Price of care rose 15% after independent practice buyouts, study finds
The number of physician practices integrated with hospitals is steadily rising as a result of acquisitions, as is the commensurate price of services. At least, if that’s what data from 2008–2016 show.
The analysis comes from a new paper published by the National Bureau of Economic Research (NBER), which attempts to make sense of long-term trends in various markets, in this case healthcare. During the eight-year window, physicians became increasingly employed by hospital systems, rising from 27.5% of doctors in 2008 to 47.2% by 2016.
Some of the movement is not a result of buyouts, but what NBER called “hospital integration events.” These are periods in which practices had a high number of patients linked to care at a hospital system through partnerships, partial acquisitions or referral contracts but otherwise remained independent.
The researchers zeroed in on 276 full acquisitions and 66 integrations to get a sense of how this all affects the price of care delivery. Using claims data, NBER found that over eight years, the price of physician care rose over 15%. Hospital care also climbed, though by a smaller 3.3%.
“Using demand estimation to characterize substitution patterns for both physicians and hospitals, we construct tests that demonstrate price increases are larger among transactions with greater scope for foreclosure and recapture,” the firm said of its methodology. “Our estimates suggest that the costs of these mergers of hospitals and physicians have been substantial, and our mechanism tests offer guidance in predicting where the anticompetitive effects of non-horizontal mergers are likely to be strongest.”
Of note, price increases also compounded based on the number of acquisitions and integrations. Per the analysis, after a physician becomes part of a hospital system as part of multiple subsequent buyouts, billed care from doctors rose an additional 9%, likely as a result of diminishing competition in a given market.
Under regulators’ noses
Nearly all buyouts and integrations fall under the radar of regulators, as they represent small practices. This suggests market consolidation is happening with little or no oversight.
“These results pose a challenge for antitrust enforcement agencies. Over the last two decades, enforcement agencies have focused on protecting consumers from mergers of the largest head-to-head competitors,” NBER wrote. “However, our analysis demonstrates that hospital acquisitions of physician practices, transactions that have reshaped the physician industry via many small non-horizontal acquisitions, have harmed consumers.”
The group added that the negative impacts of small practice consolidation can be challenging to estimate, but that data point to the “scale of consumer harm generated by these transactions” being similar in magnitude to “horizontal hospital mergers,” which have piqued the interest of regulators due to their more immediate, visible impacts on regional economies.
The negative impacts include the crushing of independent rivals, fueling the increase in consolidation, NBER concluded.
Studies that include more recent data are necessary to analyze if the trend is still holding true in 2025. However, a study published in January by JAMA found over 50% of primary care physician practices were affiliated with hospitals as of 2022, meaning market consolidation trends seem to be continuing.
Researchers in that study used data from PitchBook and IQVIA as the basis for their analysis.
The full paper from NBER is available here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.