Credit: NCI
The trend of hospitals consolidating medical groups and physician practices is increasing the cost of patient care, new research suggests.
The study was conducted using 4 years of data from nearly 160 medical groups in California.
Results showed that hospital-owned physician organizations incurred higher expenditures than physician-owned organizations for services to patients covered by commercial health maintenance organization (HMO) insurance.
The findings, published in JAMA, come as a growing number of local hospitals and large, multihospital systems in the US are acquiring physician groups and medical practices.
“This consolidation is meant to better coordinate care and to have a stronger bargaining position with insurance plans,” said James Robinson, PhD, of the University of California, Berkeley School of Public Health.
“The movement also aligns with the goals of the Affordable Care Act, since physicians and hospitals working together in ‘accountable care organizations’ can provide care better than the traditional fee-for-service and solo-practice models. The intent of consolidation is to reduce costs and improve quality, but the problem with all this is that hospitals are very expensive and complex organizations, and they are not known for their efficiency and low prices.”
Dr Robinson teamed up with Kelly Miller, of Integrated Healthcare Association in Oakland, California, to analyze data on 158 major medical groups. The data spanned the period from 2009 to 2012.
Of the 158 organizations, 118 (75%) were physician-owned and provided care for 3,065,551 patients, 19 (12%) were owned by local hospitals and provided care for 728,608 patients, and 21 (13%) were owned by multihospital systems and provided care for 693,254 patients.
The patients were covered by commercial HMO insurance. The data did not include patients covered by commercial preferred provider organization (PPO) insurance, Medicare, or Medicaid.
The researchers assessed costs related to physician visits, inpatient hospital admissions, outpatient surgery and diagnostic procedures, drugs, and all other forms of medical care except mental health services.
Results revealed that the average expenditure per patient across all physician organizations increased by 16.5% between 2009 and 2012, from $2954 to $3443.
By 2012, expenditures per patient had increased to an average of $3066 in physician-owned organizations, $4312 in local hospital-owned organizations, and $4776 in multihospital system-owned organizations.
This represents a 40.6% relative difference in expenditures per patient associated with hospital ownership and a 55.8% relative difference associated with ownership by a multihospital system compared with ownership by member physicians.
After adjusting for patient severity and other factors over the period, local hospital-owned physician organizations incurred expenditures per patient 10.3% higher than physician-owned organizations. And organizations owned by multihospital systems incurred expenditures 19.8% higher than physician-owned organizations.
Dr Robinson said these findings might be explained by the fact that, once a medical group has been acquired by a multihospital system, physicians in those groups are expected to admit their patients to the high-priced hospital.
“Hospital-owned medical groups usually are expected to conduct ambulatory surgery and diagnostic procedures in the outpatient departments of their parent hospital, but hospital outpatient departments are much more costly and charge much higher prices than freestanding, non-hospital ambulatory centers,” he said.
Dr Robinson added that public policy should not encourage mergers and acquisitions as a means of promoting collaboration. Instead, policymakers should consider supporting the use of bundled payments for hospitals and physicians to improve the coordination of care.
“Hospitals are an essential part of the healthcare system, but they should not be the center of the delivery system,” he said. “Rather, physician-led organizations based in ambulatory and community settings are likely to be more efficient and provide cheaper care.”
The researchers noted that their findings are limited to California, and further studies should be conducted using data from other states.
“Nevertheless, these findings are important,” Dr Robinson said, “since California is the nation’s leader in terms of having physicians participate in large medical groups that already perform the functions ascribed to ‘accountable care organizations’ by the Obama administration.”
