Obamacare Encourages Consolidation, Discourages Independent Medical Practices

The payment system is forcing doctors to sell out to hospitals. The trend, and the law, will be unstoppable without reform.

In 2008, 62 percent of American physicians were “independent,” meaning they had their own practices and were not employed by hospitals. By 2012, that number had fallen to 49 percent. Today, just 35 percent of American doctors are independent. Why? One of the many effects of the Affordable Care Act, writes Scott Gottlieb, a physician and resident fellow at the American Enterprise Institute, has been the loss of private practices in favor of consolidated health systems that employ doctors as salaried workers.

Multiple provisions of Obamacare encourage consolidation into large health systems. Gottlieb writes that the law includes a number of payment reforms that are easier for large institutions to comply with and which are biased against independent doctor arrangements. For example, to comply with new payment reforms, health care providers must control their IT infrastructure. This is something that only hospitals — who already have their own servers worth millions of dollars — can afford.

Similarly, Gottlieb notes that Medicare reimbursement favors hospitals rather than independent practices, as Medicare often pays more for procedures that are performed at hospitals. For example, it pays $749 for a heart scan performed at a hospital compared to $503 when performed in an independent office, or $124 for a short doctor’s visit at a hospital, compared to $70 at an independent practice.

The problem with consolidated systems is that they reduce competition, as there are few independent providers left to compete on prices and service. With single, monopolistic hospitals in place, costs will rise and quality will fall. To combat these problems, Gottlieb fears politicians will turn to increased government regulation rather than implementing market-based reforms that are not biased against private practice physicians.

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