“The consolidation is unstoppable,” said James Robinson, a health economist at the University of California at Berkeley. “The optimistic scenario would be that the consolidating system, instead of increasing prices and increasing use of high-priced services, would collaborate with the insurer to develop targets that hold down the premium.”
Robinson's look at California's market did not consider prices, but did find results that suggest increased use of high-priced services. The study compared patients' annual total cost of care—for hospital services, physician visits, laboratory tests and pharmaceuticals—by physician employment. Patients of doctors in medical groups owned by health systems were the most costly ($4,776), followed by hospital-owned medical groups ($4,312) and physician-employed doctors ($3,066). (The researchers adjusted for regional differences and the severity of patients' illness.)
Health system- and hospital-owned medical groups direct patients to laboratories and clinics associated with the hospital or system, which raises prices, Robinson said. Independent doctors may be more likely to use cheaper, independent outpatient services. “There is huge variability out there in the price of the same service, depending on where it is,” he said.
The second study looked exclusively at physician prices across U.S. markets and compared prices in highly consolidated markets against prices in highly competitive markets. The researchers reviewed prices for 10 common office visits, including internal medicine, cardiology, general surgery and gastroenterology. The more competitive the market, the lower the price, they found.
The results add to a small group of studies that examine consolidation among physician practices. “This all starts with the growth of larger practices and the policy incentives being created to form larger practices and the private market pushing doctors to form larger practices,” said Laurence Baker, a Stanford University health economist and one author of the study.
One such policy is the development of accountable care organizations under the Patient Protection and Affordable Care Act, Baker said. ACOs encourage closer coordination of doctors' practices, which can be accomplished through consolidation, he said.
For policymakers, the results should raise questions about how to benefit from consolidation without compromising pricing power, something that may be possible with new incentives for efficiency under creative payment models. Antitrust enforcement also has a role, he said. “I think it's already being done.