Private practice medicine refers to any medical practice wholly owned by one or more physicians, rather than a hospital, health system, or corporation. As of 2024, about 42% of U.S. physicians work in private practice, according to the American Medical Association. That’s an 18 percentage point drop since 2012, making private practice the minority model for the first time in American medicine’s history.
Whether you’re a patient trying to understand how your doctor’s office operates or a physician weighing career paths, the distinction between private practice and employed medicine shapes everything from appointment length to how decisions get made.
How Private Practice Differs From Employed Medicine
In a private practice, physicians own the business. They hire their own staff, lease or buy their office space, choose which insurance plans to accept, and keep the revenue after expenses. This is fundamentally different from being employed by a hospital or health system, where the organization owns the practice, sets the schedule, negotiates insurance contracts, and pays the physician a salary (sometimes with productivity bonuses).
The ownership distinction carries real consequences. A private practice physician decides which electronic health record system to use, how many patients to see per day, and how long appointments last. An employed physician typically works within parameters set by administrators. In 2024, 35.4% of physicians were practice owners, 57.5% were employees, and 7.1% were independent contractors.
Private practices also handle their own billing and collections. They submit claims to insurance companies, manage denials, and absorb the cost when patients can’t pay. Hospital-employed physicians hand that work off to the system’s billing department. This difference alone explains why many physicians choose employment over ownership: running a medical practice means running a small business, with all the headaches that entails.
Types of Private Practice
Solo Practice
A solo practitioner is a single physician who owns and operates the practice independently. This model offers maximum autonomy. The physician controls every clinical and business decision. The tradeoff is isolation: solo practitioners face logistical challenges accessing continuing education, covering for vacations, and keeping up with certification requirements. Research shows family physicians and surgeons in solo practice are less likely to pass their maintenance of certification exams compared to those in group settings. Solo practitioners also tend to earn less than their group practice counterparts, though their operating costs are lower.
Group Practice
Group practices range from two physicians sharing an office to organizations with over 100 doctors. Partners typically share overhead costs like rent, staff salaries, and equipment. Physicians in group practices generally report better work-life balance and higher earnings than solo practitioners, with studies across the U.S., Taiwan, and South Africa all finding increased individual earnings in group settings. Group practices also tend to be more efficient in terms of both cost and profit.
The downside scales with size. As groups grow larger, relationships become less collegial and individual physicians lose autonomy. Some research has found worse continuity of care in group practices, with the patient-doctor relationship becoming diluted when patients rotate among multiple providers.
Single-Specialty vs. Multispecialty
A single-specialty group might be five cardiologists sharing a practice. A multispecialty group brings together physicians from different fields, offering patients a wider range of services under one roof. Multispecialty practices can capture more revenue by keeping referrals in-house, but they’re more complex to manage and require balancing the interests of physicians with very different practice patterns.
How Private Practices Make Money
Most private practices still operate on a fee-for-service model, which remains the dominant payment structure for outpatient care in the U.S. The practice bills a fee for each office visit, procedure, lab test, or imaging study. Revenue depends directly on volume: more patients and more services mean more income.
Capitated payment is an alternative that’s gaining traction. Under capitation, a practice receives a set amount per patient per month, regardless of how many times that patient comes in. First introduced in the 1980s to control costs, capitation is resurging through federal programs. Some Medicare models now combine a flat visit fee with a monthly per-patient payment adjusted for how sick the patient population is. The logic is that capitation rewards practices for keeping patients healthy rather than for ordering more tests.
A newer model, direct primary care, eliminates insurance entirely. Patients pay a monthly membership fee, typically between $50 and $150, and receive unlimited scheduled appointments, both in person and virtual. These practices don’t accept insurance, Medicare, or Medicaid. With no billing department, no reimbursement codes, and no documentation required to justify payment, the administrative burden drops dramatically. Physicians maintain smaller patient panels and offer longer visits. The model works well for primary care but doesn’t easily extend to specialties that require expensive equipment or procedures.
