Hospital ownership of doc groups leads to higher costs

Hospitals and healthcare systems may want to rethink plans to acquire physician practices to increase care coordination. A new study finds that hospital ownership of physician groups in California led to a 10 to 20 percent increase in overall costs.

James C. Robinson, Ph.D., of the University of California, School of Public Health, Berkeley, and Kelly Miller, of the Integrated Healthcare Association in Oakland, California, published their findings in the latest issue of the Journal of the American Medical Association. They conducted the study to determine whether total expenditures per patient were higher in physician organizations owned by local hospitals or multihospital systems compared with physician organizations owned by participating physicians.

Robinson and Miller analyzed date on total expenditures for care provided to 4.5 million patients treated by integrated medical groups and independent practice associations in California between 2009 and 2012. Of the 158 organizations studied, 118--or 75 percent--were physician-owned, 19 organizations--or 12 percent--were owned by local hospitals and 21 organizations (13 percent) were owned by multihospital systems.

The researchers found that the average expenditure per patient across all physician organizations increased by 16.5 percent between 2009 and 2012, from $2,954 to $3,443. By 2012, expenditures per patient had increased to an average of $3,066 in physician-owned organizations, $4,312 in local hospital-owned organizations and $4,776 in multihospital system-owned organizations.

After adjusting for patient severity and other factors over the period, local hospital-owned physician organizations incurred expenditures per patient 10.3 percent higher than did physician-owned organizations, according to the study. Organizations owned by multihospital systems incurred expenditures 19.8 percent higher than physician-owned organizations. The largest physician organizations incurred expenditures per patient 9.2 percent higher than the smallest organizations.

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

They also noted that antitrust law and policy must strike the appropriate balance between permitting hospital acquisitions that improve efficiency and preventing acquisitions that increase expenditures. "Reform of payment methods by Medicare and private insurers should focus on the total expenditures made on behalf of patients by the physicians and facilities involved in their care to promote coordination but also to create incentives for efficiency and price reductions," the authors said.

In reaction to the study, some health policy experts told the Los Angeles Times that organizations can achieve care coordination without consolidation and the acquisitions just reduce competition and increase prices.

"There may be some be cost efficiencies internally, but the savings aren't passed along to the consumer or the employer paying for the care," Suzanne Delbanco, executive director of Catalyst for Payment Reform, an employer-backed group in San Francisco, told the publication.

But the California Hospital Association (CHA) said the partnerships are a good method to align financial incentives among providers and deliver care more efficiently.

"There needs to be a new way to transition from providing care to being part of a team that manages health," Anne McLeod, senior vice president for public policy and transformation at CHA, told the Times.

To learn more:
- here's the study abstract
- read the article

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