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Is Hospital Ownership of Physician Practices Driving Up Prices?

Pic Vein CenterCurrently, there is a trend happening across the country of hospitals purchasing physicians’ practices. In fact, the share of practices owned by hospitals doubled from 2001 to 2008, resulting in less physician owned practices. This integration means there are more producers of complementary services that are either related or commonly owned.

While on its face, this may seem a positive occurrence, leading to better patient care in terms of efficiency and quality, some studies and research may prove otherwise. In fact, one new study shows that this increase in hospital ownership is leading to higher costs for patients.

The study was published in Health Affairs and is titled “Vertical Integration: Hospital Ownership of Physician Practices is Associated with Higher Prices and Spending.” The study conducted by researchers at Stanford University examined approximately 2.1 hospital claims between 2001 and 2007. These claims were from patients in fee-for-service, private health plans.

The results proved mixed; however, it did reveal a negative picture of the integration for those who are privately insured. The most definite finding was that practices owned by hospitals led to higher prices, along with higher hospital spending.

The Affordable Care Act actually provides incentives for practices and hospitals to form ACOs, or Accountable Care Organizations, by offering Medicare payment bonuses. On one hand, the study does acknowledge that is certain cases this integration can prove beneficial to patients. Greater coordination of care between hospitals and physicians is one of the most beneficial points.

However, there are other concerns raised by the research. Vertical integration can increase the market power of healthcare providers and encourages doctors to provide inappropriate treatment through the facilitation of kickback payments that would be illegal if made formally.

The American Hospital Associations vice president of trend analysis, Caroline Steinberg, indicated that the goal is not to raise prices. She says that hospitals are integrating with these practices as a way to engage physicians in innovative payment processes. The payment methods include bundling payments for single services.

Finally, the research did not study is the impact of this consolidation on patient health outcomes or the quality of care provided. The researchers do say that this is an important topic for additional research.