Hospital purchases of private practices drive up spending, prices

Hospital acquisitions of physician practices often increase both prices and spending by privately insured patients, according to a new study published in Health Affairs.  

Researchers, led by Laurence C. Baker of Stanford University, analyzed 2.1 million hospital claims from workers of self-insured employers over a six-year period. Prices were more likely to increase when hospitals bought practices than when hospitals and physicians formed looser partnerships, according to the study.

"The message from the study confirms that when doctors and hospitals merge it may not be in consumers' best interest," Daniel Kessler, a study co-author and law and health policy professor at Stanford, told Kaiser Health News. "We are not saying ACOs [accountable care organizations] and integration are necessarily a bad thing but there is a potential downside and people should be aware of it and here is more evidence of it."

The Affordable Care Act provides incentives to hospitals to acquire practices because it encourages providers to establish ACOs, according to KHN. Although the Federal Trade Commission (FTC) has thus far only intervened in these collaborations when they stifle competition by controlling too many physicians in one community, this study may provide an impetus to scrutinize hospitals' purchases more closely, according to the article.

"This study could be the evidence the FTC needs to challenge hospital physician practice acquisitions … that they believe have a strong prospect of leading to higher prices for consumers," Paul Ginsberg, a professor of health policy at University of Southern California, told KHN.

Hospitals do not purchase practices with the goal of driving up prices, according to Caroline Steinberg, the American Hospital Association's vice president of trends analysis. "Hospital are integrating with physicians because it is a necessary way to engage physicians in innovative payment methods such as bundling payments for one service such as hip replacements and ACOs," Steinberg told KHN.  To keep spending down, Steinberg recommended payment models that link payments to cost containment and insurers' use of "narrow networks."

In January, a federal judge ruled that St. Luke's Health System in Idaho violated antitrust laws with its purchase of the state's largest independent physician's practice, FierceHealthcare previously reported.

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

 

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