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Our Take: Feature - GAO report on physician consolidation

September 29, 2025

Feature: GAO report analyzes the effects of physician consolidation on prices, quality of care

Physician consolidation with health systems can increase spending and prices with no corresponding increase in the quality of care, according to a new report by the U.S. Government Accountability Office, but less is known about the effects of other types of physician consolidation, such as the acquisition of physician practices by insurers, private equity firms, and other entities.

The watchdog agency included peer-reviewed studies and reports published from January 2021 through mid-2025 by researchers, stakeholder groups, and others in its review. It also interviewed or received responses from industry stakeholders and relevant organizations.

The GAO’s findings showed physician consolidation has increased substantially in the last dozen or so years. For instance, according to data from the American Medical Association, 29% of physicians were employed by or affiliated with health systems in 2012, but by 2024 about 47% were consolidated with health systems. The Physicians Advocacy Institute said the percentage of hospital-employed or -affiliated physicians in 2024 was 55%, up from 26% in 2012.

The authors of the GAO report said the variations in estimates was likely due to a difference in how researchers defined and measured hospital-physician consolidation.

Estimates of physician consolidation with corporate entities and insurers also varied, though the report said “some evidence suggests an increase in recent years.” The GAO’s review found that all 10 of the largest health insurers had acquired a physician practice or management services organization in recent years.

UnitedHealth Group’s Optum had the highest percentage of physician consolidation; as of May 2024, the UHG subsidiary employed or was affiliated with approximately 99,000 physicians, or about 10% of physicians nationwide.

Physicians are relinquishing ownership of their practices for several reasons, the report indicated. One reason is that certain types of expenses have increased faster than revenue.

Consolidating with a health system can give physicians more access to resources, such as IT systems and expensive equipment, and can put them in a better position to negotiate higher payment rates with insurers. It also reduces their administrative and regulatory burdens.

Health systems have their own reasons for acquiring or affiliating with physician practices, including additional revenue through referrals and higher reimbursement rates. Acquiring physician practices also increases their market share, giving them greater negotiating power with insurers.

The GAO also found in interviews with hospital stakeholders that acquiring physician practices helps them navigate the shift from fee-for-service to value-based payment models, as it facilitates the coordination of care across health care settings.

Insurers also said they acquire physician practices to increase their leverage in negotiations with health systems and other providers. The acquisitions can help insurers reduce the costs of care, as well, and make it easier for them to participate in value-based payment models.

The report also pointed out that when insurers employ physicians, they may have “additional influence” over how the physicians document health conditions for Medicare Advantage plan members, which can lead to higher reimbursement.

The GAO’s review “generally found that hospital-physician consolidation resulted in some degree” of increased spending in traditional Medicare.” Only two studies examined the effect on commercial insurance spending, and those had conflicting results in terms of per-patient spending. Consolidation did, however, generally lead to price increases.

Spending increases could stem from increased utilization and more access to care, one of the stakeholder groups told the GAO. The group also noted that health systems may need to invest in the physician practices they acquire in order to shore up the practices’ financial stability. In turn, the health systems may need to raise their prices to recoup their investment.

A physician group the GAO interviewed said primary care physicians employed by or affiliated with health systems may be expected to see more patients, with shorter visits, which may increase referrals for diagnostics or specialist visits. This could also contribute to increased spending.

The GAO’s review found limited studies on the spending and price effects of private equity-physician consolidation.

However, a study published last week in the Annals of Internal Medicine found that staffing cuts in hospital emergency departments after acquisitions by private equity firms may be responsible for an observed increase in mortality.

The analysis included data from 49 hospitals owned by private equity firms and 293 “nonacquired” hospitals; the data spanned the period between 2009 and 2019.

Compared with the control hospitals, salary expenditures for emergency department staff at the private equity hospitals decreased by 18% after the hospitals were acquired. Medicare beneficiaries in the emergency departments at the private equity hospitals experienced 7 additional deaths per 10,000 visits after the acquisition (a 13% increase) compared with the control hospitals.

In addition, compared with the control hospitals, more patients in the emergency departments at the private equity hospitals were transferred to other acute care hospitals.

The GAO report dovetails with a working paper published in July by the National Bureau of Economic Research. The NBER paper found the cost of care increases when hospitals acquire physician practices, suggesting that the ongoing integration of providers is driving up prices due to diminished competition.

The authors of the NBER paper concluded that many of the acquisitions they observed were “likely anticompetitive” and harmed both patients and payers “by increasing the cost of care without generating commensurate increases in quality.”

But as independent practices become less common, those that are still independent will find it more difficult to continue on their own.

“With greater consolidation, remaining independent practices may face additional challenges, such as reduced ability to negotiate contracts and payments with insurers or to receive referrals from other physicians,” the GAO report noted. “This could, in turn, lead them to look for partners to acquire or affiliate with their practice.”

D.C. Developments

President Trump announced a new 100% tariff on branded (patented) pharmaceutical products imported to the U.S., starting Oct. 1. Drug companies that either have broken ground or have construction underway on manufacturing facilities in the U.S. will be exempt from the tariffs, according to the post. Anticipating tariffs, several of Europe’s largest drugmakers announced plans earlier this year to build new U.S. manufacturing sites. In addition, the European Union negotiated a trade deal with the U.S. this summer that includes a provision keeping pharmaceutical tariffs at 15%, The New York Times reported, though it is unclear whether those terms will hold or when they will go into effect. According to the Times, an administration official said more details about the policy will likely be provided this week. In several instances so far this year, tariffs on a variety of products have been canceled or modified soon after they were announced.

