The consolidation of independent physicians into hospitals, health systems and corporate entities has been intensifying over the past 20 years.
According to a study published in July by the National Bureau of Economic Research, which analyzed hospital acquisitions of physician practices between 2008 and 2016, the share of physician practices acquired by hospitals rose by 71.5% in that time frame.
Zach Cooper, PhD, a co-author of the study, joined Medical Economics on Aug. 15 to discuss the findings of the study and what policies may be effective in slowing down the tide of physician practice consolidation.
Here are three takeaways from the discussion:
1. Site-neutral billing. Dr. Cooper noted that disparities in Medicare reimbursement rates between hospitals and independent physician practices are among the most significant drivers of physician consolidation.
“[Medicare] will end up paying more to physicians that are in practices owned by hospitals than they will to practices that are independent. That creates a really strong incentive for physicians to sell and hospitals to buy,” he said. “We got to get rid of that. I know that’s something the Trump administration is looking into now, and there have been a bunch of piecemeal bites at that over the last couple years. So that’s a real thing that we’ve got to change, introducing so-called site-neutral billing reform.”
2. Antitrust enforcement. Massive, vertically integrated entities have come to define the modern era of healthcare. UnitedHealth Group, for example, directly employs or contracts with 90,000 physicians, representing approximately 10% of the U.S. physician workforce, according to a report released in July by the Center for Health & Democracy and funded by Arnold Ventures. Dr. Cooper said antitrust regulation in healthcare can be “tricky,” because many of these deals are in and of themselves relatively small transactions.
“But I think you can do a couple of things. The first is, we offer a bit of a road map for which deal is the most problematic, and the deals that are the most problematic tend to be ones where one of the parties already has a lot of negotiating power, so maybe it’s like a monopoly, a hospital,” he said. “The others are going to be deals that are going to shift a whole lot of patient referrals. And so it could be a deal where one physician is already sending a lot of our patients to a bigger hospital, she gets bought by a different hospital, and it’s going to steer all her patients to that new owner. That’s the kind of deal that’s going to raise prices pretty substantially and we want to really take a look at that.”
3. Increased regulation for mergers and acquisitions. Looking at deals on an individual level is one aspect of antitrust enforcement, but Dr. Cooper said there also should be more regulations in place to slow deal activity in the industry overall.
“Because there are a lot of little deals, we might want to offer some barriers that sort of slow down the merger process,” he said. “It could be things like requiring hospitals to say how these mergers are going to benefit the community, how they’re going to impact quality, and have them state affirmatively the good that these transactions are going to do, and why that’s going to outweigh the harm that we just showed pretty convincingly occurs when these types of transactions get consummated.”
