Market power and provider consolidation in physician markets

The Risks and Benefits of Physician Practice Acquisition and Consolidation: A Narrative Review of Peer-Reviewed Publications Between 2009 and 2022 in the United States

The objective of this narrative review was to assess current literature regarding acquisition and consolidation of physician practices in the United States (US). The acquisition and consolidation of physician practices is a trend affecting patient care, quality of services, healthcare economics and the daily practice of physicians. As practices are acquired by fellow physician groups, private equity investors and entities such as hospitals or large healthcare systems, it is important to better understand the underlying forces driving these transactions and their effects. This is a narrative review of peer-reviewed publications to determine what current literature has covered regarding the acquisition and consolidation of physician practices in the US regarding risks and benefits of this trend. Sources included the SCOPUS, Medline- PUBMED and Web of Science databases. Peer reviewed publications from 2009 to 2022 were included for initial review and curation for relevance using the search terms "physician" and "practice" with either "acquisition" or "consolidation". Synthesis conducted after narrowing down of relevant articles did not use quantitative measurements, but instead examined overall trends, as well as risk and benefits of ongoing acquisition and consolidation in a narrative format. Journal articles focused on physician consolidation in the US often reported increases in physician numbers with decreases in numbers of individual practices. Private equity quantitative analyses reported rapidly accelerating acquisitions driven by these investors, and vertical integration scholarly work reported frequent geographic consolidation of nearby practitioners. Risks associated with these transactions included such items as decreased physician autonomy and higher cost of care. Benefits included practice stability, improved negotiation with insurers and improved access to resources.

Urgent Care Centers Deter Some Emergency Department Visits But, On Net, Increase Spending

There is substantial interest in using urgent care centers to decrease lower-acuity emergency department (ED) visits. Using 2008-19 insurance claims and enrollment data from a national managed care plan, we examined the association within ZIP codes between changes in rates of urgent care center visits and rates of lower-acuity ED visits. We found that although the entry of urgent care deterred lower-acuity ED visits, the impact was small. We estimate that thirty-seven additional urgent care center visits were associated with a reduction of a single lower-acuity ED visit. In addition, each $1,646 lower-acuity ED visit prevented was offset by a $6,327 increase in urgent care center costs. Therefore, despite a tenfold higher price per visit for EDs compared with urgent care centers, use of the centers increased net overall spending on lower-acuity care at EDs and urgent care centers.

Primary care competition and quality of care: Empirical evidence from Medicare

In this paper, we explore the effects of primary care physician (PCP) practice competition on five distinct quality metrics directly tied to screening, follow-up care, and prescribing behavior under Medicare Part B and D. Controlling for physician, practice, and area characteristics as well as zip code fixed effects, we find strong evidence that PCP practices in more concentrated areas provide lower quality of care. More specifically, PCPs in more concentrated areas are less likely to perform screening and follow-up care for high blood pressure, unhealthy bodyweight, and tobacco use. They are also less likely to document current medications. Furthermore, PCPs in more concentrated areas have a higher amount of opioid prescriptions as a fraction of total prescriptions.

Power and Purchasing: Why Strategic Purchasing Fails

Policy Points Strategically purchasing health care has been and continues to be a popular policy idea around the world. Key asymmetries in information, market power, political power, and financial power hinder the effective implementation of strategic purchasing. Strategic purchasing has consistently failed to live up to its promises for these reasons. Future strategies based on strategic purchasing should tailor their expectations to its real effectiveness.

CONTEXT

Strategic purchasing of health care has been a popular policy idea around the world for decades, with advocates claiming that it can lead to improved quality, patient satisfaction, efficiency, accountability, and even population health. In this article, we report the results of an inquiry into the implementation and effects of strategic purchasing.

METHODS

We conducted three in-depth case studies of England, the Netherlands, and the United States. We reviewed definitions of purchasing, including its slow acquisition of adjectives such as strategic, and settled on a definition of purchasing that distinguishes it from the mere use of contracts to regulate stable interorganizational relationships. The case studies review the career of strategic purchasing in three different systems where its installation and use have been a policy priority for years.

FINDINGS

No existing health care system has effective strategic purchasing because of four key asymmetries: market power asymmetry, information asymmetry, financial asymmetry, and political power asymmetry.

