The corporate medicine crackdown is hitting the wrong target, says economist Wayne Winegarden, Ph.D.

The Centers for Medicare & Medicaid Services (CMS) proposed another physician pay cut for 2027 on July 14, trimming the conversion factor 1.19% for qualifying alternative payment model participants and 1.68% for everyone else as a temporary 2.5% increase expires at the end of this year. In a separate rule released July 2, the agency proposed raising hospital outpatient rates 2.4%.

Wayne Winegarden, Ph.D., has spent years arguing that the gap between those two numbers, and not corporate ownership, is what is emptying out independent practice.

A senior fellow in business and economics at the Pacific Research Institute (PRI) and director of the free market think tank's Center for Medical Economics and Innovation, Winegarden made that case in a February issue brief, "How Government Policy Is Consolidating the Practice of Medicine." Medicare physician payments rose 12% in nominal terms between 2000 and 2022 while the cost of running a practice climbed nearly 48%, according to Medicare Payment Advisory Commission (MedPAC) data cited in the brief.

The American Medical Association estimates that inflation-adjusted Medicare physician reimbursement fell 33% between 2001 and 2025, and the Physicians Advocacy Institute counts 7,600 practices and 74,500 physicians acquired by hospitals between 2019 and 2024. Thirty-three states restrict the corporate practice of medicine to some degree, and several have moved recently to tighten those limits.

Oregon's Senate Bill 951, which became law in June 2025, bars management services organizations (MSOs) and their shareholders, directors, officers and employees from owning or controlling shares in, or serving as officers or employees of, the professional medical entities they contract with.

Lawmakers in Washington, Vermont and North Carolina have weighed similar measures. Winegarden argues those bans land almost entirely on independent physicians, since hospitals are typically exempt, and that they redirect consolidation toward hospitals rather than slow it.

Related content: State crackdowns on 'corporate medicine' may be backfiring on independent physicians

Oregon's law, among the strictest in the country, drew its first major test this spring, when Eugene Emergency Physicians sued to block PeaceHealth from handing three emergency departments to a group backed by Georgia-based ApolloMD. The parties settled in May before the judge ruled on an injunction, and PeaceHealth moved to restore its contract with the local group.

Winegarden points to California as the better template. Gov. Gavin Newsom signed Senate Bill 351 in October 2025, barring private equity groups from interfering with physicians' professional judgment or taking ultimate control over coding, medical records and hiring decisions, while leaving practices free to affiliate with an MSO, a hospital or an insurer.

At the federal level, he wants Medicare physician pay permanently indexed to inflation and site-neutral payment for common outpatient services.

Medical Economics spoke with Winegarden about what another year of payment cuts does to a practice weighing an offer, how to tell an MSO partnership from an acquisition with the paperwork rearranged and whether independent practice survives the next decade.

Our conversation, lightly edited for length and clarity, follows.

Watch our conversation here.

CMS proposed another physician pay cut for 2027 while proposing a raise for hospital outpatient departments. What does another year of that gap do to a practice weighing an offer?

Winegarden: That's just an accumulation of frustration. Adjusted for inflation, the payments to physician offices have been going down. They're down 30%, 31%, whatever the number is, and every year it makes it harder and harder for independent physician practices to stay viable. Another year is just another year of that.

There is the actual financial difficulty of managing that, and then there's the psychological element of wondering whether this is ever going to get better. All of that, on the margin as we economists like to say, is going to convince more people that they've reached their breaking point and they're done. Exactly how many isn't knowable per se, but undoubtedly, the longer this drags out, the more practices will shut down.

Your February brief for the Pacific Research Institute argues that payment distortions and regulatory favoritism, not ownership structures, are pushing independent practices out. If Medicare had tracked inflation since 2001, how much of that consolidation doesn't actually end up happening?

I think the exact number is one of those things that's not necessarily knowable. What we do know is that the decline in compensation is a major driving factor, so if you eliminate a major driving factor, you would imagine that a substantial part of that wouldn't happen.

From a physician's perspective, there are different trade-offs between having your own independent practice and being part of a hospital system, and as people age and as different events happen, people will make different choices. So who knows what the trend would have been in this counterfactual. But the thing we know for certain is that if you eliminate that driver, you're not going to have that influence on doctors.

That may be the most material point. If, from a doctor's perspective and a health care perspective, consolidating with the hospital is the best way to deliver care, then we want to see care gravitate toward that kind of facility. What we don't want is unjust government payment policies putting their finger on the scale, and that's what we're seeing. If you adjust that, you would see that ill effect gone, and that's where you get a much better policy environment.

You argue for site-neutral payment and physician pay indexed to inflation. One saves money, one spends money. What's the sequence that gets both of those actually through Congress?

