LUGPA Policy Brief - Hospital Consolidation and the Decline of Independent Practice, Protecting Competition, Patient Choice, and Physician-Led Care

August 2026

At a Glance

What’s Happening

Healthcare consolidation continues to accelerate as hospitals, health systems, insurers, private equity firms, and other corporate entities acquire independent physician practices. This trend is reducing the availability of physician-led independent care and increasing the market power of large healthcare systems.

According to the latest research from the Physicians Advocacy Institute (PAI) and Avalere Health:

• 82% of physicians are employed by hospitals or corporate entities as of January 2026.
• 59.7% are employed by hospitals or health systems.
• 22.3% are employed by corporate entities.
• Since 2018:
• Approximately 152,000 fewer physicians remain independent.
• 63.9% of physician practices are now owned by hospitals or other corporate entities.
• Hospitals and corporate entities acquired approximately 85,000 physician practices.

Hospitals alone acquired approximately 32,800 physician practices since 2018, and hospital-owned practices now represent approximately 30.6% of physician practices nationwide.

Why It Matters

An Uneven Competitive Landscape

Hospitals frequently acquire physician practices and convert them into hospital outpatient departments (HOPDs), allowing health systems to receive:

• A physician professional payment; and
• A separate hospital facility fee.

This payment differential creates incentives for hospitals to acquire physician practices, even when care can be safely and effectively provided in lower-cost physician offices or ambulatory settings.

Independent practices must compete against health systems with greater financial resources, higher reimbursement opportunities, and increased negotiating leverage.

Impact on Patients and Physicians

Higher Costs and Reduced Choice

Healthcare consolidation can increase prices and spending without guaranteeing improved quality.

When physician practices become hospital-owned facilities, patients may face:

• Higher out-of-pocket costs;
• Additional facility fees;
• Increased insurance premiums;
• Fewer affordable care options.

As consolidation continues, patients may have fewer choices regarding where they receive care and which providers they can access.

Independent practices also face growing pressures, including:

• Declining Medicare reimbursement;
• Rising labor and operational costs;
• Administrative burdens;
• Prior authorization requirements;
• Increasing regulatory complexity.

Policy Considerations and Legislative Activity

1. Site-Neutral Payment Reform

Aligning Medicare payments for similar services across physician offices, ambulatory surgery centers, and hospital outpatient departments would reduce incentives for hospital acquisition of physician practices.

Supporters argue site-neutral policies would:

• Lower costs for Medicare and patients;
• Encourage competition;
• Create a more level playing field.

2. Supporting Physician-Led Competition

Congress has considered legislation to expand physician-led alternatives to large health systems, including:

• Restoring Rights of Physicians to Own Hospitals Act (H.R. 3022) — would repeal certain restrictions on physician-owned hospitals.
• Physician Led and Rural Access to Quality Care Act (S. 1390/H.R. 2191) — would modify restrictions affecting physician-owned hospitals, particularly in rural communities.

Supporters argue physician-led facilities strengthen competition, improve access, and promote innovation.

3. Greater Oversight of Healthcare Consolidation

Federal and state policymakers are examining whether consolidation is reducing competition and increasing costs.

Recent proposals include:

• Take Back Our Hospitals Act of 2026 (S. 4085 / H.R. 7920) — would restrict Medicare payments to certain hospitals and skilled nursing facilities owned or controlled by private equity firms, corporations, or REITs, addressing concerns about cost-cutting, service reductions, and financial instability.
• Corporate Crimes / Stop Corporate Crimes Against Health Care Act of 2026 — would increase accountability for certain corporate healthcare practices through enhanced penalties, compensation clawbacks, and restrictions on certain financial arrangements.

States are also pursuing:

• Healthcare transaction review requirements;
• Ownership transparency laws;
• Corporate practice of medicine enforcement;
• Private equity reporting requirements.

LUGPA Position

LUGPA supports policies that preserve physician-led independent practice, strengthen competition, and protect patient access to high-quality, affordable care.

LUGPA supports:

• Site-neutral payment reform to eliminate unnecessary incentives for hospital acquisition of physician practices.
• Fair reimbursement policies that allow independent practices to compete based on quality, value, and innovation.
• Greater transparency and oversight of healthcare consolidation to protect competition and patient choice.
• Policies that support physician-led care models and preserve independent practice.

Conclusion

Hospital consolidation is reshaping American healthcare. While hospitals provide essential services, unchecked consolidation risks increasing costs, reducing competition, limiting patient choice, and weakening physician independence.

A competitive healthcare system requires a level playing field where physician-led practices can compete based on quality, efficiency, and patient outcomes—not ownership status or access to hospital-based payment advantages.

Policies that promote competition, payment fairness, and transparency are essential to preserving patient choice and a sustainable healthcare system.