Study shows magnitude of continuing provider consolidation
- From 2010 to 2016, healthcare markets continued to concentrate, according to new research published in Health Affairs.
- In 2016, 90% of metropolitan statistical areas (MSAs) had a high concentration of hospitals.
- Primary care physician concentration increased the most, in part due to such providers being acquired by larger care delivery systems. "From 2010 to 2016, the share of primary care physicians working in organizations owned by a hospital or health care system increased from 28% to 44% — a dramatic increase of 57% — while the shares in independent solo practices or organizations owned by a medical group decreased," wrote author Brent Fulton, assistant adjunct professor at Petris Center in the School of Public Health, University of California, Berkeley.
Anyone following the provider industry this year can point to multiple examples of high profile mergers and joint ventures, but Fulton's research puts a hard number on the trend of hospital consolidation, which has been ongoing since since the 1990s. This year in particular, large health systems have been active in the M&A space.
In addition to a high concentration of hospitals in MSAs, 65% percent of MSAs were highly concentrated for specialist physicians, 39% for primary care physicians and 57% for insurers.
Such consolidation is generally done under the banner that providers will seek to decrease costs and increase consumer savings. However, as Fulton noted, evidence has shown consolidation is often associated with higher hospital prices.
"Furthermore, my results are consistent with the fact that more physicians are joining larger physician organizations and that more physicians work either directly for hospitals or in organizations that are owned by hospitals," he wrote.
"We knew hospitals had been buying up physician organizations but we didn't know the extent," Fulton told Healthcare Dive, adding, "The increase of hospital ownership of primary care organizations was interesting, because we hadn't realized the magnitude had increased so much."
The American Medical Association in its recent Physician Practice Benchmark Survey found the percentage of physicians who owned practices decreased to 47.1% in 2016, down from 53.2% in 2012. While many found the data cause for concern, Dr. Farzad Mostashari, co-founder of Aledade, pointed out in his analysis the data also show the percentage of physicians directly employed by a hospital or in a hospital-owned practice (about a third) went unchanged from 2014 to 2016.
"Not only had the proportion of physicians in hospital employment flatlined, but the rate at which hospitals were buying up practices had slowed," Mostashari wrote in a July opinion piece for Healthcare Dive. "In 2014, 24.5% said that a hospital had purchased their practice in the past five years. In 2016, that dropped to 21%."
Still, Fulton's research points to the continuing trend of industry consolidation. Greater competition is needed in the industry as evidence piles up regarding how consolidation can lead to greater costs passed down to the consumer.
Consolidation in the healthcare space hasn't proven to be a benefit, Martin Gaynor, an economist at Carnegie Mellon University, told Healthcare Dive. He noted evidence has shown the trend hasn't delivered better care coordination and said it has prevented innovations from emerging within the industry. "Consolidation and concentration are undermining the functioning of the U.S. healthcare system," Gaynor said. "It's something we have to address and we have to do it now."
The topic is becoming somewhat more en vogue to discuss. In addition to a whole issue of Health Affairs concentrating on markets within the industry, the American Enterprise Institute recently published a post stating healthcare needs market discipline.
Noting more research on the topic is needed, Fulton stumps for greater federal scrutiny over merger proposals and evaluation of policies that restrict market entry, among other recommendations.
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