Trend Toward Practice Consolidation Continues

A recent survey by the American Medical Association showed that 49.1% of its members work in physician-owned practices. Per the AMA, this is the first time the number has dropped below 50%. Previous surveys showed the number at 60.1% in 2012 and 54% in 2018. These results are unsurprising given the steady growth of large healthcare systems through mergers and acquisitions. The entrance of non-healthcare corporate giants like Amazon and Walmart (Walmart recently purchased telehealth company MeMD) into the industry also adds to this push toward “employee” physicians.

Large medical systems can leverage massive resources compared to smaller, independent practices, seemingly giving them a competitive advantage. In many industries, this allows such companies to lower costs. However, a recent study (https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2020.01006?journalCode=hlthaff) in the journal of Health Affairs shows that physician groups that consolidate with hospital systems often end up increasing their charges. As these groups begin utilizing hospital-based testing and labs, all of which receive greater reimbursement than non-hospital-based services, their overall costs to patients and insurance companies increase. Smaller practices can use this to provide better value than their larger competitors.

Physician-owned practices also have the benefit of being able to evolve to meet industry changes far quicker than large healthcare systems. With fewer bureaucratic hurdles to pass, smaller practices can quickly implement new technology, services, and policies. Small practices can also prioritize customer service. Like most large corporations, healthcare systems often must sacrifice a certain amount of service in favor of convenience. Smaller practices can counter this by providing more direct communication options with patients, quicker response times for inquiries, prescriptions, and appointment requests, shorter wait times, and less staff and physician turnover.

Other tips to stay competitive include hiring a marketing service, asking patients to leave reviews on sites such as Google and Yelp, and prioritizing relationships with local, independent physicians to increase referral sources. Like other industries that face corporate competition, small healthcare practices will have to continually evolve to provide a level of service that meets or beats the competition.