Large, physician-owned group practices are gaining ground as a popular form of practice, even as the number of physicians in solo and small practices declines, and employment maintains its appeal.
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As physicians shift from owning private practices to employment in hospital systems, this countertrend is also taking place. Large group practices are growing in number, even as solo and small practices are in decline.
Do large, physician-owned groups bring benefits that beat employment? And how do large groups compare with smaller practices and new opportunities, such as private equity? You’ll find some answers here.
Working in large group practices
Large group practices with 50 or more physicians are enjoying a renaissance, even though physicians are still streaming into hospital systems. The share of physicians in large practices increased from 14.7% in 2018 to 17.2% in 2020, the largest 2-year change for this group, according to the American Medical Association.
“Physicians expect that large groups will treat them better than hospitals do,” says Robert Pearl, MD, former CEO of Permanente Medical Group, the nation’s largest physicians’ group.
Compared with hospitals, “doctors would prefer working in a group practice, if all other things are equal,” says Dr. Pearl, who is now a professor at Stanford (Calif.) University Medical School.
Large group practices can include both multispecialty groups and single-specialty groups. Groups in specialties like urology, orthopedics, and oncology have been growing in recent years, according to Gregory Mertz, managing director of Physician Strategies Group in Virginia Beach, Va.
A group practice could also be an independent physicians association – a federation of small practices that share functions like negotiations with insurers and management. Physicians can also form larger groups for single purposes like running an accountable care organization.
Some large group practices can have a mix of partners and employees. In these groups, “some doctors either don’t want a partnership or aren’t offered one,” says Nathan Miller, CEO of the Medicus Firm, a physician recruitment company in Dallas. The AMA reports that about 10% of physicians are employees of large practices.
“Large groups like the Permanente Medical Group are not partnerships,” Dr. Pearl says. “They tend to be a corporation with a board of directors, and all the physicians are employees, but it’s a physician-led organization.”
Doctors in these groups can enjoy a great deal of control. While Permanente Medical Group is exclusively affiliated with Kaiser, which runs hospitals and an HMO, the group is an independent corporation run by its doctors, who are both shareholders and employees, Dr. Pearl says.
The Cleveland Clinic and Mayo Clinic are not medical groups in the strict sense of the word. They describe themselves as academic medical centers, but Dr. Pearl says, “Doctors have a tremendous amount of control there, particularly those in the most remunerative specialties.”
Pros of large groups
Group practices are able to focus more on the physician participants’ needs and priorities, says Mr. Mertz. “In a hospital-based organization, physicians’ needs have to compete with the needs of the hospital. … In a large group, it can be easier to get policies changed and order equipment.”
However, for many physicians, their primary reason for joining a large group is having negotiating leverage with health insurance plans, and this leverage seems even more important today. It typically results in higher reimbursements, which could translate into higher pay. The higher practice income, however, could be negated by higher administrative overhead, which is endemic in large organizations.
Mr. Mertz says large groups also have the resources to recruit new doctors. Small practices, in contrast, often decide not to grow. The practice would at first need to guarantee the salary of a new partner, which could require existing partners to take a pay cut, which they often don’t want to do. “They’ll decide to ride the practice into the ground,” which means closing it down when they retire, he says.