Costs At Hospital-Owned Physician Groups Up To 20% Higher


By Anne Zieger | October 24, 2014

Dive Brief:

  • A new study by researchers from UC Berkeley has concluded that hospital ownership of physician groups in California generated 10% to 20% higher overall costs for patient care.
  • The research, which was published in the Journal of the American Medical Association, found that total spending per patient was 10.3% higher for hospital-owned physician offices than with doctor-owned practices. Meanwhile, when health systems ran multiple hospital-owned groups, per-patient spending was 19.8% higher.
  • One factor in the higher costs observed by researchers is that newly-acquired physician groups often face pressure to refer patients to more expensive imaging and outpatient treatments that can be less expensive at freestanding clinics.

Dive Insight:

Research like this is beginning to pile up, undermining the premise that mergers and acquisitions between hospitals and medical groups create efficiencies and improve the cost of care. Increasingly, it’s begun to seem as though this kind of consolidation does not have the effect promised by the parties involved, but rather, gives them extra tools to ratchet up prices.

Concerned by these trends, the FTC has begun jumping in to challenge some healthcare mergers, with agency economists arguing that price increases resulting from mergers could be as high as 40% to 50%. In the past two years alone, the agency has litigated three hospital mergers, including one in Albany, GA, Toledo, OH and Rockford, IL. It also just won its first-ever litigated case challenging a health system acquisition of a physician group in Idaho.

All told, while healthcare mergers and acquisitions are still poised to continue at a rapid rate, they’re likely to be under increasing scrutiny from regulators. After all, reform can’t work if prices rise at this rate.

Recommended Reading

Los Angeles Times: Medical costs up to 20% higher at hospital-owned physician groups, study finds