Two Studies Signal Practice Consolidation May be Driving Up Healthcare Costs

Journal of American Medical Association recently published two studies that show that the trend toward medical practice consolidation may be influencing the cost of healthcare services. Practice consolidation is the situation where hospitals and large medical conglomerates purchase physicians’ practices.

The two studies show that because of less competition and the increased number of practices being owned by large organizations and hospitals may actually lead to higher healthcare costs for patients.

One study was conducted by researchers from the University of California. This study examined the expenditures of 4.5 million patients in California who were covered by a health maintenance organization between 2009 to 2012. The examined costs included professional, laboratory, pharmaceutical, hospital and ancillary services.

The study showed that the average expenditure per patient was 10.3% higher for practices owned by hospitals and 19.8% higher for practices owned by health systems than those at doctor-owned practices.

The second study was conducted by researchers at Stanford University and looked at the costs of 10 types of office visits. The study looked at 1,058 counties throughout the United States. The research used the Hirschman Herfindahl Index to examine the level of competition in the counties. The study discovered that in less competitive markets, private provider organizations paid between 8.3% and 16.1% higher for identical services.

The authors of the Stanford study say that a correlation between competition and prices may have important implications for health policy, due to the pressure to increase practice size that could continue and 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.”