The health care system is supposed to put the patient first. Physicians evaluate, diagnose, treat, and manage risk. Hospitals, insurers, administrators, and regulators exist to support that clinical relationship and not to displace it.
Yet the current structure of American medicine produces the opposite outcome. Patients face longer waits and higher barriers. Independent physicians confront declining real reimbursement and mounting administrative demands. Practices are acquired by health systems. Physicians spend more time on documentation and prior authorization than on patients. And the same clinical service can generate dramatically different payments depending solely on who owns the facility where it is delivered.
This is not a failure of individual doctors, hospitals, or insurers. It is a structural problem created by the interaction of payment policy, administrative requirements, and market incentives that increasingly reward institutional ownership over independent clinical care.
Payment does not treat equivalent care equally
One of the clearest distortions is the difference between payment for services in a freestanding physician office versus a hospital outpatient department. The Medicare Payment Advisory Commission (MedPAC) has repeatedly documented substantial site-of-service differentials. In 2023, an epidural injection in a freestanding office generated roughly one-third of what is being done in the hospital outpatient department. Depending on the service, total payments can differ by 80 percent or more.
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MedPAC has stated that when a service can be safely provided in different settings, a prudent purchaser should not pay more simply because it occurs in a more expensive institutional setting. KFF has noted that these payment differences create financial incentives for hospitals to acquire physician practices, because converting an independent office into a hospital outpatient department can generate higher total payments for the same clinical work. If the patient receives the same physician, the same evaluation, and the same treatment, a large payment differential based primarily on ownership functions as an ownership premium rather than payment for additional clinical value.
Independent physicians are being asked to do more with less
While institutional settings enjoy higher total payments, independent practices face a stark arithmetic problem. Adjusted for inflation in practice costs, Medicare physician payments have declined approximately 33 percent since 2001. Between 2001 and 2026, Medicare physician payment rose only about 10 percent, while the cost of running a medical practice rose approximately 63 percent, according to American Medical Association (AMA) analyses. Those costs include staff, technology, liability insurance, supplies, facilities, and regulatory compliance.
When reimbursement fails to keep pace with expenses, practices have limited options: see more patients, shorten visits, reduce staffing, cut clinical hours, stop accepting certain plans, consolidate, or close. None of these options improves patient care. They simply redistribute scarce physician time away from the exam room.
Administrative work is displacing clinical work
Prior authorization illustrates the burden with particular clarity. The AMA’s 2025 physician survey found that physicians and staff spend an average of 13 hours per week per physician on prior authorization. Practices process roughly 40 requests per physician each week. Forty percent of physicians report having staff dedicated exclusively to this task.
The clinical consequences are measurable. Ninety-five percent of physicians reported that prior authorization delays necessary care. Seventy-nine percent said patients abandon treatment because of authorization barriers. Ninety-two percent said it negatively affects clinical outcomes. In a separate AMA survey, 29 percent of physicians reported that prior authorization had led to a serious adverse event for a patient, including hospitalization, permanent harm, or death. A system designed to control costs has layered on bureaucracy that consumes hundreds of hours of clinical labor annually, time that could otherwise be spent evaluating patients or coordinating complex care.
The rock and the hard place
Physicians are trapped between two opposing forces. On one side, payers reduce real reimbursement and intensify scrutiny of coding and medical necessity. Independent practices lack the negotiating leverage and administrative infrastructure of large systems, so the pressure falls hardest on them. Survival often requires higher volume and shorter visits.
On the other side, medical boards, regulators, and retrospective reviewers treat documentation as primary evidence of whether the standard of care was met. A clinically appropriate decision that was imperfectly documented because the system demanded greater volume can become the basis for investigation or discipline. A documentation deficiency is not automatically a clinical deficiency. Treating them as identical creates an unfair accountability system that ignores the operational realities physicians face.
Consolidation becomes the rational response
When independent practices receive lower effective reimbursement while hospital-owned settings can generate higher total payments for comparable services, ownership itself becomes financially valuable. Acquisition becomes rational. Once a practice is converted, the physician’s clinical work may remain essentially the same, yet the billing pathway and total payment change. The patient still needs the same clinical judgment; the organizational structure surrounding that judgment has simply become more expensive. This produces a self-reinforcing cycle: higher institutional payments → greater financial advantage for consolidation → fewer independent practices → greater institutional market power → continued consolidation.
