When Hospitals Acquire Medical Practices, Costs Go Up for Patients

The healthcare landscape has shifted dramatically in recent years. One of the biggest changes is the rapid growth of hospital-owned physician practices. Increasingly, independent physician groups have been merging with and being acquired by large hospital systems. For consumers, this can have significant implications, especially when it comes to price. Outpatient care can cost more when that care is obtained at a medical practice that is owned by a hospital.

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A study by Harvard Medical School’s Department of Health Care Policy appears to confirm this shift. Researchers analyzed cost and volume of health care services in 240 cities from 2008 to 2012. They discovered that spending for outpatient care increased measurably in communities where physician-hospital integration had increased by approximately five percentage points. This was especially true for patients whose doctors’ practices had been acquired by hospitals.

J. Michael McWilliams, MD, and associate professor at Harvard Medical School was one of the study’s authors. In a Wall Street Journal story, Dr. McWilliams estimated that the annual financial impact for a patient whose doctor’s practice was acquired by a hospital would be around $1,400. Across the board, outpatient spending increased an average of $75 annually in the communities studied.

The researchers investigated whether these increases could be attributed to a greater volume of services being provided. However, they concluded that the increases in cost were not due to increases in services. Instead, the increases were “driven almost entirely by higher prices” for outpatient care, according to the study.

Why is this happening?

Dr. McWilliams and his co-authors theorize that consolidation of physician practices and hospitals is enhancing their bargaining power in the marketplace. That stronger bargaining power is allowing them to command higher prices from commercial insurers. The people who will feel the financial impact most acutely are those patients whose doctors’ practices have been acquired by hospitals.

At IBJI, we take pride in the fact that we remain an independent practice that is owned and run by physicians. We are committed to providing high quality specialty care at lower cost. IBJI is able to deliver on this promise in many ways and for many reasons, including the following:

• At IBJI, we are a team of musculoskeletal specialists who offer expertise in orthopaedics, rheumatology, physiology, podiatry, physical medicine and rehabilitation, diagnostic imaging, pain management and physical therapy. This specialized focus enables us to provide more efficient, collaborative care.
• Unlike hospitals and many hospital-owned practices, IBJI does not charge extra facility fees for services provided in our clinics.
• IBJI is continually working to create coordinated care programs for our patients. This approach improves outcomes, enhances the overall care experience and reduces costs. ​

IBJI’s news article outlining the financial implications for patients was recently published on the Chicago Tribune’s TribLocal websites. To learn more, visit https://www.ibji.com/affordability