Hospital employment of doctors and ownership of physician practices has grown over the past decade as healthcare providers seek to curb expenses with economies of scale and deliver better coordinated treatment to patients.
Research reported in JAMA Internal Medicine examined how the rise of tighter financial integration between doctors and hospitals impacted costs for people enrolled in private health insurance plans from 2008–2012.
In communities with the sharpest increase in financial integration between doctors and hospitals over the study period, average annual outpatient costs for each person with private health insurance increased by $75, while the amount of outpatient services they used was little changed.
“We document an increase in spending driven by prices, without any change in utilization,” lead study author Hannah Neprash, a health policy researcher at Harvard University in Boston, said by email.
“Some price increases may be acceptable—particularly if they are accompanied with improved quality of care,” Neprash added. This study, however, didn’t look at changes in quality associated with physician-hospital integration, she said.
Using Medicare claims data for 240 metropolitan areas nationwide, the researchers identified physicians who were either directly employed by hospitals or who worked for practices owned by hospitals.
Overall, the proportion of physicians with close financial ties to hospitals rose from 18% in 2008 to 21.3% in 2012.
Next, the researchers analyzed spending and prices for nearly 7.4 million non-elderly adults in these regions with two common types of private health insurance coverage: preferred-provider organizations (PPO) or point-of-service (POS) plans. These types of insurance may tie patients’ out-of-pocket fees to the prices doctors charge.
The cost increase seen with greater financial integration of doctors and hospitals was confined to outpatient spending, bringing the average outpatient cost per enrollee in the PPO and POS plans in 2012 to about $2,400.
The average cost of $872 for inpatient treatments, however, was unaffected by financial ties between doctors and hospitals, the study found.
One shortcoming of the study is that the researchers didn’t assess quality of care, the authors acknowledge. Better quality outpatient care might justify higher prices, the researchers note.
Newer payment arrangements, however, are starting to hold providers more accountable for both inpatient and outpatient spending and for outcomes, noted senior study author Dr. J. Michael McWilliams of Harvard Medical School and Brigham and Women’s Hospital in Boston.