Americans’ day-to-day interaction with the health care system used to look very different. For most of American history, physicians who wanted to practice could find a community that needed care and hang their shingle. As recently as the early 1980s, more than three-fourths of physicians were practice owners. In 2024, only a little over a third of all physicians were owners.

Younger physicians can see the trends and are much less likely to start These trends have also had an outsize impact on primary care physicians. In 2024, fewer than 50% of all family medicine physicians owned an independent practice, and just over a third of internal medicine physicians and pediatricians did. Rural areas have also suffered as practices have been forced to consolidate or close due to lack of revenue. Between 2019 and 2024, more than 40% of independent practices in rural areas either closed or were acquired.

How did we get here?

Decades of deliberate policy decisions have incentivized industry consolidation, transforming the U.S. physician workforce from overwhelmingly independent to overwhelmingly employed by corporate entities. A 2024 survey found that approximately 70% of physicians and medical students said consolidation was negatively impacting patient care, and 50% of physicians who experienced a merger or acquisition said it had negatively affected their job satisfaction.

While there has been a wealth of research focusing on consolidation in various layers of the health care system, such as mergers between hospitals, another driver of consolidation has been underexplored: it has become more expensive for independent physicians to both start and maintain their practices. In part, this is because of the cost of capital.

Historically, physicians could rely on personal savings and financing from community banks to launch their practices. Today, however, the rising burden of medical debt and widespread bank mergers have made these traditional financing avenues less viable. At the same time, many practices have also struggled to access sufficient, affordable capital to weather emergency shocks — including the pandemic and the hack and prolonged outage of Change Healthcare’s ability to process physician reimbursements in 2024.

The sustainability of independent practices is also under threat. Independent physicians have limited bargaining power when negotiating reimbursement rates with increasingly consolidated and powerful commercial payors. When asked why they sold their practices, surveyed physicians ranked the ability to better negotiate higher payment rates as the top reason. Declining reimbursements impede these practices’ financial viability at every stage, including their ability to access startup and emergency capital.

This paper will explore the policy drivers of physician consolidation, the cost of capital for independent practices, and policy solutions to level the playing field.