The sequence is going to be different for the exact reasons you just said. Site-neutral payment gets through because it saves money. The idea that we're paying significantly more for a service because the exact same service was provided in the hospital setting, by essentially what is a physician practice, doesn't make sense. It's excessive. So on the cost savings alone, it seems like we can get that passed.

When you're talking about physician reimbursement, you are talking about potentially spending more money. But the way I look at it is that inflation is a tax, and what you're really doing is imposing a higher and higher tax on independent practices by allowing inflation to erode the compensation for their services. Basic economics says the more you tax something, the less of it you get. Going back to the last question, we've been allowing this inflation tax to consistently impose a higher and higher burden on physicians, and we're getting less of it. So it's a matter of removing that distortion.

Now, I'm an economist, not a politician, not a legislative person. How do you turn that into the talking points? How do you get the coalition? How do you get that through? That's a much more difficult question, and it makes physician payment much harder than what you've seen in terms of site-neutral payments. But I think where it starts is with doctors saying, look, we're losing this independent family practice, and patients seem to want that. Leveraging off of that, and leveraging off of the trends, hopefully you can change the dynamics.

The other thing to remember in terms of cost is the whole idea of penny wise, pound foolish. How do things work out dynamically? That becomes a little less certain. Hospital settings are typically more expensive. If you're spending more but keeping more independent practices open, even with site-neutral payments, how do things net out? When we think about things dynamically, it probably still costs more, but I'm not sure it isn't a bit less than what you would get from just that basic static analysis.

How do you define an independent practice?

It's a loaded one, but it's an important one, especially in light of the research we've been doing. If you go to the traditional definition, you're talking about a doctor-owned or controlled practice. That's very tight, and I think for most physicians, that is the common definition.

So when you now have management service organizations or other types of corporate practice coming in, that is a bit of a hybrid. You're not in a hospital setting, but you're not necessarily a clean, independent practice either.

But in some ways that's the beauty of it, because society evolves, our needs evolve, medical technology evolves, the capital required evolves. All of these things evolve over time. So what is the most efficient way to provide these services, so we get the best care at the lowest possible price? One of the things I think we need to be open to is that we don't necessarily know. We need experimentation. So having different forms of delivery, different structures, perhaps they won't work out, but perhaps we're going to discover a better way of delivering care.

Broadly speaking, when we talk about overall health care costs and quality, we need to allow more of those dynamics to occur, so that we're not saying, oh, just a few hundred people in D.C., or just a few think tank economists, are coming up with schemes. We don't know the answers. But if we empower the millions of doctors and other types of health professionals to provide different ways of structuring the delivery of care, or different ways of delivering care, that's how we're going to get health care costs better under control and increase quality.

So whether or not MSOs are exactly an independent practice, that's getting into some of the details. We don't want to lose the forest for the trees. Having different structures is a really important way to see how we can deliver better care, and over time we'll see what works and what doesn't. Keep adapting and hopefully keep improving. That's the ultimate goal.

What separates an MSO deal that preserves independence from an acquisition with the paperwork rearranged?

Part of what you're talking about is who has control over decision-making. There are going to be different structures, and you're seeing more and more laws at the state level. We've looked at California more favorably than something like Oregon, because you want to have the physician in control of the decision-making. That's one of the more important issues, and I think most patients are going to be more comfortable with it. You don't want some bean counter at a desk somewhere in Pennsylvania coming up with a rule when someone is being treated in Oregon, California, Minnesota, whatever.

You would also imagine that because that's what patients want, that's going to be a bit of a requirement, especially for independent practices. People don't go into medicine because they want to deal with insurance forms, and they don't go into independent practice because they want to adhere to these kinds of corporate structures. They want to practice medicine. It's as much of a calling as it is a career. So I think you're going to see that having that type of independence is going to be an important aspect to them. Otherwise, why not just go to a hospital system? It's easier.

So from that perspective, I think you're going to see people driving more toward physician control over decision-making, and from the MSO perspective, that is where they're going to find they get value out of it. That's where the MSO can provide the capital, provide infrastructure and deal with a lot of the administrative burden, freeing the doctors up to have a better cost structure and spend more time on medicine. Again, things will evolve, and we'll see where they go, but that seems to be the right balance.

We know a fair amount about what happens to prices when hospitals buy practices. What do we know about what happens when practices affiliate with MSOs?

You do see better collections, so you're going to see more revenues, and that is part of what's happening. You want to see the finances of the practice firmed up, and you do start to see that.

You still see prices lower than the prices in the hospital. Some may be higher than what they were as an independent practice, and some of that is because they're able to actually collect on payments that the independent practice had trouble getting. That's part of the efficiencies.

