Dive Brief:
- A study of more than 2.2 million privately insured patients found that prices paid to anesthesia practitioners were higher when hospital outpatient departments and ambulatory surgery centers contracted with a physician management company, which are commonly referred to as staffing companies. Prices rose even more if the staffing firm had private equity backing, according to researchers at Columbia University's Mailman School of Public Health and Weill Cornell Medical College.
- The study found that allowed amounts paid increased by 16.5%, and that unit prices standardized by procedure complexity and duration climbed by 18.7%, for patients who received anesthesia services in facilities during a contract with a PMC compared to at those without such a contract.
- Physician management companies appeared to negotiate significantly higher prices for anesthesia services, the study authors concluded, raising concerns that such price inflation could lead to higher insurance premiums and patient cost-sharing. The findings were published in JAMA Internal Medicine.
Dive Insight:
Researchers for several years now have been trying to get a handle on the influence of corporate ownership and private equity investment in medical practices, a phenomenon that appears to be picking up pace. Data published in JAMA in 2020 showed private equity firms acquired 355 physician practices between 2013 and 2016, with the number of deals growing each year. The No. 1 specialty targeted was anesthesiology, with PE firms buying 69 of those practices during that time.
Physician management companies manage the administration of medical practices, including insurance contracting and billing. In the latest study, the authors examined PMC contracts with hospital outpatient departments and ambulatory surgery centers from 2012-2017, combined with commercial claims data from three large national insurers in the Health Care Cost Institute database.
Valued at more than $26 billion annually, the anesthesiology industry ranks highly among specialties in which PMCs employ physicians, according to study senior author Lawrence Casalino, professor of public health at Weill Cornell Medicine. Healthcare facilities can either employ anesthesia practitioners themselves or outsource to a PMC or independent anesthesia group.
The prices paid to anesthesia practitioners in hospital outpatient departments and ASCs increased after a PMC contract, the study found. And while PMCs both with and without PE investment saw prices rise, allowed amounts and unit prices increased by 26.0% and 25.6%, respectively, for facilities that contracted with PE-backed PMCs.
Because unit prices are standardized by procedure type and duration, the data suggest the increases were due to higher prices paid per service and not driven by changes in the types of procedures, the researchers said.
"One way PMCs may command higher prices is by amassing market share and by developing better negotiating expertise," said study author Ambar La Forgia, an assistant professor of health policy and management at Columbia. "PE-backed PMCs may also have had stronger incentives to create short-term returns for investors relative to those without PE investments."
PMCs may also gain leverage over insurers by threatening to move practitioners out of network, La Forgia said. "Although we did not find evidence that practitioners moved out-of-network except for a modest increase in the year the contract started, the mere threat may be sufficient to influence negotiating dynamics between PMCs and insurance companies," she said.
The research was funded by the Physicians Foundation Center for the Study of Physician Practice and Leadership at Weill Cornell Medical College, Arnold Ventures and the Commonwealth Fund.
The study reflects a larger trend of disappearing independent physician practices that accelerated during the pandemic. A separate study in 2021 by Avalere, conducted for the Physicians Advocacy Institute, found almost 70% of U.S. physicians are now employed by a hospital or corporate entity.