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The Hidden Costs Of Provider Consolidation

by Jamie Carracher

September 18, 2017

Rising health care costs are a challenge facing consumers all over the United States. As the cost for prescription drugs, doctor’s visits and hospital stays continues to increase, it’s leading to higher health insurance premiums and huge medical bills for patients.

One major cause of rising costs is provider consolidation – when more and more of the region’s doctors and medical experts work for the same hospital or health system. Traditionally, provider consolidation has been viewed in the context of hospitals merging with other hospitals. By no surprise, research has found that when hospitals in a region get bigger and squeeze out competition, prices go up for consumers. That’s basic economics.

Now, however, researchers have identified a new source of increasing provider consolidation: hospital systems buying smaller physician practices. A new study from Health Affairs reports 22 percent of physician markets in the U.S. in 2013 were categorized as “highly concentrated,” according to federal merger guidelines. This increased market concentration is being driven by purchases of small physician practices, which fall below the threshold for federal anti-trust review.

“You have a local hospital system and they’re going in and buying one doctor at a time. It’s onesies and twosies,” Christopher Ody, the Northwestern University economist who authored the study, told Kaiser Health News.

This is just part of a larger trend around provider consolidation. If hospital systems continue to merge or scoop up small physician practices in communities across the country, these trends will continue to further drive up the costs of health care .