During the past several years, however, physician practices appear to be changing, as a number of doctors merge their offices into larger practices; sell their practices to hospitals, insurance companies, and physician management firms; contract to provide exclusive services to providers such as hospitals; or go to work for larger providers as salaried employees. Lifestyle preferences are at play, with younger doctors more willing than their predecessors to work for an outside institution to secure a set schedule and salary; about half of doctors hired out of residencies or fellowships in 2010 took jobs at hospitals. At the same time, hospitals and insurers are eager to hire doctors, given forecasts of a pending physician shortage by the end of the decade (see " Physician Supply "). The shortfall is predicted to occur in the midst of rising demand for medical services by aging baby boomers and millions of Americans who could gain insurance coverage under the 2010 Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended). Hundreds of physician practices, insurers, and hospitals have announced financial and clinical integration to quality as ACOs. Congress is playing dual roles regarding the consolidation. On the one hand, lawmakers designed the ACA in part to reduce health delivery fragmentation and help control government and private spending. In addition, Congress and federal regulators have been monitoring, and continue to monitor, the health care system for signs that mergers and acquisitions may be having negative effects on costs, competition, and consumer access such as distorting prices or creating conflicts of interest in provision of services. Analysts and lawmakers are aware that the health care sector went through a similar round of restructuring during the 1980s and 1990s, as physicians sold their practices and managed care insurance plans expanded. In contrast to the previous round of consolidation, where doctors were seen as gatekeepers for managed care plans that attempted to limit services, the ACA envisions "patient-centered" care where doctors and other providers are rewarded for necessary treatment that improves quality of outcomes. Still, it is not clear how the new round of changes ultimately will play out. This report provides background on factors contributing to changes in physician practice organization, including physician supply, lifestyle changes, and government incentives. Next it examines different types of integration, the legal intricacies of affiliation, and the possible implications for consumer and federal policy. A quarter of U.S. doctors are graduates of international medical schools. Practice Consolidation

Historically, physicians have operated in small or solo practices, with a number of factors limiting integration with other health care providers. Delivery Reforms

Physician practices, hospitals, and other health care providers in recent months have announced affiliations to qualify as accountable care organizations (ACOs) under the ACA. Concierge Practices

While the main trends appear to be consolidation, a small but growing number of doctors are responding to pressures to change health care delivery and reimbursement by creating concierge practices, where physicians see fewer patients who pay an annual fee to receive care. Physician practice operating costs have not been declining in concert with real compensation, according to the MGMA.
A growing number of U.S. physicians are combining their practices; affiliating with hospitals, insurance companies, and specialty management firms; or going to work directly for such organizations. The moves are part of a broader trend toward consolidation in health care, with the overall number of mergers and acquisitions in the sector at the highest level in a decade.
Alterations in physician practice appear to be a response to a number of factors. Younger doctors are more eager than their predecessors to work for an outside institution, such as a hospital, to secure a set schedule and salary. Private practices have become more complex to manage, even as physician compensation has been declining. Doctors see financial advantages to building larger practices, in terms of ability to control expenses and negotiate higher fees with insurers. Further, not all trends are toward consolidation. A small but growing number of doctors are reacting to market incentives by moving in a different direction: creating concierge practices in which they see a limited number of patients who pay an annual retainer.
According to experts, physician practices also may be affected, in part, by provisions of the 2010 Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended), designed to spur closer financial and clinical affiliation among health care providers. For example, the ACA creates health care delivery systems called Accountable Care Organizations (ACOs), under which providers contract to oversee a patient's total course of care in a bid to manage costs and improve quality. A number of physician practices, insurers, and hospitals have announced affiliations to qualify as ACOs. In another move partly spurred by the ACA, hospitals and health plans have been hiring physicians to ensure they will have adequate staff to treat the millions of Americans projected to gain insurance during the next few years. Several major studies have warned of a looming shortage of physicians, particularly primary care doctors.
Congress is playing dual roles regarding the consolidation. On the one hand, the ACA was designed, in part, to prompt affiliation among doctors and other health care providers in order to reduce fragmentation and help control government and private health spending. At the same time, lawmakers are monitoring the health care system for signs that consolidation is having negative effects on consumer access, prices, and competition. The health care sector went through a similar round of restructuring during the 1980s and 1990s, including mergers and acquisitions of physician practices, ultimately prompting a backlash from some consumers who complained they were being blocked from specialists and procedures. The ACA envisions a different system of "patient-centered care," where doctors and other providers are given incentives to improve quality and efficiency, rather than to limit services. Still, it remains to be seen how the current round of changes will play out as physicians and other providers form larger organizations. This report provides background on factors contributing to changes in physician practice organization, including physician supply, sources of revenue, operating costs, and government incentives. It also examines the different types of integration, the legal intricacies of affiliation, and the possible implications for consumer and federal policy.