In 2012, Jackson Healthcare began surveying physicians and hospitals to track four trends:

  1. Which physician specialties were selling their practices
  2. What motives were driving these physicians to sell their practices
  3. Which physician specialties were hospitals acquiring
  4. What motives were driving hospitals to acquire these practices

We conducted our most recent survey of physicians and hospitals between May and June 2015. This survey encompassed telephone interviews with 23 hospital executives who acquired at least one physician practice within the past three years.

In addition to hospital executives, 69 physicians who had sold their medical practice were interviewed. These physicians were currently employed by the acquiring hospital.

What follows are this year’s findings.


Physicians Initiate the Majority of Acquisitions

Sixty-eight percent of the physicians interviewed reported approaching the hospital and initiating acquisition discussions.

This aligns with our findings in past surveys. In 2012, 70 percent of acquisitions were initiated by physicians. And in 2013, 60 percent of acquisitions were physician-initiated.

Hospital executives concurred. All but one reported that in at least one acquisition, the physician had initiated discussions.


Most Common Acquisition: Primary Care Practices

The majority of the acquisitions reported by the hospital executives were primary care. This includes general internal medicine and family medicine.

Other types of practices hospitals have acquired include (in order of quantity):

  • Cardiology
  • Orthopedics
  • General Surgery
  • Endocrinology
  • Gastrointestinal
  • Urology
  • Oncology

While no hospital executive reported acquiring surgery subspecialty practices during the past three years, four plan to acquire various surgical subspecialty practices during 2015.


Motives for Acquiring Medical Practices

Hospitals report both offensive and defensive reasons for acquiring medical practices. These included:

  • Expanding service capabilities
  • Meeting community need
  • Insurance-related purposes
  • Increased efficiency and alignment
  • Increased market share

Seventeen out of the 23 hospital executives interviewed for this study were seeking to increase their capabilities in certain specialty areas. Eleven of 23 said the private practice environment is conducive to acquisition at this time. Physicians who had sold their practices agreed, saying the cost of remaining independent in the current environment is too great.


Life After Acquisition

Hospitals are primarily looking at the cultural and organizational fit of each physician practice with the hospital.

Other characteristics hospitals look for in an acquisition target include:

  • Reputation of the practice
  • Strategic value of the practice
  • Location of the practice
  • Quality of physician(s) in practice
  • Referral patterns
  • Existing relationships between hospital and practice

Newly employed physicians accustomed to making their own decisions and having control over their own practices, face an environment in which they are no longer the primary decision-maker in the strategic direction of their practices.

Thirty-two percent of acquired physicians cited the inability to choose/influence/direct their own staffs as a disadvantage of employment. Twenty-eight percent said that hospital-driven productivity goals were preventing them from spending as much time as they would like with each patient. As one physician said, “I was used to cooperating with administration. Now I was expected to comply.”


Bottom Line: Acquisitions a Win for Hospitals & Physicians

Overall, the acquisition of physician practices by hospitals was a win/win for the respondents in this year’s surveys. Twenty-two out of 23 hospital executives said their expectations for the acquisition were either fully or partially met.

Although there are struggles in acclimating to employment, physicians said the advantages of employment outweighed the disadvantages. And for the majority of physicians who sold their practice, there are no regrets. Seventy-seven percent said that, knowing what they know now, if they had to go back and do it all over again they would.

Sixty-four percent of physicians said employment has met or exceeded their expectations. And 80 percent are satisfied with their current work environment.

Of the physicians who were hoping to decrease their administrative burden, 94 percent succeeded. Of those who were hoping to work less hours, 57 percent said they are. Seventy-two percent of physicians reported making the same or more money than they did in private practice.

Why Physicians Are Selling Their Medical Practices from Jackson Healthcare