Are Healthcare Costs Rising Because of Practice Consolidation?

St Louis Laser Liposuction CenterTwo studies recently published in the Journal of American Medical Association presented results that illustrate the recent trend of medical practice consolidation is affecting the cost of healthcare services. This trend is a result of hospitals and large medical groups purchasing private physicians’ practices.

The two studies indicate that because of decreasing competition and the increasing number of hospital-owned practices, healthcare costs could be rising.

Conducted by researchers at the University of California, one study examined the overall healthcare expenditures of 4.5 million patients in California. The patients in the study were covered by a health maintenance organization for the period of time between 2009 and 2012. Costs that were examined included professional, pharmaceutical, lab work, hospital, and ancillary services.

The University of California study determined that the average patient expenditure was 10.3% higher for hospital-owned practices; and 19.8% higher for practices owned by health systems than costs at physician-owned practices.

A second study conducted by researchers at Stanford University scrutinized the costs of 10 types of office visits, made at 1.058 counties throughout the country. By using the Hirschman Herfindahl Index, the study determined the overall level of competition in the counties. It was discovered that in markets that had less competition, private provider organizations paid between 8.3% and 16.1% more for the same services.

The researchers point out that an association between prices and competition can have effects on health policies become of the pressure to increase practice size, and could continue and may even increase in the future.

The study states: “Higher health care spending due to increased prices paid to physicians without accompanying improvements in quality, satisfaction, or outcomes would generate inefficiency in the health care system.”