Hospital purchase of medical groups cause outpatient prices to rise

Hospitals have been aggressively purchasing medical groups in recent years, and when they do so, prices for patients have a tendency to rise, according to a new study by researchers at Harvard Medical School and Brigham and Women's Hospital that was published in the most recent issue of JAMA Internal Medicine

The researchers examined the records of 7.4 million enrollees in preferred provider or point-of-service health plans from December 2013 through mid-July of this year and situated them in some 240 metropolitan statistical areas (MSAs) nationwide.

Those individuals enrolled in health plans in MSAs where hospital ownership of physician practices exceeded the 75th percentile experienced a mean increase of $75 per individual on outpatient care spending, with an increase from $38 to $113 per enrollee. The median represented an overall spending increase of 3.1 percent.

"The market power that is in the hospital's hands is conferred to the physician practice," J. Michael McWilliams, M.D., an associate professor at Harvard Medical School and one of the paper's co-authors, told the Wall Street Journal. 

However, there was no correlation of higher inpatient spending or utilization for the study cohort, the researchers concluded. 

The cost increase was moderate compared to a study last year that correlated hospital ownership of physician practices to double-digit upticks.

Nevertheless, the business practice of hospitals acquiring medical groups has begun to catch the attention of federal regulators, who may intervene more aggressively in future transactions.

Although some concern was raised that hospital ownership of medical groups may be causing costs to rise without additional benefits, the American Hospital Association deflected the criticism, telling the Wall Street Journal that the study doesn't take into account other payment models that have led to improvement in the quality of care and slower healthcare cost growth.

To learn more:
- read the Wall Street Journal article 
- check out the study abstract