mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
Prices Prices Prices
ACA Consolidation Push Sends Costs Skyrocketing

We already knew that when hospitals combine with each other, they raise the cost of health care—but a new study confirms that cost spikes also happen when hospitals acquire previously independent physician practices. According to a new study from UC Berkeley researchers, published in the Journal of the American Medical Association, these kind of acquisitions in California raised costs by 10 to 20 percent. These higher costs then are absorbed by consumers and taxpayers (who fund subsidies) in the form of higher premiums and higher deductibles. The LA Times has more:

Total spending per patient was 10.3% higher for hospital-owned physician offices compared with doctor-owned organizations, according to the study.

Costs were even higher when large health systems running multiple hospitals owned medical groups. Their per-patient spending was 19.8% higher compared with independent physician groups.

Mergers between hospitals and physician groups often are touted as a way to coordinate care better, eliminate unnecessary tests and treatments and ultimately reduce costs. Provisions of the Affordable Care Act encourage healthcare providers to collaborate more and shift away from conventional fee-for-service medicine.

It’s not clear exactly how common these acquisitions will become. One study by Merritt Hawkins found that 2014 will see 75 percent of newly hired doctors working for hospitals. Other studies point in different directions. But it’s clear that more consolidation will happen, at whatever rate, and that the ACA is contributing to the momentum behind these acquisitions. The ACA was pitched as a way to save the U.S. some health care dollars, but in this case at least it is accelerating one of the worst trends currently increasing the cost of U.S. health care year on year.

Features Icon
show comments
  • Andrew Allison

    TAI’s thinking on this topic appears to me to be very wooly. Since nobody was covered by ACA before this year, I think we need to look elsewhere for an explanation as to why hospital costs are skyrocketing. ACA is basically an insurance scam, er scheme, designed to transfer taxpayer funds to private insurance companies via subsidies and guaranteed profits while increasing the number of those insured. With all it’s faults, it’s far from clear that ACA, rather than the desire of hospital owners to negotiate better reimbursement rates from insurance companies and of doctors to get out of the insurance administration business, is responsible for the consolidation wave. The increasing costs could be explained by the reduced competition.

    • FriendlyGoat

      I think you’re right about this. It’s fashionable right now to blame ACA for everything under the sun, but costs have always been going up as people and companies in medicine sought to simply make more money. They still are, and they still would be—-with or without ACA.

  • Thom Burnett

    I’ll agree that it’s a bit soon to blame ACA for this. At worst it will be only one of a few reasons for consolidation.

    There’s a general pattern that the more complicated the rules and regulations the more that favors big firms over small ones. Big companies can afford accountants, lawyers, lobbyists etc to deal with the complications. Smaller players are disadvantaged.

    ACA probably added to the advantage of being a big company but even that is hard to say this soon.

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service