Provider Consolidation And Its Effect On Spending And Prices

by Alicia Caramencio

July 12, 2016

“Here’s What Happens To Your Medical Bills When Your Doctor Joins Forces With A Hospital” is the headline of a recent Forbes article by Dr. Peter Ubel. So what has Ubel found out? Unsurprisingly, medical prices go up.

Ubel cites a study in JAMA Internal Medicine that looked at what how physician-hospital consolidation affects spending and prices for outpatient and inpatient services. “Such integration could end up costing lots of us lots of money. When hospitals and physician practices join forces, healthcare prices often rise,” he writes.

You can see in the chart below that as physician-hospital integration increased so too did outpatient spending –  an uptick driven almost entirely by price increases.


Hospital mergers and physician practice acquisitions give physician practices and hospital systems stronger market power to drive up prices for patients. And the larger the market share of the newly formed provider system, the higher the prices are likely to go.

While the rhetoric behind consolidation is about efficiency, the reality is higher prices for consumers. As Ubel concludes, “The federal government hopes that promoting hospital/physician integration will lower healthcare expenses. That is probably wishful thinking.”

Learn more about what provider consolidation means for consumers and the health care system.