AHA: Health Insurer Policies Fuel Physician Practice Acquisitions

June 08, 2023 - Health insurer policies are increasing administrative burden for independent physician practices, pushing them to seek employment in other settings and fueling physician practice acquisitions, a report from the American Hospital Association (AHA) highlighted.

The number of physician practices affiliated with hospitals and health systems has grown in recent years. Most of the discussions surrounding these acquisitions tend to focus on hospitals’ intentions and perspectives. The AHA report provides insight into physicians’ views and what may motivate them to turn to hospitals and health systems for continued employment.

A survey conducted by Morning Consult on behalf of AHA found that 94 percent of physicians feel it has become more financially and administratively difficult to operate a practice. Similarly, 90 percent of medical students said they felt unprepared to oversee the business side of their medical career.

Seeking employment in hospital settings may help relieve some of the financial and administrative burdens physicians face. In fact, final-year medical students ranked hospital employment as the practice setting they were most open to pursuing.

Health insurer policies are also driving physicians to change employment settings.

Over eight in ten (84 percent) employed physicians said the administrative burden from commercial health insurers and government insurance programs influenced their employment decision. In addition, 81 percent of physicians reported that commercial insurer policies interfered with their ability to practice medicine.

Prior authorization policies from insurers have played a significant role in increasing physician burden. Nearly 90 percent of physicians described the burden of prior authorization as high or extremely high, a survey from the American Medical Association (AMA) revealed.

A report from the Medical Group Management Association (MGMA) found that 77 percent of practices have hired additional staff or redistributed staff to work on prior authorization processes.

Regulatory requirements from public payers have also exacerbated burdens for physicians, the report noted. For example, the Medicare Promoting Interoperability Program requires eligible professionals to demonstrate meaningful use of certified EHR technology to avoid payment penalties.

The costs associated with operating a practice coupled with low reimbursement may also be prompting physician practice acquisitions.

Physician practices must manage the costs of maintaining EHRs and patient portals, billing and claims submission, staff recruitment and retention, and office rent. The AHA report referenced one study that found the costs associated with these administrative activities range from $20 for a primary care office visit to $215 for an inpatient surgical procedure.

Three in four physicians indicated that low reimbursement rates from public payers impede their ability to practice medicine, according to the Morning Consult survey. Between 2001 and 2023, physician payments fell by 26 percent and physicians expect future cuts to reduce care access and spur office closures.

Physician practice acquisitions may help provide an alternative route for practices at risk of closing or other financial hardships. Physician practice acquisitions by health insurers have also become more common.

So far, in 2023, CVS Health has acquired the value-based primary care organization Oak Street Health in a $10.6 billion deal and the home healthcare company Signify Health in an $8 billion transaction.

UnitedHealth Group and its subsidiary Optum are the largest employers of physicians in the country, with over 70,000 employed or affiliated physicians. The company recently acquired Crystal Run Healthcare, Kelsey-Seybold, and Atrius Health.

Acquisitions by commercial insurers are subject to fewer regulatory requirements than hospitals, the report noted. Physician practices acquired by insurers do not have to follow Emergency Medical Treatment and Labor Act (EMTALA) obligations. However, hospitals with an emergency department that acquire practices must comply with EMTALA and provide a medical screening exam and stabilizing treatment to all patients regardless of their ability to pay.

“Despite efforts to paint hospitals and health systems as the sole cause of physician practice pattern changes, the truth is that commercial insurer policies, such as prior authorization, are creating unworkable environments forcing physicians to prioritize administrative duties over caring for patients,” the AHA report concluded.

“The result is increased burnout among physicians with no signs of stopping anytime soon. Physicians are searching for alternative practice settings that reduce these burdens and provide adequate reimbursement, while allowing them to focus on caring for patients.”