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The Keckley Report

The Long-Term Consequence of Physician Employment in U.S. Healthcare

By April 25, 2022March 1st, 2023No Comments

In its most recent survey for the Physicians Advocacy Institute, Avalere found:

·        Physician employment by hospitals, health systems or corporate entities increased from 62.2% in January 2019 to 73.9 % as of January 2022—a 19% increase from 2019 to 2021 representing 108,700 physicians.

·        52.1% of physicians were employed by hospitals and health systems and 21.8% of physicians were employed by other types of corporate entities.

·        The South has the highest percentage of corporate-employed physicians at more than 25% and experienced the biggest increase in corporate-employment (+53.1%) spurred by a 94% increase in the percentage of corporate-owned medical practices.

To industry watchers, these findings are no surprise. For physicians, the professional headwinds have stiffened:

·        Surveys have shown growing discontent among physicians due to burdensome administrative and regulatory red-tape and reimbursement cuts by payers.

·        The pandemic exacerbated their frustrations at a time when private equity investors flush with capital offered an alternative to hospitals and insurers offering employment.

·        Strategic investors like Optum, CVS, Walmart, Amazon and other mega-corps’ were doubling-down on their healthcare offerings including employment opportunities to physicians.

·        Alternative payment models and shared savings programs sponsored by CMS have had mixed results: few physicians have seen shared savings bonuses.

·        And growing concern about inflation and healthcare prices impacts practitioners. 19% of households have an unpaid medical bill and surveys show affordability is the public’s #1 concern about the health system.

That’s where we are. The near-term impact of the shift to physician employment is clear:

·        Information technologies and data-driven clinical and administrative decision-making are finding their way into medical practices. Employer access to capital is a strategic advantage.

·        Incentives for increased physician productivity increase: outcomes and patient experience scores are foci for bonus payments but volume remains the key to compensation for most.

·        Standardization and efficiency drive day-to-day administration in the practice.

·        Payers i.e., employers, consumers and health insurers pay more. Studies by Avalere and others have shown the physician employment is associated with higher prices and costs to payers and patients. To private investors and physicians who share in ownership, these factor heavily into their returns.

The short-term impact of physician employment is closely monitored. But the long-term consequence of employed physicians is somewhat unclear. Currently, four major players are prominent in the mix; physician employment plays a critical role in each:

·        Physician employment by hospitals facilitates a deliberate transition from a voluntary medical staff to a tightly aligned medical group that enables systemness and rationalization of inpatient services.

·        Insurer employment facilitates a closed network of providers tightly aligned with the plan’s enrollment, benefits design and use-optimization of high value facilities and services.

·        Private equity employment facilitates access to capital for revenue growth and a liquidity strategy for shareholder physicians if the venture is successful.

·        Strategic investor employment facilitates access to capital, national scale and diversification of services out of reach to most.

In a September 13, 2021 letter to CMS Administrator Chiquita Brooks LaSure, the Physician Advisory Institute argued for restricted scope of practice for nurse practitioners, continuity in the agency’s alternative payment programs and relief from planned cuts to physician income. “PAI urges the Agency to maintain the consistency of policies over time as small and independent physician practices continue to adjust to the wide-reaching and universally detrimental effects of the COVID-19 public health emergency (PHE) on medical practices…”

The reality for PAI and physicians is this: the independent practice of medicine appears an artifact of the profession’s past. What’s ahead is uncertain as the four aspirants (above) pursue their unique physician alignment strategies, regulators struggle with equity and price transparency across healthcare and the public’s use of alternative models that are accessible and affordable increases.

For the 484,000 physicians who are employed and the 1.1 million applicants hoping to land a slot in med school, the public’s trust in the profession is intact.  But for the Physician’s Advocacy Institute, the American Medical Association and others who represent the voice of physicians, it’s a mandate to re-think policies, resources and educational programs for members.


