Nearly three quarters of U.S. physicians (74%) are employed by hospitals, health systems or corporate entities as of January 1, 2022, according to new data from Avalere, in a study sponsored by the Physicians Advocacy Institute (PAI) that examined physician practice trends over the three-year period between 2019 and 2021. This is an increase from 69% of U.S. physicians being employed just last year.

Health systems and corporate entities have been steadily acquiring physician practices for years, but Avalere researchers found the trend has accelerated drastically since the onset of COVID-19. More than one hundred thousand (108,700) physicians became employees since January 2019. Of those, 83,000 (76%) became employees since the pandemic began.

Corporate entities such as private equity firms and health insurers are driving the spike in these trends. Corporate purchases of practices increased by 86% during the study period, and corporate employment of physicians increased by 43%. In 2021, corporate entities acquired 13,600 additional physician practices. In comparison, hospital, and health system purchases of practices (9%) and employment of physicians (11%) continued at steadier rates.

PAI’s data also back up the American Medical Association’s latest national survey that highlighted the largest shift in physician employment the professional group has seen since kicking off the biennial poll in 2012. Susan R. Bailey, M.D., president of the organization at the time, pointed to a handful of potential factors in the shift ranging from a new crop of young physicians entering the workforce to COVID-19 disruption.

And this trend brings up the question: How is this going to change the quality of medical care for the public? Anecdotal reports that may answer this question are beginning to appear in the media.

A recent report by Kaiser Health News says that private equity companies pool money from wealthy investors to buy their way into various industries, often slashing spending and seeking to flip businesses in three to seven years. While this business model is a proven moneymaker on Wall Street, it raises concerns in health care, where critics worry the pressure to turn big profits will influence life-or-death decisions that were once left solely to medical professionals.

Nearly $1 trillion in private equity funds have gone into almost 8,000 health care transactions over the past decade, according to industry tracker PitchBook, including buying into medical staffing companies that many hospitals hire to manage their emergency departments.

KHN says that two firms dominate the ER staffing industry: TeamHealth, bought by private equity firm Blackstone in 2016, and Envision Healthcare, bought by KKR in 2018. Trying to undercut these staffing giants is American Physician Partners, a rapidly expanding company that runs ERs in at least 17 states and is 50% owned by private equity firm BBH Capital Partners.

These staffing companies have been among the most aggressive in replacing doctors to cut costs, said Dr. Robert McNamara, a founder of the American Academy of Emergency Medicine and chair of emergency medicine at Temple University.

American Physician Partners employs fewer doctors in its ERs as one of its cost-saving initiatives to increase earnings, according to a confidential company document obtained by KHN and NPR.

This staffing strategy has permeated hospitals, and particularly emergency rooms, that seek to reduce their top expense: physician labor. While diagnosing and treating patients was once their domain, doctors are increasingly being replaced by nurse practitioners and physician assistants, collectively known as “midlevel practitioners,” who can perform many of the same duties and generate much of the same revenue for less than half of the pay.

In a statement to KHN, American Physician Partners said this strategy is a way to ensure all ERs remain fully staffed, calling it a “blended model” that allows doctors, nurse practitioners and physician assistants “to provide care to their fullest potential.”

Critics of this strategy say the quest to save money results in treatment meted out by someone with far less training than a physician, leaving patients vulnerable to misdiagnoses, higher medical bills, and inadequate care. And these fears are bolstered by evidence that suggests dropping doctors from ERs may not be good for patients.

Not everyone sees the trend of private equity in ER staffing in a negative light. Jennifer Orozco, president of the American Academy of Physician Associates, which represents physician assistants, said even if the change – to use more nonphysician providers – is driven by the staffing firms’ desire to make more money, patients are still well served by a team approach that includes nurse practitioners and physician assistants.