Private equity in medicine did not kill private practice

On September 16, Senators Warren, Wyden, and Merkley, with Representatives Ocasio-Cortez, Hoyle, and Subramanyam, introduced the Stop Corporate Takeovers of Physicians Act. Modeled on an Oregon law that took effect this year, it would bar private equity funds, insurers, and other for-profit corporations from owning or controlling medical practices, close the friendly-physician loophole, and limit restrictive covenants. Most physicians will like most of what is in it. I do.

But the bill treats private equity as the disease. I have watched the actual disease for thirty years, twenty of them owning a gastroenterology practice and more than ten as a hospital-employed physician. Private equity did not make independent practice impossible. It arrived afterward and bought what was left at a discount.

We do not have to guess. When the American Medical Association (AMA) asked physicians who had sold their practices why, 70.8 percent cited inadequate payment rates and 63.6 percent cited the burden of payers’ regulatory and administrative requirements. Physicians did not sell because investors showed up with checkbooks. They sold because the business had stopped working.

The revenue stopped keeping up

According to AMA analysis of federal data, the cost of running a medical practice rose 59 percent between 2001 and 2025 while Medicare physician payment stayed essentially flat. Adjusted for practice-cost inflation, that is a 33 percent decline.

Physicians are the only Medicare providers without an automatic annual inflation update. No business survives a quarter-century of revenue falling a third behind its costs by running leaner. It survives by getting bigger, or by being sold.

The government pays a premium for consolidation

Now add the most damning fact in American health policy. Medicare pays, on average, two to four times more for many identical outpatient procedures performed in a hospital outpatient department than for the same procedure performed by the same physician in an office. Same procedure. Same physician. Same patient. The only variable is who owns the room.

That is a government price list. A hospital acquiring an independent practice collects more for the same work on day one, having changed nothing clinically.

Compliance costs do not scale down

Every major regulatory program of the past two decades imposed costs that are fixed rather than proportional, and fixed costs are consolidation policy regardless of intent.

• Electronic records were mandated, then billed to the practice: Under the Health Information Technology for Economic and Clinical Health (HITECH) Act, a Health Affairs study found implementation cost an average five-physician practice about $162,000, plus $85,500 in first-year maintenance. The maximum Medicare incentive was about $44,000 per physician over five years, and practices that did not demonstrate meaningful use faced payment reductions starting in 2015. A health system absorbed that as an IT project; a small practice absorbed it as a year’s profit.
• Quality metrics followed: A 2016 Health Affairs study found practices spent 785 hours per physician per year on quality reporting, about $40,000 per physician and more than $15.4 billion nationally. Only 27 percent of physicians believed the measures reflected care quality. That study predates the Merit-based Incentive Payment System (MIPS).
• Prior authorization became a department: The AMA’s 2026 survey found physicians complete about 40 prior authorizations per week, consuming 13 hours of physician and staff time. Forty percent of practices now employ staff whose only job is prior authorization.
• Denials became a second billing cycle: One industry analysis found 21 percent of commercial inpatient claims were initially denied, while only 3 percent stayed denied after appeal. Most of that gap is money owed all along, collected twice.

Since the early 1970s, according to an analysis of Bureau of Labor Statistics data, physicians grew about 200 percent while health care managers grew about 660 percent.

The workforce squeeze finished it

Independent practice now recruits into a shortage. The Association of American Medical Colleges (AAMC) projects a shortfall of up to 86,000 physicians by 2036, and a fifth of the current clinical workforce is already 65 or older.

A practice recruiting a new partner is bidding against a hospital that collects the site-of-service premium and ancillary revenue, and can subsidize salaries from the facility side of the ledger. The hospital is simply paid more for the same work.

Then consider who is being recruited. The median indebted medical graduate of 2025 owed $215,000 at federal rates above 8 percent, with interest accruing through residency on a first-year stipend of about $68,000. Offer that physician a choice: take on more debt and business risk to own a practice in a payment system that shrinks every year, or accept a guaranteed salary with someone else absorbing the overhead.

Younger physicians show a stronger preference for employment, often citing work-life balance and financial stability. That is usually described as generational. I read it as arithmetic. We handed them the debt, the declining fee schedule, and the compliance burden, then expressed surprise that they did not want to own it.

The self-employed share of physicians fell from about 35 percent in the early 2000s to under 25 percent by the mid-2010s, and kept falling. That is not a generation rejecting independence. It is a generation declining to buy into a business designed to lose.

Private equity is the smaller buyer

Here is what the bill’s framing obscures. By the AMA’s own 2024 benchmark survey, 6.5 percent of physicians worked in private equity-owned practices. Meanwhile 34.5 percent worked in hospital-owned practices and another 12.2 percent were directly employed by hospitals. The Government Accountability Office (GAO) puts hospital-affiliated physicians at no less than 47 percent, up from under 30 percent in 2012. In my own specialty, a 2025 Health Affairs study found about 57 percent of gastroenterologists were hospital-employed in 2023, with private equity-affiliated specialists a smaller share.

