Hospitals have been gradually buying up smaller physician practices, driving up the cost of care for patients without always increasing the quality of care, a new report has found.
According to a new study from the National Bureau of Economic Research, there has been a steady increase in hospitals buying physician practices resulting in a decrease in competition, ultimately causing higher costs for patients. That practice involves hospital groups buying once private practices and folding the doctors and patients under their hospital’s umbrella and management.
“Collectively, our evidence demonstrates that the price increases we observe are likely a function of lessening of competition,” researchers wrote.
From 2008 to 2016, the number of physicians acquired by hospitals increased nearly 72 percent. By the end of that period, nearly half–or 47.2 percent–of physician practices were owned by a hospital, the study found.
In nearly all instances, this was followed by “significant and sudden” price hikes – with no noticeable change in the quality of care received, the study found.
While the researchers noted the scale of price increases varied from hospital to hospital, they did “not observe any concurrent increases in quality after hospital-physician integrations that could explain the sudden price increases we observe.”
Even when prices are high, as long as there’s competition, the quality of care and overall outcome for patients is usually better, according to the University of Texas at Dallas economics of health professor Luba Ketsler.
“When there is all of this merging taking place, there is some concern that if there is less competition, a lack of quality can happen,” Ketsler said. “So not only are prices getting higher, but the quality might drop as well.”
Along with the increase in mergers, the researchers found there were only a handful of federal investigations into the consolidations.
“Our estimates suggest that taking action against many physician-hospital mergers could help preserve competition in health care markets and keep prices from rising,” they added.
While hospitals are the biggest monopoly, the biggest uptick in buying physician practices in recent years has been from private equity firms, Ketsler explained.
“So since that paper has taken place, there’s also a huge uptick in private equity firms, and they’re especially interested in particular markets where they can really make a killing, like where they make massive profits,” Ketsler said.
Whether it’s a hospital or private equity firm buying up the practices, costs will rise for the patient, Ketsler said.
“They make a lot of money and it becomes very expensive for the patient because they’re able to raise costs and the quality goes down because there’s less oversight over time,” Ketsler said.
While the researchers found that quality of care is likely to go down when physician practices are bought by hospitals, Ketsler said that’s not always the case.
“Let’s say that I’m a small clinic and a hospital buys me up, now that I’m part of a hospital system, I could send my patient to the hospital, and they will have access to some surgical procedures that I would they would not have had access to before,” Ketsler said.
There are positives the study didn’t address and benefits to physicians in smaller clinics that join a hospital system, according to Ketsler. This includes access to electronic health record systems, which are often expensive for a solo physician to implement.
Ketsler noted patients can also benefit going to a doctor within a hospital system. If the patient ends up in the emergency room, doctors will already have access to their medical records and be aware of any medications.
Meanwhile, the American Hospital Association, the national body representing all types of hospitals and health care networks, slammed the study as “flawed,” in a statement to The Independent.
“This flawed study uses data from over a decade ago from a single insurer – one that has become the largest single employer of physicians in the US and one of the most aggressive acquirers of physician practices,” Aaron Wesolowski, vice president of research strategy and policy communications, said.
“In other words, the study conveniently ignores one of the largest factors impacting physician employment in recent years – its own acquisition practices.”
“Hospital partnerships for physicians and their practices can offer stability and resources, including upfront investments, infrastructure improvements, electronic health records alignment and facility upgrades, allowing for the continuation of access to care, especially in rural communities,” Wesolowski said.
Wesolowski urged the researchers to take a closer examination of corporate insurers and other entities that he says have been the main source driving the uptick in physician acquisitions in recent years.
