How hospital contract tactics and private equity are squeezing independent physicians, and the bills that could stop it

Horizontal and vertical consolidation has distorted the American health care market for decades. For those of us practicing medicine on the ground, this is not an abstract economic theory. As a senior staff pathologist, I see the everyday consequences of a market out of balance. Independent physicians and other clinicians, alongside patients, feel the direct impact through skyrocketing premiums, eroded therapeutic autonomy and a steady evaporation of local care options. For too long, policy frameworks have effectively subsidized open-ended health care inflation. Recently, however, the momentum has shifted. A bipartisan consensus is finally emerging to target the specific, nonpublic legal mechanisms that allow massive corporate health systems to monopolize regional markets and destroy baseline economic competition.

The leverage of restrictive contracting

To understand how these monopolies sustain themselves, one must look at the mechanics of restrictive contracting. Dominant health systems maintain artificial leverage through anticompetitive clauses forced upon commercial insurers. When a mega-system controls a regional market, it routinely demands “all-or-nothing” provisions. These clauses require an insurer to include every facility in the corporate network. To gain access to the system’s essential, highly specialized hubs, insurers are forced to accept, and overpay for, its high-cost, underperforming outpatient branches.

This bundling of services relies heavily on anti-steering and gag clauses. Anti-steering terms legally block insurers from offering financial incentives, such as lower co-pays, to patients who choose independent, affordable care alternatives. Gag clauses, meanwhile, prevent physicians and insurers from disclosing transparent prices to patients. Together, these terms destroy normal price discovery and trap patients inside high-cost corporate ecosystems.

Emerging legislative remedies

Legislative remedies are catching up. The federal Healthy Competition for Better Care Act aims to ban all-or-nothing, anti-steering and gag clauses across commercial contracts. Major business coalitions, including The ERISA Industry Committee (ERIC), have vocally supported this change because consolidation routinely robs employers of affordable options. By legally decoupling elite specialty centers from underperforming corporate branches, this framework forces health systems to compete on actual clinical value rather than raw contract leverage.

Hospital executives vigorously defend these bundled contracts as a financial necessity. They argue that healthy profit margins from wealthy specialty centers are required to cross-subsidize negative-margin services such as rural clinics. However, health economists and regulators increasingly view cross-subsidization as an opaque, unregulated tax on employers. When financial engineering replaces transparent funding, the market breaks down. If a rural facility requires financial assistance, it should be supported through transparent global budgets, targeted tax incentives or direct federal grants. We can no longer tolerate hidden, anticompetitive commercial contracts that avoid public accountability.

The private equity threat

The rapid influx of private equity capital further complicates the corporate capture of health care. Over the past decade, private equity firms have aggressively acquired nursing homes, outpatient surgical centers and independent physician practices. This trend creates a dangerous mismatch between the stable, long-term needs of patient care and the short-term, high-yield expectations of Wall Street investors.

These investment strategies often rely on highly leveraged corporate restructuring, such as sale-leaseback deals. In these deals, a firm buys a practice, strips out the underlying real estate and forces the clinical facility to lease its own building back. This saddles essential care infrastructure with compounding rent solely to generate short-term dividends. To counter these risks, lawmakers introduced the federal Corporate Crimes Against Health Care Act, which would establish strict transparency rules and criminal penalties for executive payouts when predatory financial engineering leads to facility insolvency. In addition, the Stop Corporate Takeovers of Physicians Act seeks to curb management services organizations (MSOs) that use “friendly physician” models to strip physicians of control over scheduling and billing.

The ground game for independent medicine

Federal antitrust enforcement sets national baselines, but local execution remains the critical battleground. As the 178th president of MedChi, The Maryland State Medical Society, I have seen firsthand how vital it is for physicians to lead this charge. We have thoroughly documented how restrictive physician noncompete covenants trap clinicians inside monopolistic systems, worsen local workforce shortages and prevent the growth of independent, physician-led practices.

Fortunately, advocacy delivers results. Maryland recently passed landmark legislation that sharply restricts health care noncompetes in our state, banning them for lower- and mid-tier earners and limiting their duration and geographic reach for high earners. The alignment of federal oversight and state-level physician advocacy marks the beginning of a major structural shift. When federal legislation eliminates predatory contracting tricks and state medical societies dismantle the barriers to physician independence, health care can finally function as a transparent, patient-centered market.

Eric Wargotz, MD, FCAP, is a practicing pathologist based in Maryland, a clinical professor emeritus of pathology at the George Washington University School of Medicine and Health Sciences and the 178th president of MedChi, The Maryland State Medical Society. Views are his own.