For nearly a decade leading up to 2013, Dr. James Min experienced firsthand the dual demands of being a physician and a business owner at Bristow Run Family Medicine in Prince William County. This private practice model, common for many doctors, required him to split his focus between patient care during the day and managing the financial intricacies of the practice by night.
“The complexities of healthcare, from billing and insurance contracting to the ever-changing regulations, added a significant layer of work for physicians,” Dr. Min recalls. “You dedicate your days to patients, and then the business management tasks consume your nights. It becomes incredibly draining over time.”
Beyond the core responsibilities of practicing medicine and staying updated with medical advancements, Dr. Min was responsible for the practice’s financial health. This included managing payroll, navigating the complexities of medical billing, keeping abreast of Medicare billing regulation changes, pursuing denied insurance claims, and evaluating employee benefits packages. His partners managed other crucial aspects, with one handling human resources and another overseeing IT infrastructure.
In 2013, seeking a more streamlined professional life, Dr. Min made a significant career shift. He joined Novant Health, a health system based in Winston-Salem, North Carolina. This transition marked the opening of Novant Health’s Bull Run Family Medicine practice in Haymarket, with Dr. Min as the initial and sole physician. This move involved Dr. Min selling his shares in Bristow Run Family Medicine to his partners.
“My decision was driven by a desire to refocus purely on patient care,” he explains. “I was ready to relinquish some autonomy in exchange for having a larger organization handle the burdens of billing, HR, and similar administrative functions.”
Interestingly, Dr. Min’s former partners at Bristow Run Family Medicine also later affiliated with Novant Health, joining as a separate family practice, highlighting a broader trend within the medical landscape.
The evolution continued as Novant Health formed a joint venture with the University of Virginia Health System in January 2016 for its Virginia operations. By July 2021, UVA Health assumed full ownership, further solidifying the integration of these practices into larger health systems. Today, Dr. Min serves as the medical group physician market executive for what is now UVA Community Health, while still practicing at Bull Run Family Medicine’s Haymarket location.
Dr. Min’s experience reflects a nationwide trend. Across Virginia and the United States, the number of physicians in independent practices is steadily declining. Doctors are increasingly choosing to sell their practices and join established health systems or retire, influenced by the growing challenges facing independent medical practice. This shift is a major factor in the ongoing consolidation within the healthcare industry.
In 2012, a majority, 60.1%, of physicians in the US were part of private practices. In contrast, 23.4% were in practices at least partially owned by a hospital or health system, as reported by the American Medical Association’s Physician Practice Benchmark Survey. However, a decade later, in 2022, the landscape had significantly shifted. Only 46.7% of physicians surveyed remained in private practices, while 31.3% were associated with practices at least partially owned by health systems. This data underscores the significant movement away from independent practice models and towards larger healthcare organizations.
The Enduring Appeal of Private Practice
Despite the growing trend towards health system affiliations, many physicians advocate for the benefits of private practice. They argue that independent practices offer a higher quality of care, rooted in greater physician autonomy in treatment decisions and a more personalized patient experience. This perceived difference in care quality is coupled with measurable differences in patient costs. A 2023 study from Harvard University researchers and the National Bureau of Economic Research, published in the Journal of the American Medical Association, analyzed 580 health systems. The study revealed that physician services within health systems cost between 12% and 26% more than those in independent practices.
Several factors contribute to this cost disparity. One significant element is the variation in site-of-service fees, particularly for procedures like colonoscopies, as explained by Dr. Paul Berggreen, board chair and president of the American Independent Medical Practice Association. Medicare and numerous commercial insurers typically offer higher facility fee reimbursements to hospitals compared to independently operated care centers.
“It’s crucial for people to recognize that independent practices deliver high-quality care and that this segment of care delivery is vital to maintain within the healthcare system,” Dr. Berggreen emphasizes. “It fosters healthy competition within the system.”
Physicians in private practice often highlight their autonomy in patient care decisions as a key advantage. This autonomy translates to more time spent with patients, a factor many private practitioners value highly.
Dr. Dan Moore, who established RevMed in Henrico County in 2021 after working in a chain-owned urgent and primary care center, experienced firsthand the pressures of production-driven healthcare. He felt compelled to see patients at an increasingly rapid pace.
In a typical urgent and primary care setting, Dr. Moore explains, “the focus shifts to generating [insurance] codes as quickly as possible. The amount of time spent with a patient becomes secondary to the compensation model. The system essentially pushes for greater and greater productivity from healthcare providers.”
Furthermore, private practitioners believe that the ability to build long-term relationships with patients enhances the quality of care.
“When my patients contact me, they are assured of speaking with me, not just whoever is on call that day,” Dr. Moore points out. “This continuity of care is a cornerstone of my practice.”
Dr. Sandy Chung, CEO of Trusted Doctors, a pediatric practice group in Fairfax, and past president of the American Academy of Pediatrics, acknowledges the trade-offs as practices grow larger. “As groups expand, some of the personal touch that is characteristic of smaller practices can be lost.” However, she also concedes that some patients might prefer the standardized experience offered by larger health systems or practices, valuing consistency across visits and services.
The Economic Realities Facing Independent Practices
The most significant challenge for small, physician-owned practices to remain independent is the pressure from low reimbursement rates from both Medicare and commercial health insurance. Medicare physician reimbursement rates have not kept pace with the rising costs of running a medical practice.
