In the fourth quarter of 2024, the median American hospital system lost $306,792 on every physician it employed, per physician, per year, across the entire employed physician population. Kaufman Hall's quarterly hospital financial operations analysis has tracked this metric since 2017, and Q4 2024 was the first time the per-physician loss crossed $300,000. The trajectory is linear and accelerating, with hospital systems that expanded physician employment aggressively between 2012 and 2022 now sitting on employed physician networks that consume cash at unsustainable rates. That single number explains why the hospital buyer class that competed for physician practices across every American specialty for thirty years just stopped competing, and it also explains, specifically, why American ophthalmology practices now exist in a market where hospital systems are no longer a realistic buyer. When hospitals leave the buyer universe, the structural options for what happens to the roughly 4,300 independent ophthalmology practices approaching succession drop from four to three: strategic corporate buyers take the top, PE is stuck, hospitals just exited, and what's left determines the category's next decade.

The Number in Context

Kaufman Hall's methodology tracks hospital operations across a large panel of US health systems, and the per-physician subsidy figure captures the gap between employed physician revenue (professional fees, technical fees, reimbursement) and total cost (salaries, benefits, overhead allocation, malpractice, administrative support, infrastructure). Hospital employment is now running a structural loss at a scale that changes strategic planning across American healthcare. A hospital system employing 500 physicians is subsidizing those employed physicians to the tune of approximately $153 million annually, and a system employing 2,000 physicians is absorbing more than $600 million in annual employed-physician losses. That's unsustainable at current hospital operating margins, where the calendar-year-to-date median through December 2025 ran at 1.3%. Kaufman Hall's framing for CEOs was blunt. Ken Kaufman's own analysis put it directly: "if a factory is losing $5 on every widget it produces, the answer is not to produce more widgets. Rather, expenses need to come down." That's what hospital systems started executing in 2024 and accelerated through 2025.

The Retrenchment That's Already Happening

Ascension, the largest Catholic health system in the United States, divested 12+ hospitals and affiliated practice networks across 2024-2025. Nine Illinois hospitals went to Prime Healthcare in Q1 2025, three Michigan hospitals transferred to MyMichigan Health, and additional transactions with Guthrie Clinic, Mercy Health, and UAB Medicine totaled approximately $450 million in divested infrastructure. Ascension's FY25 operating loss improved from -$1.8 billion to -$491 million, with the improvement driven primarily by the divestiture pipeline. CommonSpirit Health, the third-largest nonprofit hospital system by revenue, reported an FY25 operating loss of $225 million (-0.6% operating margin) and consolidated its eight-region operating structure down to five regions as part of broader cost reduction. Providence Health & Services consolidated seven divisions into three, a shrinkage that was described in Providence's public filings as operational efficiency, but the underlying driver was employed physician subsidy losses. Across the sector, the median operating margin doesn't support continued aggressive physician employment expansion, and every marginal employed physician at six-figure annual losses compounds the operating margin pressure. Hospital systems aren't expanding physician employment networks; they're shrinking them.

Why Ophthalmology Was Never a Hospital Priority to Begin with

Even before the per-physician subsidy reached current levels, American hospital systems historically didn't compete aggressively for ophthalmology practices the way they competed for primary care, cardiology, orthopedics, or oncology. The American Academy of Ophthalmology's own workforce and market structure analyses have consistently noted the structural reason: ophthalmologists don't generate hospital inpatient volume. Cataract surgery is performed in ambulatory surgery centers, most retina injections and procedures are office-based, glaucoma surgeries happen in ASC settings or office-based surgical suites, and oculoplastics, cornea, and refractive surgery are similarly ambulatory-dominant. Almost none of the specialty's revenue flows through hospital inpatient infrastructure.

