Introduction

For decades, independent medical practice represented the backbone of American healthcare. Physicians built practices rooted in their communities, controlled their clinical decisions, and maintained autonomy over how medicine was delivered.

That model is now under severe pressure.

The financial math of independent medicine is changing rapidly. The cost of running a medical practice continues to rise while reimbursement growth remains modest. Staffing expenses, technology investments, compliance requirements, and administrative burdens are increasing faster than the revenue physicians receive.

According to the American Medical Association, the cost of operating a medical practice has increased by more than 60 percent since 2001, while Medicare physician payments have grown only around 10 percent during the same period. The gap between costs and reimbursement continues to widen.

As a result, independent physicians across the United States are confronting a difficult reality: maintaining traditional independence is becoming increasingly unsustainable. Many practices are now being forced to choose between a limited set of survival strategies.

The future of independent medicine may depend on which of these models proves most viable.

1. Selling to Health Systems

The most visible trend in recent years has been the rapid acquisition of physician practices by hospital systems and large healthcare organizations.

In 2012, fewer than 30 percent of physicians were employed by or affiliated with hospital systems. By 2024, that number had risen to nearly half of the physician workforce.

Health systems offer several advantages that independent practices increasingly struggle to replicate on their own. Large organizations can provide financial stability, centralized administrative support, access to advanced technology platforms, and stronger negotiating leverage with payers.

However, employment within a hospital system also comes with tradeoffs. Physicians often relinquish significant control over operational decisions, scheduling, and sometimes even clinical workflows. In some cases, consolidation can also contribute to rising healthcare costs due to increased market concentration.

For many physicians, employment provides stability but comes at the cost of autonomy.

2. Partnering With Management Services Organizations

Another pathway gaining momentum is affiliation with management services organizations (MSOs).

MSOs provide nonclinical administrative services to physician practices, including billing, contracting, technology infrastructure, and operational management. Many of these organizations are supported by private equity capital, which allows them to invest in scaling physician groups.

The MSO model attempts to preserve physician ownership while providing the financial resources and operational infrastructure required to remain competitive in a complex healthcare market.

Supporters argue that these partnerships allow physicians to focus more fully on patient care while experienced management teams handle the growing administrative burden of running a medical practice.

However, the model remains controversial. Critics raise concerns that private equity involvement may prioritize financial returns over long-term clinical priorities, and regulatory scrutiny has increased as policymakers examine the role of private equity in healthcare consolidation.

Despite these concerns, MSO partnerships continue to expand rapidly across many specialties.

3. Joining Clinically Integrated Networks and Value-Based Organizations

A third path is emerging through clinically integrated networks, independent physician associations, and value-based care organizations.

These structures allow physicians to maintain practice ownership while participating in coordinated networks that share data analytics, care management infrastructure, and value-based contracting capabilities.

For independent physicians, the appeal lies in gaining access to scale without fully surrendering autonomy. Networks can negotiate contracts with payers, manage population health programs, and support performance improvement initiatives that would be difficult for a small practice to implement alone.

As value-based reimbursement models expand, participation in coordinated networks may become increasingly important. Risk-based contracts often require the kind of data infrastructure, quality reporting capabilities, and care coordination resources that individual practices cannot sustain independently.

However, building effective networks requires strong governance, trust among participating physicians, and the ability to align incentives across multiple organizations. Not every market has succeeded in building these structures effectively.

Final Thoughts

Independent medicine in the United States is not disappearing, but it is being reshaped by powerful economic forces.

The traditional model of a fully autonomous, small physician practice operating independently in a fee-for-service environment is becoming increasingly difficult to sustain. Rising costs, administrative complexity, and changing reimbursement models are forcing physicians to reconsider how they organize and deliver care.

Health system employment, MSO partnerships, and clinically integrated networks each offer potential solutions, but none are without challenges.

The future of independent medicine will likely depend less on preserving traditional ownership structures and more on designing organizational models that allow physicians to remain financially sustainable while delivering coordinated, high-quality care.

What this means for healthcare leaders

The issues discussed here reflect deeper structural choices facing health systems today—choices around strategy, governance, operating models, and long-term sustainability.

Organizations confronting similar challenges often benefit from stepping back, clarifying priorities, and aligning strategy with execution.

Learn how we support healthcare leaders with strategic clarity, system redesign, and performance transformation.