Private practice is dying. Here's how to save it.

Private physician practices are disappearing. In their place, hospitals and insurers are employing physicians across most markets, threatening the traditional independent private practice model so many physicians and patients prefer.

This shift isn't happening by accident. Running a private practice today means navigating a maze of regulatory requirements, battling shrinking reimbursement and rising operational costs, and absorbing administrative burdens that few physicians can manage on their own. Medicare physician pay has declined33% since 2001, after adjusting for inflation.

Given those headwinds, it's no wonder physicians are leaving private practice. Between 2012 and 2024, the share of physicians in private practice dropped from 60.1% to just 42.2%.

Hospitals acquired 7,600 physician practices between 2019 and 2024 alone. Roughly 74,500 additional physicians became hospital employees over that same period. Hospitals now employ over half of U.S. physicians and own nearly 30% of all practices.

The effects of this consolidation are especially acute in rural America, where one in five Americans lives and access to care is already a problem. Rural patients travel an average of 35.6 miles round-trip for medical or dental services — more than double the distance urban patients travel. Losing even one local physician can have ripple effects across an entire region.

Large health systems are important parts of our health care system. But when they become the only place where patients can seek care, costs go up.

Some practices have been able to retain their independence by partnering with management services organizations, or MSOs. These entities provide administrative and operational support so that physicians can focus on practicing medicine.

That support is essential. Physicians don't go to medical school to practice human resources or corporate finance. Yet today, running an independent practice often means juggling payroll, employee recruiting and retention, regulatory compliance, and technology infrastructure.

Teaming up with an MSO can allow physicians to offload the non-clinical chores of health care while maintaining control over their core role — delivering outstanding care to patients.

We have both seen firsthand how this model can free physicians to provide better care. For example, Platinum Dermatology Partners turned to IKS Health for help streamlining front- and back-office processes and optimizing revenue-cycle management procedures in order to stay financially sound. That partnership also enabled the practice to launch a Virtual Care Assistant that handles prescription renewals and triages messages from patients.

As a result, the practice has been able to grow — and provide top-flight dermatologic care to many more people.

Research shows that this kind of division of labor can yield better-quality care at lower cost to the healthcare system. A 2024 analysis found that Medicare expenditures for beneficiaries under the care of physicians who adopted the MSO model dropped by nearly $1,000 per beneficiary in the 12 months following the transition from being an unaffiliated private practice.

By contrast, Medicare expenditures for beneficiaries whose physicians affiliated with hospitals jumped more than $1,300 in the 12 months following that transition.

Medicare beneficiaries whose physicians partnered with MSOs also spent fewer inpatient days in the hospital and had fewer visits to the emergency room the year after their doctor made the move.

That's the MSO model in action: doctors lead, operations run better, and patients receive cost-effective, quality care.

Clinical authority must always remain with physicians. But the administrative burdens of running a practice, from HR to billing to compliance, aren't part of delivering care. Like any business, physician practices should have the flexibility to bring on experts to manage them.

MSOs are among the most effective ways to keep community-based physician practices independent. They are the prescription for preserving private practice as an option for patients.

Anthony Petelin, MD, is a dermatologist, practicing Mohs surgeon, and physician executive currently serving as president of Platinum Dermatology Partners. Grace Terrell, MD, MMM is Chief Medical Officer at IKS Health, a practicing internist in North Carolina, and the author of multiple books, including the forthcoming "Core Versus Chore: Using Human-centered Design to Solve Burnout and Inefficiency."