For the first time, most physicians worked outside of physician-owned practices in 2020, as doctors continue to gravitate toward employment by hospitals and other organizations, according to a new American Medical Association survey.

The trade group’s latest Physician Practice Benchmark Survey found that 49.1% of patient care physicians worked in physician-owned practices in 2020, a drop of almost 5 percentage points from 2018, when that figure was 54%. It’s 11 percentage points lower than 2012, when 60% of physicians worked in physician-owned practices.

“I think it is the most consequential institutional change in our healthcare system in the last 30 years,” said Jeff Goldsmith, president of the consultancy Health Futures.

The AMA has documented the gradual evolution away from physician-owned practices in each iteration of its biennial survey, which it has performed since 2012. Last year’s results, which include responses from 3,500 physicians, suggest the trend has entered hyperdrive.

The drop in physician ownership has corresponded with a rise in employment by hospitals, companies like UnitedHealth Group’s Optum and private equity firms. The AMA found almost 40% of physicians worked directly for hospitals or practices at least partially owned by hospitals in 2020, up from 29% in 2012.

Physicians’ age and specialty affect their likelihood of choosing independence or employment. Among doctors 55 and older, 55% worked in private practice last year. But only one-third of physicians under 40 did the same.

It used to be that new doctors would go straight into private practice with ambitions of becoming partner. Today, most young doctors coming out of training are very specific about not wanting ownership stakes, said Ericka Adler, a partner at Roetzel & Andress and leader of its healthcare practice. Working for a hospital is less burdensome, there are better benefits and the future is more certain than in private practice, she said.

“If they’re careful about who they’re going to work for, they can have that lifestyle,” Adler said. “They don’t have to have burnout. So I think they’re being really picky about who they’re going to work for.”

Emergency medicine was the only specialty in which more than 20% of physicians worked directly for hospitals, according to the survey. That share ranged from 5% and 13% in all other specialties except family medicine, where only 1.6% of physicians worked directly for hospitals.

Fewer than 40% of surgical subspecialists and radiologists were employed compared with 58% of pediatricians and family medicine physicians.

Lots of factors are coming together to make employment an increasingly desirable option. Healthcare has grown immensely more complicated in recent decades, with new Medicare regulations around value-based purchasing, electronic health records and insurer prior authorizations, to name a few.

“In a small practice, that really falls on the doctor’s shoulders,” Adler said. “It’s just more than some people can take.”

Goldsmith thinks student debt is the biggest factor driving physicians into employment. Young people are coming out of residency with hundreds of thousands in loans.

“I would not be inclined to take the business risk of hanging up my shingle or of joining a small, poorly capitalized private practice,” Goldsmith said. “If I had the choice, I’d rather shift it to a larger entity.”

Last year’s survey was the first time the AMA specifically asked about private equity ownership. Just 4% of physicians said their practiced was owned by a private equity firm. Although it wasn’t explicitly asked in the past, the AMA said “fill in responses” suggest that was about 2% in 2018.

Adler said that figure undercounts private equity’s involvement in physician practices. The issue might be semantic: Oftentimes private equity doesn’t technically own the practice, but manages it through contracts that seem like ownership. Her practice represents thousands of physician practices, and private equity activity has been very active so far in 2021.

“We’ve probably done more deals than we’ve ever done before,” Adler said. “The volume of private equity deals is tremendous right now.”

The survey found private equity ownership was well below 10% in all specialties except emergency medicine and anesthesiology, where it was between 10% and 15%.

Between 2018 and 2020, the share of physicians who said their practices have at least 50 physicians increased from 14.7% to 17.2%. The AMA noted that the trends toward larger practices and those owned by hospitals are being driven by a few factors: mergers and acquisitions, practice closures, physician job changes and new physicians entering practice in settings different than those from which retiring physicians are leaving, AMA President Dr. Susan Bailey said in a statement. The survey was taken in September and October 2020, so it does not include the full effects of the COVID-19 pandemic.

“Physician practices were hit hard by the economic impact of the early pandemic as patient volume and revenues shrank while medical supply expenses spiked,” Bailey said. “The impact of these economic forces on physician practice arrangements is ongoing and may not be fully realized for some time.”

Announced mergers and acquisitions among practices increased from about 30 per year in the early 2000s to well over 200 in 2018 and 2019, the report said. The pandemic caused a dip in deal activity in 2020.

The trend of physicians increasingly being employed by hospitals or corporations is likely driving up healthcare costs, Goldsmith said. Not only do hospitals add facility fees for services, the larger organizations tend to pay physicians more than they made in private practice, he said.

“It’s not necessarily good news from a cost standpoint,” Goldsmith said.