Physician-hospital integration associated with increased outpatient health care prices

1. Physician-hospital integration was associated with increased per enrollee annual spending for outpatient health care.

2. Physician-hospital integration was not associated with significant change in inpatient spending or changes in annual utilization.

Evidence Rating Level: 2 (Good)

Study Rundown: Physician-hospital financial integration refers to the growing trend for hospitals to employ physicians and have ownership of physician practices. Integration may increase systematic efficiencies through better coordination of inpatient and outpatient health care. However, there is concern that by integrating with larger institutions, such as hospitals, physicians derive greater bargaining power with insurance providers, thereby increasing prices for services provided.

By examining a cohort of non-elderly insurance plan enrollees with regards to the level of physician-hospital integration in their geographic metropolitan statistical area (MSA) the authors of this study examined changes in both healthcare spending and utilization. Annual outpatient health care spending increased by 3.1% (or $75/year) for enrollees within MSA’s that experienced increased physician-hospital integration. Healthcare utilization and inpatient spending for enrollees within these MSAs did not significantly increase. Increased spending without changes in utilization could reflect higher prices for outpatient health care services in regions with greater physician-hospital integration.

The major strength of this study is that it was able to detect a significant difference in spending while it was designed to underestimate the effect of physician-hospital integration. The major limitations of the study are the focus on fee-for-service care models, inability to evaluate for other influences to heath care price, and lack of evaluation of the quality of health care provided.

Click to read the study, published today in JAMA Internal Medicine

Relevant Reading: Hospitals’ Race to Employ Physicians — The Logic behind a Money-Losing Proposition

In-Depth [retrospective cohort]: The study population was 7,391,335 enrollees from the Truven Heath Market Commercial Database of private-health plans and self-insured employers.  Physician-hospital integration was determined by using the Medicare service code for hospital outpatient department (HOPD), which was used to calculate the proportion of physicians using the HOPD setting code for each MSA. Physician-hospital integration for each enrollee was evaluated by metropolitan statistical area (MSA) in which they resided for both 2008 and 2012. Enrollees between these two years did not differ with regards to certain enrollee and plan specific characteristics for which data were available.

From 2008 to 2012, physician-hospital integration across 240 MSAs increased from 18.0% to 21.3%. Amongst the MSAs on the 75^th percentile of integration change, the annual spending per enrollee for outpatient services increased by $75 (95% CI, $38-$113) or 3.1%; the utilization of outpatient services estimated by price-adjusted spending did not significantly change ($14 [95% CI, -$13 to $41]). Inpatient spending ($22 [95% CI, -$1 to $46]) and utilization ($10 [95% CI, -$12 to $31]) did not change significantly over this time.

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