A simple analogy
Imagine a family-owned restaurant and a large franchise. Both employ equally skilled chefs who prepare essentially the same meal. If the franchise is reimbursed substantially more solely because of its institutional structure, the higher payment does not prove the customer received a better meal. It may simply support the layers of administration surrounding the chef. Health care now operates under a similar incentive structure.
Patients ultimately pay the price
The consequences extend far beyond physician dissatisfaction. When independent practices close or merge, patients lose choices. When physicians reduce hours or retire early, wait times lengthen. When prior authorization delays care, patients wait for medications, procedures, and specialist visits. When payment policy encourages consolidation, costs rise and independent options shrink. MedPAC has warned that financial pressures on physician practices can threaten access and that higher payments in institutional settings increase costs for beneficiaries and taxpayers. The result is a vicious cycle: lower real physician payment → financial pressure → higher volume and administrative burden → less time per patient → burnout and consolidation → fewer independent physicians → reduced access → greater institutional dependence.
What reform should prioritize
A sustainable system must restore a clear hierarchy: patient first, clinical team second, supporting organizations third. Practical steps include:
- Moving toward site-neutral payment for services that can safely be provided in lower-cost settings, as MedPAC has repeatedly recommended.
- Restoring physician payment that reflects the actual cost of running a modern practice.
- Subjecting prior authorization and documentation requirements to rigorous cost-benefit analysis. A process that consumes 13 hours per physician each week must demonstrably improve outcomes or reduce total costs.
- Ensuring independent practices are not artificially disadvantaged by ownership-based payment differentials.
- Distinguishing, in regulatory review, between clinically inappropriate care, reasonable judgment under uncertainty, and documentation or administrative shortcomings.
- Measuring success by patient access, time with clinicians, timely delivery of needed care, and whether health care dollars reach clinical care.
Conclusion
The patient is the reason the health care system exists. Physicians translate medical knowledge into individualized care. Every other component of the system should support that relationship rather than compete with it for resources.
The evidence shows a clear pattern: Physician payment has failed to keep pace with practice costs; administrative burdens consume substantial clinical time; prior authorization produces measurable delays and harm; and site-of-service payment differences create incentives for consolidation. Intentional design to eliminate independent practice is not required for these incentives to produce consolidation. A system does not need deliberate hostility to generate harmful outcomes.
If current incentives make it rational for physicians to spend less time with patients, for independent practices to sell, and for additional layers to insert themselves between doctor and patient, the system is sending the wrong signals. Reform should realign payment, regulation, and organizational incentives with the system’s stated purpose: accessible, high-quality care for patients. Anything less will continue to drive capable physicians out of independent practice, reduce patient choice, and worsen access for those the system is supposed to serve.
Kayvan Haddadan is a physiatrist and pain management physician, and president and medical director of Advanced Pain Diagnostic & Solutions, a multidisciplinary pain management practice in California that he founded in 2012. A physician and surgeon licensed by the Medical Board of California, he is double board-certified in pain medicine and physical medicine and rehabilitation. He is also certified in controlled substance registration through the DEA and serves as a qualified medical examiner through California’s Department of Industrial Relations Division of Workers’ Compensation.
Dr. Haddadan earned his Bachelor of Science degree from the College of Alborz in Tehran, Iran, and his medical degree from Shahid Beheshti University of Medical Sciences. He later received his Educational Commission for Foreign Medical Graduates certification in Philadelphia, completed an internship in medical surgery at Loyola University Medical Center’s Stritch School of Medicine in Illinois, and finished his residency in physical medicine and rehabilitation at the same institution. He completed his fellowship in pain medicine at California Pacific Medical Center’s Pacific Pain Treatment Center and also trained in medical acupuncture for physicians at the University of California, Los Angeles David Geffen School of Medicine.
Dr. Haddadan has contributed to 29 research publications across multiple specialties, including pain management, cardiology, pulmonology, endocrinology, gastroenterology, and infectious disease. His work has examined topics such as hyperlipidemia in high cardiovascular risk patients, hyperuricemia and gout management, type 2 diabetes and hypertension, chronic obstructive pulmonary disease and asthma therapies, influenza treatment, irritable bowel syndrome, and opioid related complications in chronic pain care. His research has also included clinical outcome studies in spinal cord stimulation and award-winning presentations on neuropathic pain management and neuromuscular disorders.
