Wayne Winegarden, a senior fellow in business and economics at the Pacific Research Institute and director of its Center for Medical Economics and Innovation, argues that Medicare reimbursement rules, payment advantages for hospitals and the federal 340B drug discount program have weakened independent physician practices and driven a wave of hospital acquisitions. In an opinion piece originally published in the Richmond Times-Dispatch, Winegarden writes that Congress should index Medicare physician reimbursement to inflation, adopt site-neutral payments and reform 340B.
Winegarden argues Medicare and 340B rules push independent doctors into hospital payrolls
Wayne Winegarden, a senior fellow in business and economics at the Pacific Research Institute and director of its Center for Medical Economics and Innovation, argues that Medicare reimbursement rules, payment advantages for hospitals and the federal 340B drug discount program have weakened independent physician practices and driven a wave of hospital acquisitions. In an opinion piece originally published in the Richmond Times-Dispatch, Winegarden writes that Congress should index Medicare physician reimbursement to inflation, adopt site-neutral payments and reform 340B.
Winegarden writes that in 2012 fewer than one-third of physicians were affiliated with hospitals, and that nearly six in ten are now. Between 2018 and 2026, he writes, hospitals acquired almost 33,000 physician practices and added roughly 181,000 physicians to their payrolls.
He states that Medicare physician reimbursement has fallen by roughly 33% in real terms since 2001 while the cost of operating a practice has climbed, and that physician practices, unlike hospitals, do not receive automatic inflationary updates from Medicare. Medicare also pays more for outpatient services delivered in hospital outpatient facilities than in physician offices or ambulatory surgery centers, he writes, which encourages hospitals to acquire physician practices and bill for the same services at higher hospital rates.
On 340B, Winegarden writes that eligible safety-net hospitals can purchase drugs at discounts and bill insurers and Medicare at full price, retaining the spread, and that many hospitals have turned the program into a significant source of revenue. He writes that hospitals added more than 17,000 contract pharmacies to their 340B distribution networks between 2010 and 2024, and that spending on discounted 340B drugs reached $100 billion in 2025, up from $5 billion in 2010.
Winegarden writes that some independent physicians have partnered with management services organizations, or MSOs, for financing, administrative support, technology and other business support, which he says can let physicians resist hospital acquisition and focus on practicing medicine. Some state lawmakers are wary of MSOs because they are often backed by private equity firms and other corporate investors, and worry financial interests could exert improper influence over patient care, he writes. In response, he writes, some states are revisiting corporate practice of medicine laws, which generally require physicians rather than corporations to own medical practices.
Oregon recently enacted restrictions on how physician practices may partner with MSOs, and other states are considering similar proposals, according to Winegarden. He writes that California enacted legislation in 2025 that preserves physicians' clinical autonomy and prevents non-licensed entities from controlling medical decision-making without broadly restricting how independent practices structure their business relationships, and that hospitals, which he calls the primary drivers of corporate consolidation, are often exempt from corporate practice of medicine rules.
Winegarden's recommended federal steps are to index Medicare physician reimbursement to inflation, adopt site-neutral payments so Medicare pays the same amount for the same service regardless of setting, and reform 340B so it supports vulnerable patients rather than hospital expansion. He writes that protecting physicians' clinical independence is essential, and that making it harder for independent practices to survive will leave patients with fewer choices, less competition and higher costs.
- The source does not state what data, study or methodology underlies the figures on physician hospital affiliation, practice acquisitions or physicians added to hospital payrolls.
- The source does not state a date for the figure that nearly six in ten physicians are affiliated with hospitals.
- The source does not state how the roughly 33% real-terms decline in Medicare physician reimbursement was calculated or against what baseline.
- The source does not name the Oregon restrictions on MSO partnerships or the California legislation, or state when in 2025 California enacted it.
- The source does not name any of the states considering MSO partnership restrictions beyond Oregon.
- The 2018 to 2026 range extends beyond the publication date, and the source does not state whether the 2026 portion is a projection.
- The source does not state whether hospitals, management services organizations or private equity investors were asked to respond, and includes no response from them.
Read the original at CT Examiner