Private equity is the growth story. Hospitals are the incumbent. And hospitals have been consolidating among themselves for decades. A KFF analysis found that in 2024, 97 percent of metropolitan areas had highly concentrated markets for inpatient care, and in nearly half, one or two health systems controlled the entire market. A federal review of the evidence found that hospital mergers in concentrated markets can raise prices anywhere from 6 to 65 percent.

So who buys a divested private equity practice under this bill? Almost certainly the regional health system: It has capital, it dominates the local market, it collects the payment differential, and as a nonprofit it is untouched by this legislation. We would move physicians from the smaller buyer to the larger one, in markets already short on competition, and call it restoring independent practice.

Nor can this be pinned on a single law. The Medicare Payment Advisory Commission (MedPAC) describes a thirty-year consolidation trend, and it was underway before the Affordable Care Act. HITECH, the Medicare Access and CHIP Reauthorization Act (MACRA), and the site-of-service differential each came separately. No single statute did this, so no single repeal undoes it.

A ban is not a plan

Banning a buyer does not make a practice viable. A practice that cannot survive on its own will not become independent because private equity is barred from buying it. It will sell to the hospital, or it will close. Either way, nothing the bill targets has been fixed.

What would actually change the outcome is making private practice a business worth owning again. That means:

• Pay for what the work costs: Index the physician fee schedule to the Medicare Economic Index, as every other Medicare provider already is.
• Pay the same for the same service: Full site neutrality, so no one earns a premium simply for owning the building.
• Outlaw prior authorization: Insurers argue it controls costs. Physicians report it delays care in 95 percent of their practices, and one in five inpatient claims is initially denied only for most to be paid on appeal. That is not cost control. It is administrative friction imposed on the party least able to absorb it.
• Open the networks: Narrow networks lower premiums, insurers say. They also steer volume toward system-owned physicians and wall independent practices out of their own communities. Any physician willing to accept a plan’s terms should be allowed to join it.
• Cut compliance to fit practice size: Sunset quality measures physicians do not believe measure quality, and stop imposing on four-physician practices the fixed costs designed for four-hundred-physician systems.
• End restrictive covenants: A physician who can leave has leverage. A physician bound by a two-year, 30-mile radius clause has a grievance procedure.
• Enforce antitrust law against hospital consolidation: Apply it with the energy now aimed at private equity.

Do those things and the ownership question largely answers itself. When owning a practice is feasible, rewarding, and financially better than selling it, physicians stop selling.

Only then does restricting ownership make sense, and at that point it should go further than this bill. There was a time when only a licensed physician could own a medical practice, and more than 30 states still have some version of that rule on the books, hollowed out by management company structures and by hospitals that simply bought the practices. Restore it for everyone, hospitals included. Hospital-based specialties can return to the model that worked for most of the last century and still works for many anesthesia and emergency groups: physician-owned groups contracting with hospitals. The hospital purchases a service. It does not own the doctor.

But the order matters. Restrict ownership first, and you have banned the only buyers for practices that cannot survive, in the markets that can least afford to lose them. Fix the economics first, and the restriction becomes a safeguard instead of a sentence.

Independent practice did not die because investors killed it. It died because we made it unaffordable to own, then acted surprised when physicians sold. The buyers did not create those conditions. They recognized them.

Banning them treats the symptom. Changing the conditions is the cure.

Brian Hudes is a board-certified gastroenterologist and hepatologist with more than thirty years of clinical experience and a recipient of his specialty board’s thirty-year certification award. He built and ran a private gastroenterology practice for twenty years, then spent more than a decade in hospital-based gastroenterology, most recently as chief of gastroenterology and medical director of GI and endoscopy at a 550-bed Level I trauma center in Pensacola, Florida. He is an assistant professor of medicine at Florida State University College of Medicine.

Those two halves of a career shape the way he writes about medicine and clinical technology. Outpatient practice and hospital-based care fail their clinicians differently, and many systems are designed without a meaningful understanding of both environments.

Dr. Hudes has been building clinical software alongside his medical practice for decades. In 1995, during his gastroenterology fellowship, he co-developed one of the first Windows-based endoscopy reporting systems in the United States. He is now founder and chief executive officer of AiMOS Systems Corporation, where he is developing an AI-native clinical platform for outpatient and hospital-based care. AiMOS has been accepted into NVIDIA’s Inception program.

He writes about the architecture of clinical information, administrative cost growth, physician workforce shortages, board certification policy, and the widening gap between what clinicians need and what the health care technology industry builds. He also publishes The Renaissance Physician, an independent publication examining medicine, technology, physician workforce, and the structure of modern clinical practice.