Physician-Hospital Mergers Mean Higher Outpatient Costs

October 20th, 2015

As the healthcare landscape continues to change with mergers of healthcare systems and physician practices, questions continue to rise about effects on healthcare costs. A new study in JAMA Internal Medicine adds fuel to the debate fire.

Looking at data of cost and volume of healthcare services as physician practices merged with hospital systems, researchers found an increase in outpatient spending driven by an increase in outpatient costs, while inpatient costs remained relatively unchanged. Utilization of outpatient services also did not increase. The sample of 7,391,335 nonelderly private insurance enrollees saw a mean increase of $75 per enrollee between 2008 and 2012. Physician-hospital integration increased by 3.1% during that same time period.

What could be driving the cost increases? One of the study’s co-authors suggests that physician practices owned by hospitals now have greater negotiating power behind them and can get higher rates. There is also speculation that hospitals are charging higher rates to recoup the costs of acquiring the physician practices.

The number of health systems and major insurance players continues to shrink as companies merge with one another to create even larger systems, adding to worry and uncertainty among consumer and physicians alike. Costs may be driven up in the short term as these companies combine and look to recoup – but how sustainable that will be remains to be seen.