U.S. Congress targets Medicare pay rules driving hospital consolidation
WASHINGTON, UNITED STATES — Medicare physician pay has fallen 33% in real terms since 2001 — and the consolidation math is compounding. 47% of United States physicians now work for or are affiliated with hospital systems, up from 30% in 2012, according to American Medical Association data.
On May 20, the House Energy and Commerce Health Subcommittee opened a hearing on whether the fee schedule’s budget neutrality requirement is structurally accelerating that trend.
Medicare budget rules accelerate practice consolidation
The requirement offsets pay increases for some specialties with cuts to others — a zero-sum design that hearing witnesses said makes independent practice financially unsustainable. When practices sell, Medicare pays more.
A Texas cardiologist told the subcommittee that two common cardiovascular tests would generate more than $25 million in additional annual Medicare spending if his independent practice was acquired by a hospital.
“Making sure that independent physician practices stay open…is one of the most critical ways we can ensure competition,” said Representative Kim Schrier (D-Wash.) making the competitive stakes explicit.
Proposed reforms include tying annual physician pay increases to inflation and eliminating the budget neutrality offset — changes that would decouple independent practice viability from a shrinking reimbursement pool.
Independent practices have a third option
For physician groups caught between declining reimbursement and acquisition pressure, the exit has been framed as binary: absorb the losses or sell. There is a third path.
A growing number of independent practices are outsourcing revenue cycle management (RCM), billing, and prior authorization work to offshore business process outsourcing (BPO) partners — including teams in the Philippines and India — cutting administrative overhead by 30-50% while retaining clinical autonomy, according to Auxis’s 2026 Healthcare RCM Trends analysis.
97% of healthcare organizations already outsource at least one RCM function, and 70% plan to expand. 63% report active staffing gaps in their RCM departments.
The denial rate crisis sharpens the case: $48 billion in revenue was lost to claim denials in 2025, with denial rates near 20% — recoverable leakage that outsourced RCM teams are structured to close.
The outsourced healthcare RCM market hit $34 billion in 2025 and is on track to nearly double to $67 billion within four years, driven partly by independent practices seeking margin relief that doesn’t require selling equity.
Hospitals have already made this shift. As Outsource Accelerator has reported, the move to offshore RCM is being driven by the same margin pressure squeezing independent practices today. The back office doesn’t need a legislative fix. It needs a new vendor.
