Hospitals buy more doctor’s offices. Which is linked to higher costs, the results of the study

Diving brief:

• Hospitals acquire doctor’s offices at a faster rate, and prices are increasing accordingly, according to new research.
• Between 2008 and 2016, the share of doctors integrated into a hospital increased by almost 72%, according to the study published by the National Bureau of Economic Research. On average, the integration between doctors and hospitals was followed by “important and sudden” price increases – without a change of quality, revealed research.
• This is the latest research linking suppliers to consolidate higher health costs, a trend that can be difficult to follow due to the large quantity of mergers and acquisitions that fall under regulatory report thresholds. The hospital’s main hall has sought to reduce the study, arguing that it is based on obsolete data from a single major insurer.

Diving insight:

The health care industry has been consolidated regularly for years. The network of independent doctors practices in the United States, formerly, shrinks in the middle of what doctors say they are an insufficient reimbursement and an increasing administrative burden which make them difficult to remain operational by themselves.

Currently, more than three -quarters of American doctors are employed by companies, including health systems – with far the largest owners, according to the Physicians Advocacy Institute.

Hospitals want to buy doctor practices for several reasons. Offices are a precious source of references. Bringing them internally allows hospitals to increase practices rates for outpatient treatment. And, having more doctor’s offices can help hospitals better coordinate care, especially in value -based arrangements.

However, there is a mountain of evidence showing that consolidation, including among hospitals and doctors, may not be good for patients, doctors and the large health system.

The ownership of the company is linked to a decrease in the quality of care and higher health costs for patients. Research also shows that doctors’ income drops after their hospitals.

The Nber study, which was led by Yale Public Health, Zack Cooper, noted that the share of doctors working in practices belonging to the hospital has almost doubled in the past two decades. This increase was linked to substantial price increases.

For childbirth, for example – admission to the most common hospital for private insured people – doctors’ prices increased on average by 15.1% within two years of their acquisition. During the same period, hospitals’ prices also increased, on average by 3.3%.

Researchers suggested that the increase in prices came from a loss of competition in the integration supplier market.

Prices have increased the most when an already highly integrated system bought more doctors, when hospitals bought doctors with more power to move their references and when doctors were bought by hospitals with more negotiation power, according to the study.

“Our estimates suggest that the action against many medical and hospital mergers could help preserve competition in the health care markets and prevent prices,” said the study.

However, 99.9% of the transactions analyzed in the study fell below the Hart-Scott-Rodino report thresholds for fusion activity, making it difficult for regulators to predict and prevent anti-competitive effects, according to research.

Recently promulgated merger directives which orders the Federal Trade Commission to examine a wider scope of transactions could help. However, regulators do not have resources or authority to prevent many problematic mergers, according to experts.

The American Hospital Association criticized the NBER study as imperfect, arguing that it is strongly based on obsolete information provided by Unitedhealthcare, an insurer of a parent company which is “one of the most aggressive buyers of practical doctors”.

“In other words, the study easily ignores one of the most important factors having an impact on the employment of doctors in recent years,” said Aaron Wesolowski, vice-president of the AHA research and political communications strategy, in a statement sent by email. “Beyond that, the study tries very little to recognize many of the well-documented factors that push the practices of doctors to integrate in hospitals in the first place.”

Although Unitedhealth is the largest payer operator of practical doctors, the property of the doctors hospital goes well that of insurers as a whole.