Study: Financial physician-hospital integration associated with higher prices

Over the past decade, physician-hospital integration has increased significantly — often to boost referrals and adjust to new payment models, as well as shield physicians from the growing costs of independent practice.

However, according to a new study published in JAMA Internal Medicine, financial integration between physicians and hospitals could be straining commercial prices for outpatient care.

After examining Medicare claims data for 240 metropolitan statistical areas between 2008 and 2012 for integration and concurrent changes in spending, researchers found physician-hospital integration increased by an average of 3.3 percent, though considerable variation exists between the different areas.

This increase in integration was associated with a $75 annual hike in spending on average for outpatient services. Since changes in utilization were minimal, researchers concluded this was due almost entirely to price increases. Similar changes in inpatient spending were not observed, according to the report.

"Because hospital markets are much more concentrated than physician markets on average, financial integration between hospitals and physicians may enhance bargaining power more for the physicians than for the hospitals involved," the authors of the study concluded. "By exerting market power derived primarily from its preexisting share of the hospital market, the integrated entity may be able to command price increases for outpatient physician services by threatening to exclude its affiliated hospitals from an insurer's network."

 

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