What else you need to know

Pfizer agreed to pay at least $4.9 billion to acquire Metsera, a New York-based biopharma firm with a pipeline of next-generation candidates for obesity and cardiometabolic diseases. Metsera’s most advanced candidate, MET-097i, is a GLP-1 receptor agonist — similar to Novo Nordisk’s Wegovy (semaglutide) and Eli Lilly’s Zepbound (tirzepatide) — that is being developed as a monthly injection. Another candidate, MET-233i, is an ultra-long-acting amylin analog that also has the potential for monthly subcutaneous dosing.

Novo Nordisk and Lilly are developing long-acting amylin analogs as well (cagrilintide and eloralintide, respectively). And in March, Roche agreed to pay Copenhagen, Denmark-based Zealand Pharma up to $5.3 billion to co-develop and co-commercialize petrelintide, another long-acting amylin analog in development as a weight-loss treatment. Metsera has also been evaluating MET-097i and MET-233i paired as a combination therapy, and the company has oral GLP-1 and amylin candidates in preclinical development.

Pfizer’s agreed-upon upfront payment of $47.50 in cash per share represents a 42.5% premium to Metsera’s closing price on Sept. 19. Shareholders could receive another $22.50 in clinical and regulatory milestone payments. Metsera just went public on Jan. 31, debuting at a price of $18 per share. The boards of both companies have unanimously approved the transaction, which is expected to close by year-end if regulatory approvals are received and Metsera’s shareholders approve the deal.

Premier Inc. signed an agreement to be acquired for approximately $2.6 billion by an affiliate of Patient Square Capital, a private equity firm that invests exclusively in health care companies. Based in Charlotte, N.C., Premier is one of the largest health care group purchasing organizations in the U.S., second only to Vizient by most measures. When the acquisition is finalized and Premier becomes a privately held company, none of the top five health care GPOs in the U.S. will be publicly traded.

Dr. Neel Varshney, a founding partner of Menlo Park, Calif.-based Patient Square Capital, said in a news release, “Our team sees tremendous opportunity for Premier to continue growing its differentiated portfolio in supply chain services, data and technology offerings, and consulting solutions that deliver value to patients.” The purchase price of $28.25 per share represents a premium of 9.7% to Premier’s closing price on Sept. 19. The transaction is expected to close in the first quarter of 2026. It is subject to regulatory approvals and other closing conditions, including the approval of Premier’s shareholders.

Harvard Medical School is on track to reduce its research spending by at least 20% by the end of the fiscal year (which runs through June 30), the school’s dean, Dr. George Daly, said during a recent State of the School address, The Harvard Crimson reported. “Given the dark clouds hanging over — not only Harvard’s federal grant dollars, but all of [the National Institutes of Health] — reducing our research spending and focusing on our most critical research is the responsible thing for us and other institutions to do,” Daly said. In April and May, the federal government pulled more than $2.7 billion in grants and contracts from Harvard University, alleging the university had failed “to protect students on campus from antisemitic discrimination.” Harvard responded by filing a lawsuit against numerous federal agencies.

Earlier this month, the judge ruled that while Harvard should have done “a better job of dealing with the issue,” the government “used antisemitism as a smokescreen for a targeted, ideologically-motivated assault on this country’s premier universities, and did so in a way that runs afoul of the [Administrative Procedure Act], the First Amendment, and Title VI.” The administration is appealing the judge’s decision; meanwhile, the funds have not been released, according to the Harvard Crimson report.

Privia Health Group agreed to acquire Evolent Health’s accountable care organization, Evolent Care Partners, for $100 million in cash. Depending on how the ACO performs this year, Privia could pay Evolent up to another $13 million. Privia, based in Arlington, Va., helps hospitals, medical groups, and other health care providers implement value-based care arrangements. Adding Evolent Care Partners’ 120,000 lives will bring Privia’s total number of attributed lives in value-based care arrangements to about 1.5 million, according to the announcement. Analysts estimate that 70,000 to 80,000 of those lives are in the Medicare Shared Savings Program, Healthcare Dive reported. Along with the potential to increase Evolent Care Partners’ savings rate, Privia noted, the acquisition “offers a compelling synergy opportunity” for the 1,000-plus physicians affiliated with Evolent Care Partners to join Privia’s medical groups “for a full suite of services and technology platform.” Privia anticipates finalizing the acquisition by the end of this year.

CVS Health’s Omnicare subsidiary filed for bankruptcy, according to a Sept. 22 press release. In April, a federal jury found Omnicare guilty of submitting more than 3.3 million false claims to Medicare, Medicaid, and Tricare for prescriptions for tens of thousands of patients during an eight-year period. In August, the judge ordered Omnicare to pay the federal government $949 million in penalties and damages. In its bankruptcy petitions, Omnicare claimed up to $500 million in assets and between $1 billion and $10 billion in liabilities. CVS Health said the bankruptcy process would give Omnicare a chance to reorganize its finances and evaluate options such as restructuring as a stand-alone company or a possible sale. CVS Health acquired Omnicare in 2015 in a deal valued at approximately $12.7 billion, which included about $2.3 billion in debt. Omnicare provides pharmacy services to long-term care and post-acute facilities,