Consolidation pressure builds for physician practices even as health care bankruptcies ease

Physician practices are feeling fresh pressure to scale up, sell or seek new financing as operating costs climb and cash flow stays tight, even as overall health care bankruptcy filings fell for a second straight year.

The push and pull is showing up in two places at once: in the market, where consolidation keeps reshaping bargaining power and prices, and in practice finances, where rising expenses can make independence harder to sustain.

In a recent panel discussion published by Physicians Practice, family physician Rebekah Bernard set the tone in plain terms: “Independent physicians remain at the heart of patient-centered care in America, but many of us are feeling this squeeze.” She pointed to “flat reimbursements, escalating costs, prior authorization nightmares and the growing dominance of hospital systems” as headwinds, while arguing independence is changing rather than disappearing.

A recent issue brief from the Bipartisan Policy Center takes a broad look at the trend and the trade-offs. In its review of the evidence on health care provider consolidation, BPC notes that consolidation can sometimes support integrated care and help stabilize financially vulnerable providers, but research frequently links consolidation to higher prices and higher spending, especially when hospitals acquire physician practices.

That national-level debate is landing in local boardrooms as a much more practical question: can the practice cover payroll, invest in technology, keep up with compliance, and still have enough cushion to expand?

In a recent Physicians Practice interview, Mitsubishi HC Capital America’s John Pack described “rising operating costs and financial pressure” as a key driver of deal activity, alongside reimbursement headwinds and acquisition pressure from hospitals, insurers, private equity and continued impacts of the COVID pandemic.

“We’re six years removed from the COVID pandemic, and it accelerated consolidation by hitting independent practices the hardest,” he said. “Independent practices saw sharp drops in revenue and utilization that still spill over from that period, while operating costs increased. A lot of these groups have been sold to hospitals or private equity simply to survive.”

Independent practice is shrinking, but not evenly

On the Physicians Practice panel, Melissa Lucarelli, a rural Wisconsin family physician, cited a decline in independence among family physicians over the past couple decades.

“According to the American Board of Family Medicine, when I was first in independent practice, 60% of family physicians were independent, and now it’s somewhere around 33%,” she said.

At the same time, panelists described signs of experimentation and rebuilding through models meant to preserve autonomy while sharing infrastructure. Pediatrician Andrew Hertz, who helps run a physician-owned network, said more physicians are looking for alternatives to employed practice.

“I think after years of declining number of independent practices, I think that pendulum is finally swinging back in the other direction,” Hertz said

Evidence review links acquisitions to higher prices

In the BPC brief, consolidation is framed as a double-edged sword. BPC points to a body of analyses that associate physician-hospital consolidation with price increases and higher spending, including findings summarized from a 2025 Government Accountability Office review and other studies that tracked price changes after acquisitions. The brief also highlights how site of care billing can shift when services move into hospital-owned settings, which can affect costs for commercial payers and patients.

BPC also notes that consolidation-related price increases can ripple beyond health care, affecting employer premiums and potentially showing up in broader labor-market effects.

Bankruptcies are down, but stress is not gone

While consolidation continues, one indicator of acute distress moved in the opposite direction last year.

In a restructuring-focused tally, Gibbins Advisors reported that health care sector Chapter 11 filings fell again in 2025, marking a second consecutive annual decline after a spike earlier in the decade. Its report counts 45 filings in 2025, down from 2024, and says the decline may reflect organizations acting earlier, or choosing other paths, rather than a clean return to financial health. The firm also breaks out where filings occurred by subsector, arguing that stress remains uneven across hospitals, senior care and the broader middle market.

For physician practices the slow grind of working capital and financing constraints is the major headache rather than the threat of bankruptcy.

A financing ceiling for midsize groups

Pack told Physicians Practice that many midsize practices can hit a lending “no-man’s-land,” too large for some local bank limits but too small to attract larger lenders unless they are backed by private equity. In that environment, he said, constrained cash flow can become a recurring barrier because traditional underwriting favors predictable revenue and hard assets.

“Bank underwriting requires predictable cash flow, and health care cash flow is predictable over the long term, but banks view it as volatile because of payer-mix changes, reimbursement cuts, and delays in collections,” he said. “That’s where I’d say midsize practices hit the ceiling with traditional bank financing.”

The report argues that these constraints can push practices to consider partners with deeper balance sheets, especially when groups need capital to hire, upgrade IT, or stabilize revenue cycle operations.

What practice leaders can do now

Practice leaders cannot control market consolidation, but they can tighten the basics that make a group more resilient and more attractive to lenders, partners or buyers if a deal becomes necessary.

Here are a few practical moves drawn from Physicians Practice’s coverage and the cash flow themes in Pack’s analysis:

1. Get specific about cash flow. Track days in A/R, denial rates, patient balances and collection lag by payer and location. It is easier to fix cash flow when you can point to exactly where the friction lives. Pack’s comments about constrained cash flow and underwriting expectations underscore why clear metrics matter.
2. Reduce payer friction before it becomes a financing problem. If denials or slow-pay trends are rising, treat it like an operational emergency, not an annoyance. Standardizing front-end eligibility checks, tightening documentation workflows, and auditing payer rules can help stabilize revenue. Physicians Practice has repeatedly emphasized the impact of payer processes on practice operations, including in its broader reporting on payer relationships .
3. Pressure-test your cost structure, especially labor. Staffing is often the biggest expense line and the hardest to fix quickly. Build scenarios for what happens if wage pressure persists or reimbursement dips, and identify where cross-training, scheduling changes or automation could reduce overtime and rework.
4. Keep your options open and your books ready. Even if selling is not the plan, maintain clean monthly financial statements, updated payer contracts and clear documentation of service lines and productivity. Those basics shorten timelines if you need to refinance, pursue a strategic partner, or evaluate an acquisition offer.

As the BPC brief notes, consolidation debates often focus on price impacts and market power. For many independent practices, though, the immediate question is survival math: whether day to day operations generate enough reliable cash to keep investing and keep choices on the table.