Hospital-owned physician groups far more likely to refer patients to that facility

When a hospital buys a physician practice, those doctors are more likely to refer patients to that facility, raising concerns about costs and quality, according to a paper from the National Bureau of Economic Research.

Researchers at Stanford University in California pored over millions of patient admissions in 2009 and determined that doctors who worked for medical groups owned by the hospital admitted patients to that facility 83 percent of the time. The probability they would make such a referral was about one-third higher than compared to physicians not working for hospital-owned practices.

Moreover, the hospitals where those patients were being admitted were more likely to be higher-cost and lower-quality than other hospitals operating in the region. However, the researchers noted that more investigations is necessary in order to reach any solid conclusions.

"If these results are valid, then there are large implications," Martin Gaynor, a Carnegie Mellon University health economist, told Kaiser Health News. "Hospital acquisitions of physician practices could disadvantage rival hospitals and harm competition."

Other studies have already suggested that when hospitals acquire physician groups, costs for providing care tend to rise.

Some hospitals and hospital systems went to great lengths to ensure patients were referred to their facilities. For example, St. Luke's Health System in Idaho tracked referrals made by physicians employed by medical groups it owned, and generally made it more difficult for them to make out-of-network referrals. But that business model ultimately led to the unraveling of its acquisition of Idaho's largest medical group. Although the hospital maintained the acquisition was vital to its plan to integrate care in the community, the physician referrals were key to the ruling against the hospital. 

However, pending payment adjustments to the Physician Quality Reporting System mean hospitals that have acquired large numbers of physician practices will have to make adjustments to care that take place outside of an inpatient setting.

To learn more:
- here's the paper (purchase required)
- read the Kaiser Health News article