Premiums rise when hospitals buy doctor practices, study finds
- When hospitals purchase physician groups in already highly concentrated markets in California, marketplace premiums were likely to rise 12%, according to a new Health Affairs study that measured premium data from 2014 to 2017.
- Prices were likely to rise for outpatient visits as private practices were acquired or vertically integrated with hospital systems. Researchers found in these instances prices were likely to rise 5% for primary care practices and 9% for specialty services, according to data analyzed from between 2011 and 2016.
- Hospital acquisition of private practices dramatically increased in a six-year span. In 2010, the percentage of physicians in practices owned by hospitals was 25%, but that figured spiked to more than 40% by 2016. Specialty practices owned by hospitals increased from 20% to 54% over that same period.
Payer monopolies have already been found to result in higher ACA premiums. Authors of the new study suggest their findings should serve as a warning to regulators in states across the country.
Red flags should be raised when hospitals continue to buy up private practices because the effect on premiums became larger as vertical integration increased. However, these types of acquisitions tend to fly under the radar of state regulators and don’t draw as much attention as horizontal mergers, or when a hospital buys another competing hospital.
The reason purchases of smaller doctors’ groups don’t get much attention is because they tend to be smaller acquisitions over time that eventually add up, study author Richard Scheffler of the University of California at Berkeley told HealthCare Dive.
Nevertheless, each state regulator should assess its individual healthcare markets along with the level of concentration and increased attention should be placed on these types of acquisitions, he said. “When you’re highly concentrated even a small purchase can have a huge affect,” Scheffler said.
Another recent report bolsters the findings of increased hospital-owned physician practices. Avalere found a 100% increase in such practices between July 2012 and July 2016, when there were 72,000 physician offices employed by hospitals.
This latest study is particularly interesting in light of the legal fight between California’s attorney general and health care giant Sutter Health over anti-competitive practices. Healthcare prices in northern California are far higher than the rest of the state and that’s due to Sutter’s market concentration, the lawsuit alleges.
As M&A continues its steady pace in the industry, federal and state regulators are turning a more careful eye on the potential effects of oversaturated markets. A separate Health Affairs report from earlier this year found that highly-concentrated markets in northern California caused higher prices for hospital and physician searches and for Affordable Care Act premiums.
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