In an effort to coordinate patient care and make healthcare delivery more effective, a growing number of large hospitals have been acquiring physician groups and physician practices. One would expect that this would reduce patient costs, since this would give hospitals stronger bargaining power with insurance plans and medical device companies, and allow for more efficient utilization of resources. Turns out, that’s not the case.
What’s the catch?
According to James Robinson, the lead of this 2014 study and head of health policy and management at UC Berkeley’s School of Public Health, “Hospitals are very expensive and complex organizations, and they are not known for their efficiency and low prices. It could be that once a medical group has been acquired, physicians in those groups are expected to admit their patients to the high-priced hospital.” One way this happens is that hospital-owned physician groups are required to conduct ambulatory surgery and diagnostic procedures in the outpatient departments of their parent hospital, which is more expensive than to do so in free-standing, non-hospital ambulatory centers. Another factor that leads to these increased prices is that consolidation limits competition, giving hospitals more leverage to raise prices.
The researchers analyzed data from California starting from 2009 to 2012 and found that per patient expenditures were 19.8% higher for physician groups in multi-hospital systems versus per patient expenditures for physician-owned organizations. Per patient costs in physician groups owned by local hospitals were slightly better, running 10.3 percent higher than with physician-owned groups.
Image Source: Bloomberg
What does that mean for you?
The study suggests that patient costs are actually cheapest in physician-owned groups, slightly more expensive in physician groups that are owned by local hospitals, and most expensive in physician groups that are owned by large multi-hospital systems. That isn’t to say that hospital mergers are all bad–in certain cases they do expand services and reduce waste. However, this California-based study, along with studies done in Connecticut, Massachusetts, and Florida, indicate that hospital consolidation in concentrated markets is followed by a major increase in medical prices.
Feature Image Source: Presidencia de la República Mexicana