For hospital systems, the value proposition of employing ophthalmologists was always weaker than the equivalent value of employing cardiologists (who generate cath lab and cardiac surgery volume), orthopedic surgeons (who drive operating room and rehabilitation volume), or primary care physicians (who control specialty referrals and hospital admissions). Ophthalmology generates referral value but limited direct inpatient value, which historically justified lower hospital premium offers and smaller hospital employment growth in the specialty. Even during the hospital-employment expansion wave of 2012-2022, ophthalmology was one of the specialties hospitals moved on last and least aggressively; AMA 2024 data shows ophthalmology at 70.4% private practice, higher than any other specialty, and that data reflects decades of hospital systems declining to compete aggressively for ophthalmology practices even when capital was flowing in other directions. Combine the historical hospital-ophthalmology structural mismatch with the current per-physician subsidy crisis, and hospital systems are effectively eliminated as a meaningful buyer class for independent ophthalmology practices in 2026 and beyond.

What the Retrenchment Means for the Practice Succession Wave

Approximately 4,300 solo ophthalmologists are expected to exit practice through retirement or transition by 2030 based on AMA physician practice benchmark data and American Academy of Ophthalmology workforce demographic modeling, and most of those practices will need succession transactions within the next 36-60 months. If hospital systems were active buyers, they'd absorb some share of those transitions through employment offers to successor physicians or acquisitions of retiring ophthalmologists' practices, but that's not going to happen at meaningful scale. The pathway of "hospital employment absorbs the succession wave" is structurally closed, which creates a specific question: who absorbs that volume of practice transitions between 2026 and 2030?

Strategic corporate buyers like Cencora, McKesson, Cardinal Health, and Humana/CenterWell are absorbing the top-tier platforms at strategic multiples above $800 million per transaction, and their acquisition and integration cost structures don't scale to individual sub-$10 million practice acquisitions. PE ophthalmology platforms are in stabilization or forced-seller mode, with the 2017-2019 cohort having reached the exit-cycle stage of fund lifecycles, and most of those platforms focused on their own exit negotiations rather than new acquisitions. New platform formation is constrained by healthcare PE fundraising collapsing to $9.5 billion across 10 funds in H1 2025 (from $21.7 billion peak in 2023). That leaves operator-led, patient-capital platforms as the remaining structurally viable buyer class. PE fund capital can't match that structure because fund lifecycles force exit cycles that don't align with the 30-40 year horizon of compounding physician-led value, strategic corporate acquirers don't operate at sub-$10 million transaction sizes, and hospital systems have exited physician employment expansion. Patient capital operated through permanent-hold structures capable of transacting at sub-$10 million deal sizes and holding acquired practices indefinitely is what remains.

The Structural Conclusion

American hospital systems just eliminated themselves from the ophthalmology buyer universe, not through strategic choice but through economic necessity. The per-physician subsidy crisis and the 1.3% operating margin made continued expansion of physician employment structurally impossible, and the retrenchment pipeline (Ascension, CommonSpirit, Providence) confirms that sector-wide trajectory. For ophthalmology specifically, the hospital exit compounds a trend the specialty has always reflected: ophthalmology was never going to be consolidated through hospital employment the way cardiology or primary care were, because the structural mismatch between ophthalmology's ambulatory revenue base and hospital inpatient economics made aggressive hospital competition for ophthalmology practices economically unjustifiable even in better times.

What remains is the practice-level reality. Thousands of independent ophthalmology practices will transition ownership over the next 36-60 months. Three of the four traditional buyer classes are either constrained (strategic corporates, PE), retrenching (hospitals), or structurally mismatched (hospitals again). The fourth class, patient-capital operators running permanent-hold physician-led platforms, is the only buyer class with the structural fit to absorb the long tail of ophthalmology practice succession. That's not a speculative future scenario; it's the arithmetic of American healthcare capital in 2026 after the hospital class exited. Understanding the arithmetic is the first step toward positioning capital correctly for where the category actually goes.

This article is for general educational purposes and is not legal or financial advice.

Verdira is a healthcare acquisition platform focused on ophthalmology practices. Physician ownership. Transparent structure. No volume quotas. If you're a practice owner thinking about succession or a physician exploring ownership, we're open to thoughtful conversations.

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