The Physician Squeeze: How Systemic Cuts Are Crippling American Medicine

There is a quiet crisis unfolding in American medicine. Over the past decade, physician reimbursement has fallen sharply even as expectations and oversight have exploded. Medicare payments to physicians have dropped more than 30 percent when adjusted for inflation since 2001 and nearly 20 percent in the last ten years alone. Meanwhile, inbox messages, prior authorizations, documentation demands, and liability pressures have multiplied. The math no longer works, not for physicians and not for the system that depends on them.

Each year brings a new model, a new metric, and another round of cuts. The 2025 Medicare Physician Fee Schedule reduced payments yet again, the fifth consecutive annual reduction. Under budget neutrality, any new investment in one area must be offset by cuts somewhere else, often to the physicians providing the care. Office visits that once sustained a practice now barely cover overhead. Independent clinics that anchored communities for decades are closing, consolidating, or selling to hospitals and corporate networks just to stay afloat.

Yet while physicians absorb these blows, policymakers and payers continue to argue that doctors are driving healthcare costs. That narrative is false. According to the Centers for Medicare and Medicaid Services, physician and clinical services account for only about 20 percent of total U.S. health spending, and physician income represents less than 10 percent. The real cost growth lies in insurance administration, hospital overhead, and regulatory waste. Prior authorizations, referral mandates, and redundant utilization reviews add billions in administrative costs each year, none of which heal a single patient.

For decades, the foundation of care was a straightforward fee-for-service model: a physician was paid for a visit, a procedure, a service rendered. Imperfect, yes, but transparent. Over time, that model has been replaced by value-based contracts, bundled payments, and risk-sharing arrangements. In theory these models reward quality and efficiency. In practice they reward the institutions large enough to manipulate the rules.

Hospitals and insurers have the capital, analytics, and negotiating leverage to thrive in this environment. They capture the shared savings, absorb the risk, and impose the reporting requirements. Small practices, by contrast, shoulder the administrative burden without the infrastructure to compete. They hire staff to track metrics, purchase software, and submit data, costs that rarely translate into meaningful rewards.

The winners are predictable: insurers, hospital systems, and corporate networks. The losers are the frontline physicians who spend their days face to face with patients, not spreadsheets.

Meanwhile, more is being asked of doctors than ever before. We are expected to document every encounter in granular detail, respond to a flood of messages, navigate prior authorization labyrinths, meet federal quality metrics, and bear increasing legal risk, all while being paid less for doing it. Each new layer of bureaucracy steals time from patient care.

Morale is collapsing. Physicians are exhausted, frustrated, and questioning whether they can sustain this pace. The timing could not be worse. The Association of American Medical Colleges projects a shortage of up to 86,000 physicians within the next decade. Cutting pay while increasing workload and complexity only accelerates burnout, turnover, and early retirement.

Independent medicine, the foundation of American healthcare, is vanishing. Overhead keeps climbing: staff salaries, rent, technology, malpractice coverage, compliance requirements. Reimbursement has not kept up. Many physicians now view private practice as financially impossible. Each closure pushes more care into corporate hands, where profit, not continuity, drives decisions.

Just last week, Bloomberg reported that Optum acquired yet another physician group, forty doctors in a single deal, even as it acknowledged losses in its own care delivery arm. The message is clear: when reimbursement falls and administrative costs rise, independence becomes untenable. Selling is not greed. It is survival.

But it raises a deeper question: is this the system we want — one dominated by conglomerates, where patients choose from corporate networks instead of community physicians? Every acquisition narrows choice, concentrates power, and edges medicine closer to monopoly. Fewer choices never lower costs. They simply shift them upward.

This is not about greed. It is about sustainability. A fair, inflation-adjusted reimbursement system is not a luxury; it is what keeps clinics open and patients cared for. When payment cuts drive doctors out of practice, patients lose access, continuity breaks, and trust erodes. What remains is a system run by algorithms and contracts instead of relationships and judgment.

Physicians are not asking for more money. We are asking for balance. Tie reimbursement to inflation. Reform prior authorization. End budget neutrality rules that pit physicians against one another. Re-center the system on the patient-physician relationship, not the insurer-administrator transaction.

Medicine runs on purpose, not profit. But purpose alone cannot sustain a system that treats its healers as expendable line items. Each year we ask physicians to do more, bear more risk, absorb more bureaucracy, and then pay them less for the privilege. That is not reform. It is dismantling by attrition.

If we continue to devalue those who care for patients, we will not just face a physician shortage. We will face a collapse of trust at the core of American medicine. And once that trust is gone, no algorithm, no efficiency model, and no value-based promise will bring it back.