Private Equity, Health Plans and the Fight for Physician Autonomy

Independent physicians are being squeezed from both sides. Preserving physician-led care requires an honest examination of the forces making independence harder to sustain.

Independent physicians face two powerful and connected pressures.

On one side, private equity firms offer capital, infrastructure and the promise of relief from the business burdens of medicine. On the other, stagnant reimbursement, administrative complexity and rising practice costs make it increasingly difficult to remain independent.

That is the trap.

When the economics of independent practice stop working, physicians are pushed toward employment, acquisition, concierge medicine or leaving certain health plans altogether. The decision may appear voluntary, but we should be honest about the conditions shaping it.

Share your experience in LACMA’s Independent Practice Survey

When the “business side” begins to dictate medicine

Private equity firms commonly acquire physician practices through a Management Services Organization, or MSO. The MSO handles the “business side,” while physicians theoretically retain control of the “clinical side.”

That distinction can look clear on paper. In practice, business mandates can dictate how medicine is delivered.

Physicians may face rigid scheduling templates, shorter appointments and pressure to increase daily patient volume. Compensation structures may reward productivity over time spent with patients. Cost-cutting can affect staffing levels and the availability of experienced clinical support.

Research is adding substance to these concerns. One study of private equity acquisitions in dermatology, gastroenterology and ophthalmology found a 20.2% increase in charges per claim, an 11% increase in the allowed amount per claim, a 16% increase in encounters and a 26% increase in unique patients. The findings do not prove improper billing, but they raise important questions about how ownership incentives affect prices, volume and practice patterns. Read the study in JAMA Health Forum.

A broader systematic review found that private equity ownership was most consistently associated with higher costs to patients or payers, while its effects on quality ranged from mixed to harmful. Some studies also found lower staffing levels or a shift toward less costly staffing models. The researchers cautioned that the evidence varies by healthcare setting and that some studies carry a risk of bias. That nuance matters—but so does the direction of the concern. Read the systematic review in The BMJ.

Private equity now plays such a large role in medicine that investors routinely refer to the “healthcare space,” as if physicians, hospitals and patients were simply market segments.

Medicine is not a market segment. Patient care is not a commodity. And physicians cannot be expected to retain clinical responsibility while someone else controls the conditions under which care is delivered.

What happens when physicians lose control?

The consequences are showing up in physician turnover, professional dissatisfaction and legal disputes.

A study of private equity-acquired ophthalmology practices found that the annual share of physicians leaving their practices increased by 13 percentage points—a 265% relative increase—following acquisition compared with similar practices that were not acquired. Review the study indexed by the National Library of Medicine.

Physicians working in private equity-owned practices have also reported lower professional satisfaction, less autonomy and a lower likelihood of remaining with their employer, although the number of private equity-employed physicians in that study was small. Read the findings in JAMA Internal Medicine.

California is also confronting the legal boundary between administrative support and control over medical practice.

In a Los Angeles case involving a private equity-backed MSO and a fertility practice, the Superior Court concluded that contractual provisions allowing the MSO to replace the physician-owner gave the company undue control over clinical decisions. The case is now before the California Court of Appeal. The California Attorney General has argued that MSOs may provide administrative support but cannot exert undue influence over physicians or effectively control a medical practice. Read the Attorney General’s summary of the case.

The principle is straightforward: physicians should not be forced to choose between exercising their clinical judgment and keeping their positions.

Why physicians still consider private equity

We should not pretend these offers have no appeal.

Private equity can provide capital, technology, negotiating scale, management expertise and an exit opportunity for physicians who have spent decades building a practice. For someone exhausted by staffing, compliance, contracting and revenue-cycle problems, an acquisition can feel like a solution.

The question is what comes with it.

Before moving forward, physicians should ask:

• Who will control staffing, scheduling and patient volume?

• How will productivity expectations and compensation change?

• Which clinical and operational decisions remain with physicians?

• What happens when business leadership disagrees with a physician’s judgment?

• What debt will be placed on the practice?

• What happens when the firm sells the practice again?

• How are patient records, continuity of care and physician departure handled?

• Which promises are contractually enforceable, and which are simply part of the sales presentation?

Any physician considering a transaction of this magnitude will ultimately need experienced legal and financial advisors. But these questions can help determine whether an opportunity is worth exploring in the first place.

The reimbursement tug-of-war

Private equity is only part of the story. We also need to examine why so many physicians feel they can no longer afford to remain independent.

Independent practices tell us that commercial reimbursement rates have remained stagnant—or even declined—while staffing, rent, technology, cybersecurity, insurance and compliance costs continue to rise.

A large health plan has substantial negotiating leverage. A solo physician or small group usually does not. Many physicians describe contract negotiations as “take it or leave it,” even when they can demonstrate strong quality and cost performance.

At the same time, health plans are moving toward value-based reimbursement. Measuring outcomes and rewarding quality can improve care. But small practices often lack the technology, data infrastructure and personnel required to document performance, manage financial risk and qualify for incentives.

A payment model cannot reward value if independent physicians cannot afford the machinery required to prove that value.

The burden of administrative weight

Then there is the work surrounding the work.

Prior authorization requirements consume time that physicians and staff could spend on patient care. Denials, audits and delayed claims disrupt cash flow. Appeals require documentation, persistence and personnel that small practices may not have.

Independent physicians must also invest in electronic health records, cybersecurity protections, reporting systems and compliance infrastructure to interact with increasingly complex payer platforms.

Each requirement may have a rationale when considered separately. Together, they create an administrative weight that many small practices can no longer carry.

The consequences extend beyond physician frustration. Practices may stop accepting a health plan, limit new patients, withdraw from Medi-Cal, transition to concierge medicine, sell to a larger organization or close altogether.

When that happens, communities lose access to independent, physician-led care.

Can independent physicians and health plans find common ground?

I believe the answer must be yes—but only if the conversation begins with an honest understanding of what independent physicians are experiencing.

LACMA is convening a curated group of physicians to discuss reimbursement, contracting, administrative burden and the future of independent practice. We also want to hear from the broader solo and small-practice physician community, including physicians who are not currently LACMA members.

What we learn will help shape the issues and evidence LACMA brings to its health-plan contacts.

The goal is not simply to exchange frustrations. It is to identify recurring problems, understand where change is possible and pursue practical solutions that support physicians, health plans and the patients both serve.

Independent physicians should not have to surrender their autonomy simply to remain economically viable. Health plans should not want a marketplace in which only the largest systems can afford to participate. Patients benefit when they have meaningful access to community-based physicians who know them and can make decisions based on their care—not a corporate mandate.

LACMA wants to hear from you

If you are a solo or small-practice physician in Los Angeles County, please take five to seven minutes to share your experience.

The survey examines:

• Reimbursement and contract negotiations

• Prior authorization, denials and administrative burden

• Technology, compliance and staffing costs

• Decisions to limit patients or leave health plans

• The financial sustainability of independent practice

• The issues LACMA should prioritize

• Opportunities for continued physician participation

Responses will be analyzed and reported only in aggregate. LACMA will not share names, contact information, practice identifiers or any other personally identifying information. Individual comments may be used only in de-identified form.

Please do not include exact reimbursement rates, confidential contract terms or patient-identifying information.

If you are a solo or small-practice physician, I want to hear from you. Take the Independent Practice Survey

LACMA is listening. What we learn will help define the agenda we bring into the rooms where decisions are made.