ACOs linked to consolidation of physician practices, study finds

Doctor with patient
The growth of ACOs has also led to the consolidation of physician practices, according to a Health Affairs study. (Getty/wutwhanfoto)

One worry about accountable care organizations (ACOs) is that their growth would lead to the consolidation of physician practices. A new study finds that concern has proven real.

Researchers examined changes in physician practice sizes associated with ACO market penetration three years after the launch of the Medicare Shared Savings Program, which began in 2012 and is one of the country’s largest ACO programs. In counties with more ACOs, they found more large practices and fewer small practices, according to a study published in Health Affairs.

And they found evidence suggesting that ACO-driven physician consolidation is accelerating. “These patterns suggest that the consolidation concerns initially raised regarding ACOs were warranted and that gains from care coordination facilitated by ACOs will have to be balanced against higher prices and possibly lower-quality care that could result from consolidation,” the study authors said.

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The catch is that while ACOs are associated with higher quality and lower costs, consolidation of physician practices is associated with lower quality and higher prices in some settings.

The study looked at whether physician practices consolidated after ACOs entered healthcare markets. Over a five-year period, researchers found a 4.0-percentage-point increase in large practices (defined as those with 50 or more physicians) in counties with the greatest ACO penetration compared to counties with no ACOs. They also found a 2.7-percentage-point decline in the percentage of small practices (defined as 10 or fewer physicians) from 2010 to 2015. The growth of large practices was concentrated in specialty and hospital-owned practices.

ACOs can result in physician practice consolidation as practices merge to improve their ability to coordinate patient care or because hospitals, in response to ACO incentives, acquire multiple physician practices and combine them.

Over an 18-month period, hospitals acquired 8,000 more medical practices and 14,000 more physicians left independent practice to become hospital employees, according to a report released earlier this year.

While the growth in the share of large practices was only 1-4 percentage points, it could have a big impact, the study said. For instance, in 2010, 2% of physicians in counties with high ACO penetration worked in large practices. A 4-percentage-point increase in large practices translates to a 330% increase in the number of large practices in counties with high ACO penetration, from 87 to 288.

“The sheer number of physicians in these practices means that a small number of practices could dominate healthcare markets in certain regions. If spread throughout the country, these practices could have substantial market power nationally, increasing prices and possibly diminishing the quality of care,” the authors wrote. The study “reinforces concerns that ACOs are affecting physician markets in important ways that bear monitoring.”

Future research based on additional years will be able to determine long-term consolidation patterns and implications, the researchers noted.

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