A myriad of challenges, such as the economics of reimbursement, burnout and growing administrative burdens, add to the complications of running an independent medical practice
by Intelliworx
Rural areas have lost 2,500 independent physicians during a five-year period from 2019 to 2024. At the same time, the number of physician-owned practices in rural areas dropped by 3,300.
That’s according to a new data analysis by the Physicians Advocacy Institute and Avalere, a healthcare consultancy. The researchers examined changes in location data in the IQVIA OneKey database during the period. The database contains a practice location that corresponds to a physician’s National Provider Identifier (NPI).
The study revealed the following findings:
- The volume of independent rural physicians declined by 43%;
- The volume of independent medical practices declined by 42%;
- The market share of independent rural physicians fell from 42% to 25%;
- The market share of independent medical practices declined from 58% to 38%
At the same time, the number of physicians employed by corporate-owned health systems increased 10% – from 48% to 58%. Similarly, the number of “corporate-owned practices more than doubled from 11% to 23%.”
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The report summarizes the findings this way:
“The overall decline in rural healthcare providers has been driven primarily by the decrease in independent physicians and practices and the acquisition of these practices by hospitals, health systems and corporate entities.”
It continues by noting there are adverse implications for consumers in fewer choices among providers, access to care, price and quality:
“Consolidation of physician services under hospitals and corporate entities in rural areas raises concerns about reduced access, rising costs and potential declines in care quality.”
The losses are geographically dispersed, too, affecting a wide swath of rural America. Some 39 different states have seen the number of independent medical practices drop by double-digit percentages.
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3 reasons why rural areas are losing independent providers
The effects of this study have been widely reported, but we wanted to dig deeper into the root causes. For their part, the authors of the report place the cause predominantly on consolidation:
“The overall decline in rural healthcare providers has been driven primarily by the decrease in independent physicians and practices and the acquisition of these practices by hospitals, health systems and corporate entities. While this shift reflects broader industry consolidation trends, it raises important policy considerations.”
That’s assuredly an influential contributing factor. However, we suspect it’s a first-order effect of a deeper cause – where the loss of providers is a second-order effect.
Where do we get that notion?
We keep close tabs on the market and actively support the rural healthcare community. We have conversations every day about these issues. We’ve also periodically polled providers who routinely point out the top benefits of working in rural locations. They routinely note that rural healthcare typically offers:
- more time with patients;
- better work-life balance.
- slower pace of rural life;
- greater sense of purpose; and
- more autonomy to manage work.
So, there’s got to be more to it than just the golden handcuffs. Here are some of the other reasons for the decline.
1. The weak economics of reimbursement
A panel of health experts from the University of Pennsylvania’s Leonard Davis Institute of Health Economics (Penn LDI) pins the problem on policy. The core economic issue is inadequate:
“…national funding policies exacerbated by private insurers’ unwillingness to reimburse for the full cost of procedures and Medicare Advantage’s prior authorization policies.”
In other words, rural areas don’t have the volume of patients that busier urban facilities do to cover fixed costs, for example, just keeping the lights on:
“These programs don’t seem to have fully considered the fact that insurers are not paying for the full costs of procedures in a rural hospital because procedures done on a much smaller patient cohort don’t generate the revenue needed to cover a facility’s fixed costs.”
One panelist pointed out that federal reimbursement shortages spill over into private sector insurance:
“There’s a widely held belief that both large and small hospitals get higher payment from private insurance plans than Medicare and Medicaid. But the exact opposite is true for a lot of small rural hospitals. They get paid less by private insurance plans than Medicare, and, in some cases, even Medicaid.”
Read more: Exploring the policies that are closing rural hospitals by Penn LDI
2. Rural physicians are retiring, with fewer replacements
Rural physicians are retiring, and newly minted doctors prefer being employed rather than starting a practice. That’s according to a study published in PubMed examining quality improvement (QI) in rural areas:
“Graduates of family medicine residencies do not see independent practice as a viable option, with 89.7% of graduates seeking an employed position as opposed to 5.7% pursuing practice ownership.[source] As a result, existing physician-owned practices struggle to recruit physicians, especially as older physicians retire or leave practice. [source]”
Our research also shows that new physicians tend to stay where they are trained. Those locations tend to be in urban areas, and are often learning facilities with cutting-edge research, which is appealing to a newly commissioned doctor embarking on their career.
Read more: Place matters: Closing the gap on rural primary care quality improvement capacity—the healthy hearts northwest study by Lyle J. Fagnan, Katrina Ramsey, Caitlin Dickinson, Tara Kline, and Michael L. Parchman (PubMed)
3. A confluence of unaddressed administrative issues
The American Medical Association (AMA) cites a range of issues from administrative burdens and provider burnout to payments, telehealth and prior-authorization requirements:
“The challenges my fellow physicians in independent practice and I face today – from increasing economic pressures to ever-growing administrative hassles – are significant,” wrote AMA President Bruce A. Scott, MD.
The AMA points out that some improvements have been made, but much work remains to be done:
- Cost inflation. “Adjusted for inflation, Medicare physician payment rates have plunged 29% between 2001 and 2024. Physicians, unlike other Medicare providers, do not receive an automatic annual inflation-based payment update.”
- Telehealth access. “When telehealth restrictions were temporarily lifted during the pandemic, patients and physicians came to appreciate the convenience that telehealth offers as a way to deliver and receive care. But the changes aren’t permanent yet. That needs to change.”
- Prior authorization. “This insurer cost-cutting practice puts significant administrative and time burdens on health care staff and physicians and profoundly impacts private practices’ sustainability, not to mention the health consequences for patients…Despite prior regulatory action, more needs to be done to fix prior authorization, the AMA told Congress, including bills to streamline and more efficiently apply prior authorization.”
Several surveys show that prior authorization and claim denials are prevalent problems. We found that up to 40% of providers have considered quitting over the hassle. This adds to the economic challenge: if reimbursement is already low, healthcare facilities must now work harder and wait longer for reimbursement, as well, which strains cash flow.
Keep your rural provider recruiting practices organized
From some practice owners ’ perspective, selling a practice is a way to ease the business burden yet remain in medicine. Some observers may argue that corporate consolidation is the only way to reach the economic scale necessary to turn a profit in the current environment.
For those that remain independent – or aspire to be independent – there’s some solace in knowing this issue is getting a lot of attention from some of the most influential medical organizations in the world. Policymakers are aware and it will take time for legislation that offers relief to work its way through the process.
In the meantime, it’s never been more important to take time to listen to providers, get your recruiting practices organized and look for creative ways to fill the gaps.
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The Healthcare Workforce Management solution by Intelliworx is specifically designed to support rural hospitals and healthcare. Check out this short video or contact us for a no-obligation demo.
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Image credit: Pexels and respective study