P.S. The passing last week of retired Utah Senator Orrin Hatch marks the loss of a statesman who never confused his conservative ideology with principled policymaking that crossed aisles to get things done. We have Sen. Hatch and Ted Kennedy to thank for the State Children’s Health Insurance Program (1997). I had the privilege of discussing health policies with him—always thoughtful, always inquisitive, always focused on a solution!


PAI-Avalere Report on Physician Employment Trends and Practice Acquisitions in 2019-21

Physicians Advocacy Institute

Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Physicians and Surgeons 



Pitchbook, Dealogic: 1st Quarter 2022 deal activity slowing, SPACs face challenging market conditions:  

·        Healthcare private equity deals have slowed: Value 1Q 2022: $41.5B (18.02% of total) vs $194.5B (16.89%) in 2021, $98.1B (14.36%) in 2020, and $122.1B (16.31%) in 2019.

·        deSPACs are underwater: 35.6% drop since the beginning of 2022 relative to the S&P 500’s 59.4% gain since 2018 and 10.6% decline in YTD 2022.—Lack of access to PIPE fundings a major factor.

·        VC-backed IPOs: Only 28 companies publicly listed in Q1 2022, the lowest quarterly count since Q1 2020.

·        Between Jan. 1 and April 18 of this year, 38 mergers with U.S.-listed SPACs were announced, plus three more globally, per Dealogic data.

·        609 U.S.-listed SPACs are still searching for acquisition targets as of April 22 — up from 551 at the end of 2021.

PE investors home in on value-based healthcare deals in Q1 Pitchbook April 18, 2022

Q1 2022 SPAC Update and Performance Pitchbook April 7, 2022

Dealogic January 2022


Study: Hospital cancer drug markups: This cross-sectional study examined private payer–specific prices for 25 commonly used parenteral cancer therapies at 61 National Cancer Institute–designated cancer centers. Findings:

·        Of 61 NCI-designated cancer centers, 27 (44.3%) disclosed private payer–specific prices for at least 1 top-selling cancer therapy as required by federal regulations.

·        Median drug price markups across all centers and payers ranged between 118.4% (sipuleucel-T) and 633.6% (leuprolide).

·        Across-center price ratios ranged between 2.2 (pertuzumab) and 15.8 (leuprolide).

·        Negotiated prices also varied considerably between payers at the same center; median within-center price ratios for cancer therapies ranged from 1.8 (brentuximab) to 2.5 (bevacizumab).

“The findings of this study suggest that, to reduce the financial burden of cancer treatment for patients, institution of public policies to discourage or prevent excessive hospital price markups on parenteral chemotherapeutics may be beneficial.”

Xiao et al Hospital-Administered Cancer Therapy Prices for Patients With Private Health Insurance JAMA Intern Med. April 18, 2022. doi:10.1001/jamainternmed.2022.1022


Study: Housing quality primary determinant of asthma disparities: Researchers examined how housing code enforcement systems in Boston, Massachusetts, address tenants’ reports of asthma triggers. Findings:

·        For each 10% increase in a neighborhood’s proportion of White residents, the incidence of reported asthma triggers decreases by 3.14 reports per thousand residents.

·        For each 10% increase in neighborhood median household income, the incidence of reported asthma triggers decreases by 3.02 reports per thousand residents.

Unequal Housing Conditions And Code Enforcement Contribute To Asthma Disparities In Boston, Massachusetts Health Affairs April 2022

CHF Study: Primary care investment below target in California: Investing in primary care as a preventative measure is associated with improved medical care quality, fewer hospital visits and lower spending overall, per the Cal Health Care Foundation study. Highlights

·        If all California providers spent as much on primary care as the highest investing health systems, they could avoid 25,000 acute hospital stays and 89,000 emergency department visits while saving $2.4 billion in healthcare spending a year.

·        Primary care spending as a percentage of overall health plan spending varied from 4.9% to 11.4%. That range is lower than the recommended spending levels of 9% to 12% in other states.

·        Higher primary care investment could also allow nearly 200,000 individuals on commercially insured plans in health maintenance organizations to receive recommended care, according to the study.

