Today’s Managing Health Care Costs Number is $108
Regions with higher numbers of physicians whose practices were acquired by hospitals had higher increases in outpatient costs – on the average of $75 per patient per year for those under 65 covered by commercial (employer sponsored) health insurance, according to a study published in this month’s JAMA Internal Medicine. This increase in cost is mediated entirely by outpatient price increases. There are no substantial increases (or decreases) in utilization, and there are no substantial increases (or decreases) in hospital costs. The average office visit cost for physicians who were hospital owned was $108 more than those physicians in independent practice.
The researchers used Medicare claims to assess whether physicians were employed by hospitals (hospital employed physicians are reimbursed for a facility fee). They use the Truven MarketScan database to assess difference in prices charged to commercial health plans - since there are no price differences in Medicare which sets nonnegotiable fees.
This is further strong evidence that provider consolidation leads to increased unit cost. That could be economically neutral if hospital employed physicians used their well-integrated system to lower utilization of some other services, but that does not appear to be the case. If hospitals acquire physician practices and merely hike the office visit fees without providing additional value – that would merely be “rent” and such acquisitions should be discouraged by regulators.
The graphic above shows the increase in hospital owned physicians was associated with increased price and no significant change in utilization, while the increase in concentration of physician practices was not associated with significant increase in price or utilization.
The graphic above shows the increase in hospital owned physicians was associated with increased price and no significant change in utilization, while the increase in concentration of physician practices was not associated with significant increase in price or utilization.