Data from the Medicare Economic Index shows that from 2001 to 2023, the cost of operating a medical practice increased by 47%. In contrast, Medicare physician pay only increased by approximately 9% during the same period. Adjusted for inflation in practice costs, Medicare physician pay effectively declined by 26% between 2001 and 2023, according to the American Medical Association.
Dr. Dan Moore established RevMed in Henrico County to gain greater control over patient interactions and treatment plans. Photo by Caroline Martin.
Medicare physician payment rates for 2024 are set to be 1.25% lower than 2023 rates. While the Centers for Medicare & Medicaid Services are introducing an add-on payment for outpatient and office visits related to primary care and longitudinal care, the overall financial pressure remains.
Dr. Berggreen highlights that reductions in Medicare payments impact independent physicians more directly than those employed by hospitals.
“For independent practices, every dollar collected is crucial. We must cover our overhead costs from that dollar, and what remains is our take-home pay,” he explains. Hospital-employed physicians, however, are largely insulated from these reimbursement fluctuations, as their salaries are not directly tied to Medicaid reimbursement rates.
In the realm of private insurance, large health systems possess greater negotiating power when it comes to reimbursement rates. Their size allows them to leverage better contracts with insurance companies. Conversely, small private practices with only a few physicians lack this leverage. They often must accept the contracts offered by insurers if they wish to continue serving patients covered by those plans.
“Trying to negotiate contracts with insurance companies as a small, three-doctor office is often futile. They simply don’t engage,” Dr. Min notes.
Faced with these challenges, some physicians, like Dr. Moore, are opting to forgo insurance acceptance altogether. “This approach provides me with independence and allows for a return to the foundational principles of practice design,” he says.
RevMed operates on a membership model, where patients pay a monthly fee covering most services, with some exceptions like house calls billed separately.
Other private practices are exploring collaborative models to enhance their negotiating power. The Shenandoah Independent Practice Association (SIPA), encompassing over 300 physicians in the Winchester area, is one such example. Members pay dues for three years, culminating in voting membership in the third year.
“Our collective size of 300 physicians gives us significant negotiating leverage,” says V. Allen Santos, SIPA Executive Director. Physician members can then choose to participate in the contracts SIPA negotiates.
Currently, SIPA’s primary focus is securing favorable insurance contracts. However, its organizational structure allows for expansion into other areas, such as group purchasing of electronic medical record systems or hazardous waste disposal services, should members request it.
The Support of Back-Office Services
Dr. Sandy Chung, CEO of Trusted Doctors, explains that value-based care insurance models demand infrastructure that can be financially challenging for smaller practices. Photo by Stephen Gosling.
Access to robust business support and the delegation of administrative responsibilities are also major factors driving physicians to join health systems.
Beyond the complexities of insurance claims and prior authorizations, practice owners must navigate a constantly evolving landscape of patient billing regulations, federal IT and cybersecurity mandates, and changes in healthcare law.
“For small practices with just one or two clinicians and a limited support staff, keeping up with legal changes, evolving regulations, and IT requirements becomes incredibly difficult,” Dr. Chung points out.
The rise of value-based care insurance programs adds another layer of complexity. These programs offer a fixed payment per patient rather than per service, often incorporating incentives for providers to meet specific quality metrics. These metrics can include hospital admission rates and cancer screening numbers, and some programs also offer profit-sharing opportunities.
“Success in value-based care requires a significant infrastructure,” Dr. Chung explains. This includes staff dedicated to monitoring patients’ management of complex conditions. “Small practices often lack the financial capacity to hire such specialized staff. Just managing the daily patient load can be overwhelming, leaving little bandwidth to effectively participate in value-based care models.”
Large health systems typically have dedicated teams to manage quality care metrics and the administrative burdens associated with these programs.
Another pathway for physicians seeking to maintain clinical independence while offloading administrative tasks is joining a management services organization (MSO). MSOs, often backed by private equity firms, essentially serve as outsourced business offices for medical practices.
“Practices turn to MSOs primarily for access to capital,” Dr. Berggreen notes. “This capital is essential for practice growth, improvements, investments in technology, personnel, and infrastructure needed to remain competitive.”
Mid-Atlantic Women’s Care, a practice with approximately 85 OB-GYNs across 37 locations, including Virginia, affiliated with Unified Women’s Healthcare, an MSO, in 2022. Dr. Hugh Dixon Wolcott, who retired from clinical practice with Mid-Atlantic Women’s Care in late 2022 and now consults with Unified Women’s Healthcare, highlights the resource advantages MSOs offer.
Health system-affiliated hospitals possess “tremendous resources,” particularly in data analytics, Dr. Wolcott notes. “To create a level playing field, independent practices need access to similar resources,” such as the ability to track quality metrics and provide advanced simulation training. MSOs bridge this gap by providing these resources.
Unified Women’s Healthcare operates on a fee-based structure, according to Dr. Wolcott. Some MSOs, however, acquire the physical assets of practices, such as offices and equipment, and then lease them back to the physicians.
MSOs also alleviate administrative burdens by managing IT, billing, human resources, and leveraging economies of scale for cost savings on medical supplies.
For Dr. Min, the decision to join a larger health system has proven beneficial. While acknowledging a reduced influence over high-level organizational decisions, he feels he has a significant voice within UVA Community Health and values the support of HR and billing departments.
“My wife tells me I’m definitely sleeping better now,” he concludes, highlighting a significant improvement in work-life balance.