·        Although health systems have focused on primary care, U.S. adults remain among the least likely to have a primary care doctor compared to individuals in other developed countries.

Primary Care Matters California Health Foundation


White House Releases 2022 National Drug Control Strategy: According to the 2020 National Survey on Drug Use and Health, among the 41.1 million people who needed treatment for substance use disorders (SUD), only 2.7 million (6.5%) received treatment at a specialty treatment facility over the previous year. The Strategy focuses on two drivers of the epidemic: untreated addiction and drug trafficking and targets 7 major objectives:

·        Expand high-impact harm reduction interventions like naloxone i.e., greater access to harm reduction interventions including naloxone, drug test strips, and syringe services programs.

·        Ensure those at highest-risk of an overdose can access evidence-based treatment

·        Improve data systems and research that guide drug policy development.

·        Going After Drug Trafficking and Illicit Drug Profits.

·        Obstruct and disrupt financial activities of transnational criminal organizations (TCOs) that manufacture illicit drugs and traffic them into the United States

·        Reduce the supply of illicit drugs through domestic collaboration and international coordination.

·        Reduce the supply of illicit drugs smuggled across our borders.

The White House April 21, 2022


Open Secrets: Lobbying spending in 1st Quarter 2022 vs. 1st Quarter 2021:

·        PhRMA: $8.07 (-6%)

·        AMA $6.52 (+3%)

·        AHA $5.40 (+12%)

·        AHIP $4.68 (+20%)

Note: In 2021, of 13 industries analyzed, healthcare ranked first in overall spending at $677,125,637. In the first quarter, 2022, 75 health care companies and associations spent $500,000 or more on lobbying in Q1 — and 44 of them increased their advocacy outlays by 10% or more from the same period in 2021.

Open Secrets

Med. April 18, 2022. doi:10.1001/jamainternmed.2022.1022


Study: rural hospitals at risk: Per the analysis of 4,807 cost reports from rural and urban hospitals by the Center for Healthcare Quality and Payment Reform:

·        “The majority of small rural hospitals were losing money on patient services prior to the pandemic, so the lower margins during the initial year of the pandemic pushed them even further into the red…In contrast, even though larger rural hospitals and urban hospitals also experienced lower margins, most of them continued to generate profits on patient services overall.”

·        The study projects that 200 of 600 U.S. rural hospitals are at immediate risk of closing because they could be unable to pay for their expenses within 2-3 years.

Center for Healthcare Quality and Payment Reform (

Mental Health

Morning Consult survey: Mental health decline since pandemic: 68% of parents said their own children’s mental health is currently good, but 83% said that was the case around March 2020, before the pandemic led to major disruptions. 53% say their mental health is currently good vs.75% pre-pandemic.

Morning Consult survey April 6-10, 2022

Nursing homes

Study: nursing home employees represented by unions less impacted by covid: Researchers examined whether unions for nursing home staff were associated with lower resident COVID-19 mortality rates and worker COVID-19 infection rates compared with rates in nonunion nursing homes. Findings: unions were associated with 10.8% lower resident COVID-19 mortality rates, as well as 6.8% lower worker COVID-19 infection rates.

Resident Mortality And Worker Infection Rates From COVID-19 Lower In Union Than Nonunion US Nursing Homes, 2020–21 Health Affairs April 20, 2022

Healthcare spending

Altarum: spending up 4.9% in February: Per Altarum’s Health Sector Economic Indicators: Highlights:

·        Health spending increased 4.9% in February 2022, year over year– above CMS projections of 4.2% growth for all of 2021 and below than the 9.7% increase in 2020.

·        The overall Health Care Price Index (HCPI) increased slightly in March, rising 2.3% year over year, and increasing slightly from the 2.2% growth rate a month prior—lower than the overall CPI (+8.5%) and PPI (+11.2%).

·        Among major health care categories, physician services and nursing home prices increased the least in March (0.6% and 1.4% year over year respectively), while hospital services and prescription drug prices grew by 2.2%.

 April 2022 Health Sector Economic Indicators Briefs Altarum April 21, 2022