Hospital ownership of physician practices has increased by 86% in the last three years, according to a new report.

The analysis, conducted by healthcare consulting firm Avalere Health and the not-for-profit Physicians Advocacy Institute, found that from 2012 to 2015, hospitals acquired 31,000 physician practices in the U.S.
Currently in mid-2015, one in four medical practices, or 67,000 practices, were owned by hospitals.
This is a dramatic increase from 2012, when about one in seven physician practices were owned by a hospitals.

The report also found that in the same three-year period, physicians employed by hospitals increased by 50%. In 2015, about 140,000 physicians were employed by hospitals or systems, a rise from the 95,000 physicians who were employed by hospitals in 2012. Overall, about 38% of physicians in the U.S. are employed by a hospital or system, according to the report.

The dramatic ownership and employment shifts reflect the change in reimbursement payment models, said Kelly Kenney, EVP of the Physicians Advocacy Institute. She said the CMS increasingly favors integrated health systems as opposed to independent medical practices, pointing to a February report from Avalere that found Medicare pays more for procedures performed in a hospital-setting as opposed to a physician-owned office. “There is an incentive to deliver care in the hospital setting,” she added.

The Physicians Advocacy Group describes its mission as advancing “fair and transparent payment policies and contractual practices by payers.” Its board is largely composed of current and former leaders of state medical societies, and its recent causes include opposing the proposed mega-deals among health insurers and Medicare’s plans to overhaul the way Part B pays providers for administering drugs.

Rapid changes in the healthcare delivery system has also made it increasingly more challenging for small medical practices to stay compliant, said Matthew Katz, CEO of the Connecticut State Medical Society. By aligning themselves with a large system, physicians have the support staff to understand changes while also addressing important issues like patient safety and quality, he said.

Large hospitals are attracted to small medical practices because their patients are more likely to stay within a system for additional services and treatment, Kenney said.

Katz said it will be important to look at how ownership changes have affected where and how patients now receive care. It’s a mixed bag when large systems buy a physician practice. Sometimes the practice will stay open but with reduced staff, or it will be moved closer to the system’s hospital, Katz said, adding that the changes are happening quickly. “We’re seeing changes that usually happen in decades, happen in a few short years,” he added.