But what you are still seeing, which is really important, is that it's another competitive avenue. Competition in and of itself is a dynamic process over time, and we haven't had enough time to see where things really lead. I think that will be the really exciting part, to see what happens as these organizations get established and the competition starts to take hold. They start really getting into the operations. As you move into the medium and long term, we'll start to see all sorts of innovations. But what we know for right now is that, at least in the initial term, they're still priced below where hospitals are. You see some increase in prices from where they were as an independent practice, but a lot of that is coming from more efficient billing and other types of collection, which is pretty much part of the justification for being part of that organization.

Oregon's law got its first real test this spring, when Eugene Emergency Physicians used it to fight off an out-of-state staffing firm. Does that complicate your case against these laws at all?

I don't think so. There are a lot of unique factors in that case, and I think that's part of the process. It isn't going to be smooth. We probably don't want it to be smooth, and there are probably issues that we're not thinking through. This type of conflict brings that to the fore, and we can think through the implications and come up with something better.

And it is complicated. I think that's important to recognize. This is not simple, and it shouldn't be, because health is important, health is complicated and there are a lot of factors. So these are the types of things that we expect to see.

Having said that, Oregon has an overly restrictive law, and I think part of the complications that come into play is because of the overly strict nature of their law compared to some others. I mentioned California earlier. California is focusing on who's making the decision, not who's controlling the practice per se, and I think Oregon goes too far on that, which is one reason why you may see more complications with Oregon than you would see elsewhere. And that becomes a lesson for other states: if they're going to pass such laws, they should look more toward California, not Oregon, as the example.

Corporate practice bans typically exempt hospitals. Why loosen the rules on MSOs rather than extend them to hospital-employed physicians?

For the exact reason we've been talking about. We want to see more competition. We want to see more innovation in how care is delivered. If you extend these rules to hospitals, we're actually reducing competition.

We've been talking about hospitals as kind of the big bad competitor, but in actuality, they're an important deliverer of care, not just emergency and inpatient but also outpatient, and they may have some ideas: ways of delivering care, ways of organizing care. Perhaps the future of health care is going to be much more centered on a hospital, because you can get more holistic care there. So we want that incentive for the hospitals to be very entrepreneurial as well.

If we take more of these regulations and expand them to hospitals, well, now we're just binding them with the same rules. What we want to be able to do is empower more ideas, not fewer. And that's why we want to remove them from MSOs, not expand them to hospitals.

A small primary care practice is getting calls from the local health system and an MSO. What should they ask before signing? And is staying fully independent ever still the right answer?

I'm a policy economist working in health economics, and not necessarily running practices, so I'd want to put that caveat out there. I have not run a practice, and if you're running a practice, you probably know much better than me.

But you're talking about basic decisions in terms of your quality of life, where you want to go with your patients, your value judgments. I think those are the types of questions. When you look at surveys of physicians, there are a lot of different factors that are impacting them and whether they want to stay independent, and a lot of that deals with quality of life, compensation, how they spend their time and the risks that they're bearing. So in these types of restructurings, I think those would be the primary issues that they would need to consider.

Whether staying fully independent is ever the right answer? Absolutely. Right now there's no evidence that a fully independent physician's office is not a preferred way of care, whether it's for some or all. That's what we're trying to discover. But there's no evidence out there that this is an inefficient way, that it's like a blacksmith of old and we just don't need it. There's just no evidence of that.

So when we come to the delivery of medicine, we really need to get into it with health care professionals, doctors and nurse practitioners, people who are actually on the ground, to determine how we deliver care best, because they're the ones who are going to know that.

Does independent practice survive the next decade? If it does, what does it look like and who's left? If it doesn't, what's the thing that finally ends it?

I don't think independent practices end within the next decade. If it does end, it's because of these government policies, the Medicare reimbursement, the regulations. Those are the things that are squeezing independent practices. When you talk to them, those are the things they worry about: insurance, dealing with all of those factors, the costs involved with that, the lack of scale. That's where corporate organizations can help, because you can provide that scale to get through all these burdens. So if it doesn't survive, it's going to be caused by the accumulation of those burdens. And I say that because that's exactly what independent doctors say when they complain, or when they explain why they sold their practices.

But right now, when you look at patients, there are many patients who prefer independent practices. I think we'd want to stay in that, and we don't have the evidence that that's something patients don't want. So from a demand perspective, that is something people want. So now it's just a question of whether the bureaucracy will overwhelm them, all of them. It's hard to see all of them being overwhelmed within the next decade.

But I think there is this very loud warning siren that's going off that we need to adjust. All of these factors are overburdening the medical practices. Again, if independent practices are going to go away, we want them to go away because there's a better way of delivering care, not because the insurance bureaucracy and the government bureaucracy have overwhelmed them. And so we need to focus on those other factors. How do we bring those costs down so that we can let independent practices compete and see where it all falls out?