Hospitals Industrial Organization Physician Compensation Supply of Medical Services

Are hospitals gobbling up physician practices?

Conventional wisdom holds that in recent years the answer is ‘yes’, however what does the data show?  A paper by Nipay, Richards and Penso (2018) uses an SK&A survey of physician office practices between 2007 and 2017 to find the answer.  In short, conventional wisdom is largely true with the caveat that there is significant heterogeneity across physician practices.

Vertical integration with hospitals occurred widely among office-based physician practices in 2007–17, most rapidly among medical and surgical specialty practices and more slowly  among primary care practices. Yet even within the former, rates of vertical integration varied substantially. Vertical integration has occurred most rapidly in oncology and cardiology: More than half of all independent oncology practices and close to half of cardiology practices became vertically integrated with a hospital over a ten-year period.

The rise of hospital acquisition of oncology and cardiology practices is particularly rapid with 20% of practices being hospital-owned in 2007 and now more than half of oncology practices are physician owned, and the numbers being about 10% and just under 50% for cardiology practices.

Which specialties are still likely to practice independently?  Dermatology, pediatrics, and ophthalmology is the answer.  Less than 15% of practices in these areas were owned by hospitals in 2017.

Of interest, the authors note that hospital acquisition of surgical specialties is on the rise as well. Typically, surgical specialties used admitting privileges to gain access to work in the hospital setting.  However, the authors hypothesize that this change may be due to:

a preference for hospital employment among younger surgeons and the fact that reimbursements are higher for surgeries in hospital outpatient departments than for those in ambulatory surgery centers.


  •  Sayeh S. Nikpay, Michael R. Richards, and David Penso. Hospital-Physician Consolidation
    Accelerated In The Past Decade In Cardiology, Oncology. Health Affairs.

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