The Cost of Running a Practice
Private practice overhead averages about 60% of revenue, according to data from the Medical Group Management Association. That means for every dollar a practice brings in, roughly 60 cents goes to keeping the lights on before a physician sees any personal income.
Staff salaries and benefits are the single largest expense, typically accounting for about 25% of total revenue, or roughly half the entire overhead. This includes front desk staff, medical assistants, nurses, billing specialists, and practice managers. Beyond payroll, practices pay for office rent or mortgage, malpractice insurance, medical supplies, equipment, health record systems, and utilities. Rent and malpractice premiums vary enormously by specialty and geography. A dermatologist in a mid-sized city faces very different costs than an obstetrician in Manhattan.
These fixed costs create real financial pressure. A slow month of patient volume still comes with the same rent, the same payroll, and the same insurance premiums. This vulnerability is one reason the trend has moved toward consolidation, as selling to a hospital or larger organization transfers that financial risk to an entity with deeper pockets.
Why Private Practice Is Shrinking
The decline from 60% physician ownership in 2012 to 42% in 2024 reflects several converging forces. Administrative complexity has grown steadily. Insurance billing, prior authorizations, quality reporting requirements, and compliance with federal regulations like the Stark Law (which prohibits physicians from referring patients to entities they have a financial relationship with) and the Anti-Kickback Statute all demand time and money that small practices struggle to absorb.
Hospital systems have been acquiring practices for decades, offering physicians a guaranteed salary, benefits, and relief from administrative burdens. More recently, private equity firms have entered the market aggressively. Estimates suggest 5 to 10% of physicians across multiple specialties have been acquired by private equity firms, with primary care as a primary target. Between 2018 and 2022, hundreds of primary care practices were acquired, though research shows these acquisitions have been associated with increased physician departures from the acquired practices.
The economics of scale also favor larger organizations. Hospital systems negotiate higher reimbursement rates from insurers than independent practices can. The same office visit, billed at the same code, often pays more when it’s performed in a hospital-owned clinic than in an independent office. This pricing advantage makes it increasingly difficult for small practices to compete.
What Private Practice Means for Patients
For patients, the ownership structure of a medical practice can affect the care experience in tangible ways. Private practices, particularly smaller ones, often provide stronger continuity of care. You’re more likely to see the same doctor at every visit, and that doctor is more likely to know your history without reading through a chart. The physician who owns the practice also controls the schedule, which can mean shorter wait times and longer appointments, though this varies widely.
The potential downsides are real, too. A solo or small group practice may have limited hours, no after-hours coverage, and fewer resources for complex conditions that require coordination across specialties. Hospital-owned practices, while sometimes feeling more impersonal, can offer integrated records across departments, on-site imaging and labs, and easier specialist referrals within the same system.
Direct primary care practices offer a distinct patient experience: longer visits, same-day or next-day availability, and direct communication with your physician by phone or message. The tradeoff is that you’re paying out of pocket on top of whatever insurance you carry for hospital visits, specialist care, and prescriptions.
Choosing or Starting a Private Practice
For physicians weighing their options, private practice offers clinical autonomy and the potential for higher lifetime earnings, but demands business acumen and tolerance for financial risk. Owners take on responsibilities that have nothing to do with medicine: negotiating leases, managing human resources, navigating tax law, and staying compliant with a web of federal and state regulations.
Group practices soften some of these burdens through shared overhead and administrative staff, but they introduce partnership dynamics. Disagreements over spending, scheduling, and strategic direction can strain relationships, especially as groups grow larger. Practices with more than a handful of partners often need formal governance structures, compensation formulas, and buy-in/buy-out agreements.
Despite the ongoing trend toward consolidation, private practice remains a viable path. The 42% of physicians still in private practice represent hundreds of thousands of doctors who’ve decided the autonomy and ownership are worth the complexity. For patients who value a personal relationship with their doctor and consistent care from the same provider, seeking out a physician-owned practice is still one of the most reliable ways to find it.