Studies: Practice consolidation drives up costs




The consolidation of physician practices, once considered a way to curb spending, seems to be costing the health care system more money, according to the findings of two studies published Oct. 21 in JAMA.

When researchers examined the prices paid by private preferred provider organizations (PPOs) for 10 types of common office visits, they found that the prices were higher in areas where there was less competition among physicians. The study examined the impact of competition across 10 specialties: internal medicine, family medicine, cardiology, dermatology, gastroenterology, neurology, general surgery, orthopedics, urology, and otolaryngology (JAMA 2014;312:1653-62).

PPOs reported that prices for common types of office visits were higher in less competitive areas, according to two new studies. Digital Vision /

PPOs reported that prices for common types of office visits were higher in less competitive areas, according to two new studies.

Looking at claims paid in 2010 across 1,058 U.S. counties, Laurence C. Baker, Ph.D., of Stanford (Calif.) University, and his colleagues found that in areas with the lowest amount of physician competition (measured as the 90th percentile on the Hirschman-Herfindahl Index of economic competition), an intermediate office visit with an established patient (CPT code 99213) was between $5.85 and $11.67 higher than in areas with the greatest amount of physician competition (10th percentile).

When measured across 10 types of office visits (CPT codes 99201-99205, 99211-99215), average office visit prices ranged from 8.3% to 16.1% higher in areas with less competition. A more conservative model estimated that average prices were 3.5% to 5.4% higher.

The higher prices may be justified if these larger practices are producing higher quality care, the researchers wrote, but more information is needed to determine the full implications.

The study was funded by the National Institute for Health Care Management. Three of the study authors reported receiving consulting fees from the National Institute for Health Care Management and one of the authors received consulting fees from Kaiser Permanente and the American Hospital Association.

A second study, also published Oct. 21 in JAMA, found that hospital ownership of physician practices was associated with higher spending than in physician-owned practices (JAMA 2014;312:1663-9).

James C. Robinson, Ph.D., of the University of California, Berkeley, and Kelly Miller of the Integrated Healthcare Association in Oakland, compared total spending on 4.5 million patients treated by integrated medical groups and independent practice associations in California between 2009 and 2012. All the patients included in the study were covered by commercial health maintenance organizations (HMOs).

Total spending was 10.3% higher in local hospital-owned physician organizations than in physician-owned organizations, after adjustment for patient severity, geographic costs, and other factors. Spending was 19.8% higher in practices owned by multihospital systems, compared with physician-owned organizations.

The largest organizations had spending that was 9.2% higher than the smallest organizations, according to the study.

Of the 158 organizations studied, 75% were physician-owned organizations, 12% were owned by local hospitals, and 13% were owned by multihospital systems.

“These findings are in contrast to the hope and expectation that organizational consolidation of physicians with hospital would result in greater coordination, and hence lower expenditures,” the researchers wrote. “Policy makers must strive to ensure that hospital acquisition of medical groups and physician practices does not lead to higher expenditures.”

The study was funded by the Robert Wood Johnson Foundation. The researchers reported that they had no financial disclosures.

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