FTC to probe physician practice consolidation and impact on market competition

Mergers and acquisitions deals consolidation
The FTC plans to look at commercial claims data from insurers to assess the impact of physician consolidation, including physician practice mergers and hospital acquisitions of physician practices. (Getty/Kritchanut)

The federal government plans to study the impact of physician group and healthcare facility consolidation during the past six years.

The Federal Trade Commission (FTC) has sent orders to six health insurance companies for six years' worth of patient claims data to inform the review.

The agency plans to look at patient-level commercial claims data for inpatient, outpatient, and physician services in 15 U.S. states from Cigna, United Healthcare, Anthem, Florida Blue, Aetna, and Health Care Service Corporation.

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The data will help the FTC assess the impact of physician consolidation during this period, including physician practice mergers and hospital acquisitions of physician practices, the agency said in a press release.

"The study results should aid the FTC’s enforcement mission by providing much more detailed information than is currently available about how physician practice mergers and healthcare facility mergers affect competition," the FTC said. "The study results will also aid policymakers by providing important evidence documenting how mergers and acquisitions of physician groups and healthcare facilities affect the proper functioning of healthcare markets."

RELATED: Wave of consolidation may be coming as independent physicians report COVID-19 concerns: McKinsey

This study is part of a broader initiative recently announced by the FTC’s Bureau of Economics to revamp its merger retrospective program.

The goal of the initiative is “to encourage economists both inside and outside the agency to carry out more retrospective studies to test our analytical tools and strengthen our enforcement efforts," said Chairman Joseph J. Simons in a statement.

"Merger retrospectives are a powerful way of engaging in critical self-examination to see if our antitrust enforcement is working correctly," Simons said.

According to the order sent to the six insurers, the FTC is seeking data including how much patients paid for services, what insurers actually paid, and what insurers promised to pay along with how patients chose their insurer, and what hospitals billed patients and whether physician services were included in the bill.

The FTC also wants insurers to identify "capitation, risk-sharing, bundled payment, ACO payment, value-based payment, lump-sum payment, increased reimbursement or bonuses for meeting quality objectives, or any reimbursement contracts other than fee-for-service with providers now in effect."

Consolidation between physician groups and healthcare facilities has surged over the last decade. 

Over an 18-month period between July 2016 and January 2018, hospitals acquired 8,000 more medical practices, and 14,000 more physicians left independent practice to become hospital employees, according to an analysis.

Some 44% of physicians were employed by hospitals or health systems as of January 2018, compared to just 1 in 4 in 2012, when PAI began tracking data on hospital acquisitions of independent medical practices, according to data (PDF) compiled by the Physicians Advocacy Institute (PAI) and the consulting company Avalere Health.

RELATED: Report: 8,000 medical practices acquired by hospitals in 18 months

The COVID-19 pandemic may accelerate merger activity. More than half of independent physicians reported they are worried about their practices surviving the COVID-19 pandemic indicating there may be a sharp uptick in future partnerships and consolidation, a report from consulting firm McKinsey & Co. found.

McKinsey surveyed physicians nationally in both 2019 and, again, six weeks into the pandemic, to understand physician sentiment. Nearly half of the physicians surveyed in the six weeks after the pandemic was declared said they had less than four weeks cash on hand.

Nearly seven in ten (68%) of those who were looking for partners listed financial support as the primary driver, the report said.

According to the FTC, merger retrospective analysis seeks to determine, after the fact, whether a merger has affected competition in one or more of the markets impacted by the merger.

"The analysis can shed light on whether the agency’s threshold for bringing an enforcement action in a merger case has been too permissive. It can also assess the performance of a pricing pressure index, merger simulation model, or other tools used to predict the effects of a proposed merger," the agency said.