How Hospitals Trap Physicians in the System

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I recently spoke to a former hospital executive about “trapping” physicians in the system. It’s everything you were afraid of working for the system and hospital CEOs. We discuss non-competes, price increases, the hospital’s mission, how it makes money, why it acquires primary care, and much more. Thanks to Mr. Health Veuleman for the discussion and time.

AI summary of Major Points Covered:

  • Hospital business model & revenue strategies — Hospitals rely heavily on arbitrage (e.g., technical component billing on CPT codes), government subsidies (like disproportionate share payments and especially the 340B drug discount program, which is described as abused for profit buffering), market capture through provider-based clinics, and inflating costs for higher reimbursements rather than pure fee-for-service.
  • “Trapping” physicians — Non-compete clauses act as bullying/intimidation tools (expensive to fight legally, around $250k, but often winnable via public pressure/shaming). Hospitals acquire primary care practices mainly to control referral pipelines (primary care → diagnostics → specialists), treating physicians more as interchangeable “cogs” in a system where patients are “widgets” and the focus is transactions over relationships.
  • Primary care acquisition — Hospitals buy primary care to lock in referrals and boost facility fees, not necessarily for better patient care. In contrast, direct primary care (DPC) models are presented as far superior: lower overhead, up to 100% cost savings, high patient loyalty (patients follow their doctor — ~93% within 180 days), reduced unnecessary referrals/ER use, and strong appeal to employers seeking to cut healthcare spending.
  • Critique of hospital “mission” & leadership — Hospital missions are often profit-driven rather than truly community-oriented. Many CEOs lack advanced education and operate in insular cultures. U.S. healthcare is unsustainable (already ~20% of GDP, $5.6 trillion in 2025 spending), with hospitals resistant to reforms like site-neutral payments, ending 340B abuses, or provider taxes.
  • Advice for physicians — Go independent where possible (only ~28,000 independent physicians left serving a huge market — “infinite opportunity”). Align with employers via DPC for massive savings (e.g., dropping employer spend from $1M to $250K). Physicians need to unify politically to counter the influence of hospital associations and the AMA.
  • Overall takeaway — Hospitals view the system as a “wheel” where physicians are replaceable parts, but the math favors independent/DPC models long-term. Patients and employers benefit when physicians escape corporate control.

About Shane Purcell, MD

Dr. Purcell is board certified family physician working in Anderson, SC. He received his medical degree from Mercer University in Macon, GA and completed family medicine residency at AnMed Health in Anderson, SC. After completing his residency, Dr. Purcell worked in a private group practice for 3 years before opening his own cash-only primary care clinic in 2005. As he built his cash-only clinic, he was also working part-time in a local urgent care facility. In 2008, he purchased a dormant medical clinic on the “wrong side of the tracks” and opened an urgent care and primary care clinic. After gaining his freedom from third-party captives, Dr. Purcell and a colleague formed the first direct primary care clinic in Anderson County in 2015. In 2019, he transitioned to full-time direct primary care and sold his urgent care. The direct primary care model has brought about a restoration of a relationship with patients broken by third-party middlemen. Now, he can offer more access and more of his time to patients. Dr. Purcell firmly believes that the direct primary care model is the last hope for health care in America. Dr. Purcell is an active member of several medical organizations including the DPC Alliance, Free Market Medical Association, and American Academy of Family Physicians. He is the former Chair of the Direct Primary Care Member Interest Group for the AAFP and a founding member of the DPC Alliance and the Carolina’s Free Market Medical Association. He was elected to the Advisory Committee for the DPC Alliance in the Fall of 2018 and completed his term in 2021. Dr. Purcell is the author of Magic, Pixie Dust, and Miracles: A Guide to Direct Primary Care and Employers which shares how to connect DPC with employers of all sizes. He has spoken about this topic and DPC in general at the DPC Summit, DPC Nuts and Bolts conference, Hint Summit, AAFP FMX, Carolina’s Free Market Medical Association, TedexFurman, and DPC Alliance Mastermind sessions. He continues to speak to residents and student groups about DPC as well.