aligned clinical protocols, but it can also reduce competition in local markets and strengthen negotiating leverage over prices.

On prices, federal agencies have argued the evidence is especially consistent. A U.S. Department of Health and Human Services report summarizing public input and research on consolidation said studies have found hospital mergers in concentrated markets can be associated with price increases, and it described evidence linking hospital acquisition of physician practices with higher prices for physician services.

The brief also points to a policy debate that practice managers feel directly: “site-neutral” payment — the effort to reduce payment differences for the same service depending on where it’s performed. In a separate Bipartisan Policy Center issue brief on site-neutrality, the group says Medicare pays, on average, two to four times more for many identical outpatient procedures when performed in a hospital outpatient department rather than a physician’s office; a differential critics say can encourage systems to buy practices and shift billing to higher-paid settings.

Regulators are also trying to modernize oversight tools that critics say have not kept pace with today’s dealmaking, including smaller “roll-up” acquisitions that may not trigger traditional reporting thresholds. The Federal Trade Commission and Justice Department’s merger review process under the Hart-Scott-Rodino Act was updated through a final rule published in the Federal Register, and the FTC has said the change is intended to collect more information up front to evaluate competitive effects in modern markets.

For practice leaders, the policy center’s bottom line is less about a single verdict on consolidation and more about the reality that its effects; on contracting, staffing, referral patterns and patient costs; are now a routine part of operating a medical practice, especially in communities where one or two systems dominate the market.