Physician practice concentration defies federal antitrust mechanisms, study finds

handshake
Piecemeal consolidation of physician practices can raise prices in regional markets, but the small size of transactions keeps them under the radar of federal antitrust agencies, according to a new study in Health Affairs.

As concentration of physician practices drives up prices in some markets, government agencies with antitrust concerns find themselves with few valid options. That’s because the majority of individual acquisitions have been too small to trigger a federal response, according to a new study.

While some large-scale acquisitions garner the attention of the Federal Trade Commission, the majority of healthcare deals inked in the industry’s ongoing merger mania involve hospital groups buying up individual and small practices, according to a study published Tuesday in the September issue of Health Affairs. The study’s authors note that fewer than a third of the markets where physician practices have become concentrated enough to raise the eyebrows of regulators saw any one acquisition that would trigger federal antitrust action.

RELATED: 1 in 4 physician practices now hospital-owned

As larger hospital systems buy up small practices struggling to comply with new federal regulations on their own, they create a particular problem for patients in consolidated markets, according to Martin Gaynor, a healthcare economist at Carnegie Mellon University, who formerly led the FTC’s Bureau of Economics. “These acquisitions tend to drive up prices, and there’s other evidence that seems to indicate it doesn’t do anything in terms of enhancing quality,” he told Kaiser Health News.

RELATED: Bigger isn’t always better for physician practices

The study suggests federal agencies will need to set new, strict limits on market consolidation in order to address the issue. For example, the authors suggest bright-line thresholds when market shares reach a certain size. They also suggest that state governments, which are not bound by federal requirements, also could scrutinize mergers more closely to curb excessive consolidation.

Even with these types of tweaks, however, the sheer number of small-scale deals is likely to hamper attempts to curb them, according to the study, since “the combined resources of state and federal antitrust agencies are not sufficient to identify or challenge even a modest percentage of deals.”

Because of this, the authors point out that additional policy questions arise from the effects of piecemeal consolidation, particularly with regard to quality, efficiencies of scale, and the pricing power consolidated entities have in their markets.