Some doctors are hospital employees, but many are not. The relationship between a doctor and a hospital varies widely, and the answer matters more than you might think because it can affect your costs, your care, and even who is legally responsible if something goes wrong. As of 2024, about 47% of U.S. physicians either work in a hospital-owned practice or are directly employed by a hospital, according to the American Medical Association’s Physician Practice Benchmark Survey. That leaves the majority working under other arrangements.
How Many Doctors Actually Work for Hospitals
The picture depends on which data source you use and how “employment” is defined. The AMA’s 2024 survey breaks it down this way: 34.5% of physicians work in practices owned by a hospital or health system, 12.2% are directly employed by or contracted with a hospital, and 42.2% are in private practice (a practice wholly owned by physicians). The remaining share work for other entities like universities, government agencies, or corporate-owned groups.
Bureau of Labor Statistics data from 2022, analyzed in a study published in the Journal of the Society of Laparoscopic & Robotic Surgeons, paints a somewhat different picture. It found 55% of physicians working in physician offices and 27% employed by hospitals. The gap between these datasets reflects different definitions and methodologies, but the overall trend is clear: hospital employment has grown substantially. The share of physicians in private practice dropped 18 percentage points between 2012 and 2024, while the share in hospital-owned practices rose by a nearly identical amount.
By 2024, only 35.4% of physicians had an ownership stake in their practice, down from 53.2% in 2012. Meanwhile, 57.5% of all physicians were classified as employees of some kind, whether employed by a hospital, a physician group, or another organization.
The Different Ways Doctors Work With Hospitals
When you see a doctor at a hospital or in a medical office building near one, the doctor could be connected to that hospital in several very different ways.
- W-2 employee: The doctor is on the hospital’s payroll, receives a salary and benefits, and has taxes withheld just like any other employee. The hospital sets schedules, provides malpractice insurance, and generally has more control over how the practice operates.
- Independent contractor (1099): The doctor provides services at the hospital but functions as a separate business. They handle their own taxes, may not receive benefits, and typically have more control over how they practice. Emergency room physicians, anesthesiologists, and radiologists often work this way through staffing companies.
- Hospital-owned practice: The doctor works in an office that used to be (or looks like) a private practice, but the hospital or health system actually owns it. The doctor is an employee of the system, even though the experience feels like visiting a regular doctor’s office.
- Private practice with hospital privileges: The doctor owns or co-owns their practice independently but has “privileges” to admit and treat patients at one or more hospitals. They are not hospital employees at all.
From a patient’s perspective, these arrangements can be nearly invisible. The doctor’s white coat doesn’t come with a label explaining the business structure. But the differences show up on your bill.
Why This Matters for Your Medical Bills
One of the most direct ways hospital employment affects patients is through facility fees. When a previously independent doctor’s office converts to hospital ownership, the hospital can begin charging a separate facility fee on top of the doctor’s professional fee for the same office visit. This happens because the office is now technically a hospital outpatient department, even if nothing about the physical space or the care has changed.
These facility fees produce substantially higher payments from both insurance and patients. Under Medicare, for example, converting a physician’s office to hospital-owned status triggers separate payments for the doctor’s services and for the hospital facility, a split that didn’t exist when the practice was independent. For patients, facility fees are subject to deductibles and coinsurance, which means higher out-of-pocket costs for what feels like the same appointment.
The cost effects extend beyond individual bills. Research from the National Institute for Health Care Reform found that in markets with high levels of physician employment, hospitals and their affiliated doctors gain leverage over insurance companies, making it harder for insurers to negotiate lower payment rates. In cities like Greenville, South Carolina, and Indianapolis, where hospital employment of physicians was especially concentrated, insurers reported growing difficulty containing both hospital and physician payment increases. Bidding wars between hospital systems for specialists in the same geographic area also drove up physician compensation, costs that ultimately flow through to premiums and patient prices.
Does Hospital Employment Improve Care Quality?
The theory behind hospital employment of physicians sounds reasonable: when doctors and hospitals are part of the same organization, they should communicate better, coordinate care more effectively, and reduce the kind of fragmented treatment that leads to errors and redundant testing. In practice, the evidence is mixed.
Research has found that hospital employment does not automatically produce better clinical integration. Communication between inpatient and outpatient providers continues to be a problem even when both are employed by the same hospital system. Simply putting doctors on the same payroll doesn’t mean they share medical records seamlessly, coordinate referrals efficiently, or follow standardized treatment protocols.
There’s also a counterweight on the quality side. Multiple physician respondents in the NIHCR’s community tracking study reported that employed physicians face pressure from hospitals to order more expensive testing alternatives. When a hospital’s revenue depends on the volume of services provided, employed doctors may feel pushed toward more imaging, more lab work, and more procedures than they would order independently. Whether that additional testing helps or harms patients depends on the specific situation, but it raises legitimate questions about whether financial incentives are aligned with patient interests.
Why the Shift Toward Employment Is Happening
The steady decline in private practice ownership reflects real pressures on physicians. Running an independent practice means handling billing, insurance negotiations, staffing, regulatory compliance, electronic health records, and malpractice coverage, all while seeing patients. For many doctors, especially those finishing residency with significant student debt, hospital employment offers a guaranteed salary, benefits, malpractice coverage, and freedom from the administrative burden of running a business.
From the hospital side, employing physicians ensures a steady stream of referrals, gives the system more control over care patterns, and strengthens its negotiating position with insurers. Health systems have been actively acquiring physician practices for more than a decade, and that trend has accelerated.
Legal Restrictions on Hospital Employment
More than 30 states have some version of what’s called the Corporate Practice of Medicine doctrine, a legal principle that restricts non-physician corporations from directly employing doctors or controlling medical decision-making. The idea is to prevent business interests from overriding a doctor’s independent medical judgment. States with these laws include California, Texas, New York, Illinois, and many others.
In practice, hospitals and health systems work around these restrictions through various legal structures. A hospital might own the practice’s assets, manage its operations, and pay the physician’s salary through a management services agreement, while the physician technically remains employed by a separate physician-owned entity. The practical result often looks identical to direct employment, but the legal structure preserves a layer of physician autonomy on paper. In states without strong Corporate Practice of Medicine laws, hospitals can hire doctors directly without these workarounds.
How to Find Out Your Doctor’s Employment Status
If you want to know whether your doctor is a hospital employee or works independently, start by looking at your bill. A facility fee on top of the professional fee is a strong signal that your doctor’s practice is hospital-owned. You can also check your doctor’s practice website or call the office directly. Many hospital-employed practices include the health system’s name and branding. Your insurance company’s provider directory sometimes notes whether a doctor is affiliated with a hospital system, though this information isn’t always up to date.
Knowing the arrangement won’t change the quality of the medical advice you receive in the exam room, but it can help you anticipate costs and understand why the same type of visit might cost significantly more at one office than another.