Why payment policy, not ownership structure, is driving practice consolidation

The Centers for Medicare & Medicaid Services (CMS) proposed another physician pay cut for 2027 in mid-July, trimming reimbursement as a temporary 2026 increase expires while proposing higher payments for hospital outpatient departments.

For independent practices that have watched inflation erode their Medicare payments for two decades, Wayne Winegarden, Ph.D., sees the widening gap as the central threat to their survival.

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Winegarden, a senior fellow in business and economics at the Pacific Research Institute (PRI) and director of its Center for Medical Economics and Innovation, argues that the pressure driving practices to consolidate with hospitals and larger organizations is a payment problem, more than a question of corporate ownership or management services organizations (MSOs).

Adjusted for inflation, he said, Medicare reimbursement to physician offices is down roughly 30% since 2001, and each additional year of decline adds both financial strain and a mounting sense among physicians that the squeeze will not ease.

More information on Winegarden’s February 2026 policy brief “How Government Policy Is Consolidating the Practice of Medicine.”

An inflation tax, and two uneven fixes

"Inflation is a tax," Winegarden said, and allowing it to erode payments year after year steadily raises the burden on independent practices. Basic economics, he added, says the more something is taxed, the less of it there will be.

He backs two fixes that face very different politics. Site-neutral payment, which would stop Medicare from paying more for the same service simply because it was delivered in a hospital outpatient setting, saves money and could pass on that basis, he said. Tying physician pay to inflation would cost money and be harder to move through Congress. Winegarden is careful about the limits of the argument, noting that the exact share of consolidation caused by payment policy cannot be known.

MSOs and the state-law question

Winegarden said MSOs occupy a middle ground between staying independent and being acquired, and can preserve independence when physicians keep control over clinical decisions. He pointed to California over Oregon as a model for state corporate practice of medicine laws, arguing that California focuses on who makes the decisions while Oregon's more restrictive approach reaches too far.

The next decade for independent practice

Asked whether independent practice survives the next decade, Winegarden said he does not expect it to disappear, and that patients continue to value it. If it does fade, he said, the cause will be the accumulation of Medicare cuts, insurance requirements and regulatory burdens rather than any sign that independent practice is an inefficient way to deliver care.

Related content: Does independent medical practice have a future?