CONCLUSIONS

Further investment in policies that are premised on the effectiveness of strategic purchasing, or efforts to promote it, may not be worthwhile. Instead, policymakers may need to focus on the real sources of power in a health care system. Policy for systems with existing purchasing relationships should take into account the asymmetries, ways to work with them, and the constraints that they create.

Provider Practice Competition and Adoption of Medicare's Oncology Care Model

BACKGROUND

There is a concern that the Oncology Care Model (OCM), a voluntary bundled payment program, may incentivize mergers and acquisitions among physician practices leading to reduced competition and price increases. These concerns are heightened if OCM is preferentially adopted in competitive health care markets because it could result in reduced competition, but little is known about the characteristics of markets where OCM is adopted.

OBJECTIVE

To measure the association between regional market competition among medical oncologists with the initial adoption of OCM.

RESEARCH DESIGN

The Herfindahl-Hirschman Index (HHI), a measure of competition, was calculated for hospital referral regions (HRRs) using secondary data from the Centers for Medicare and Medicaid Services. The relationship between HHI and OCM adoption was assessed using a 2-part regression model adjusting for the market-level number of practices, physician density, average practice size, sociodemographic characteristics, and medical resources. A count model on all HRRs was also estimated to assess an overall effect.

SUBJECTS

A total of 10,788 physicians in 3,537 practices who billed Medicare for oncology services in 2015.

RESULTS

OCM was adopted in 114 (37%) of the 306 HRRs. We found that practices in competitive health care markets were more likely to adopt OCM than in noncompetitive markets. Two-part regression analysis indicated a nonlinear relationship between HHI and OCM adoption. Average practice size, number of practices in an HRR, and the hospital bed rate were positively associated with adoption, whereas the rate of full-time equivalent hospital employees to 1000 residents was negatively associated with adoption.

CONCLUSIONS

OCM adoption was higher in HRRs with greater competition. Careful monitoring of market-level changes among OCM adopters should be undertaken to ensure that the benefits of the OCM outweigh the negative consequences of possible changes in competition.

Trends in Visits to Acute Care Venues for Treatment of Low-Acuity Conditions in the United States From 2008 to 2015

IMPORTANCE

Over the past 2 decades, a variety of new care options have emerged for acute care, including urgent care centers, retail clinics, and telemedicine. Trends in the utilization of these newer care venues and the emergency department (ED) have not been characterized.

OBJECTIVE

To describe trends in visits to different acute care venues, including urgent care centers, retail clinics, telemedicine, and EDs, with a focus on visits for treatment of low-acuity conditions.

DESIGN, SETTING, AND PARTICIPANTS

This cohort study used deidentified health plan claims data from Aetna, a large, national, commercial health plan, from January 1, 2008, to December 31, 2015, with approximately 20 million insured members per study year. Descriptive analysis was performed for health plan members younger than 65 years. Data analysis was performed from December 28, 2016, to February 20, 2018.

MAIN OUTCOMES AND MEASURES

Utilization, inflation-adjusted price, and spending associated with visits for treatment of low-acuity conditions. Low-acuity conditions were identified using diagnosis codes and included acute respiratory infections, urinary tract infections, rashes, and musculoskeletal strains.

RESULTS

This study included 20.6 million acute care visits for treatment of low-acuity conditions over the 8-year period. Visits to the ED for the treatment of low-acuity conditions decreased by 36% (from 89 visits per 1000 members in 2008 to 57 visits per 1000 members in 2015), whereas use of non-ED venues increased by 140% (from 54 visits per 1000 members in 2008 to 131 visits per 1000 members in 2015). There was an increase in visits to all non-ED venues: urgent care centers (119% increase, from 47 visits per 1000 members in 2008 to 103 visits per 1000 members in 2015), retail clinics (214% increase, from 7 visits per 1000 members in 2008 to 22 visits per 1000 members in 2015), and telemedicine (from 0 visits in 2008 to 6 visits per 1000 members in 2015). Utilization and spending per person per year for low-acuity conditions had net increases of 31% (from 143 visits per 1000 members in 2008 to 188 visits per 1000 members in 2015) and 14% ($70 per member in 2008 to $80 per member in 2015), respectively. The increase in spending was primarily driven by a 79% increase in price per ED visit for treatment of low-acuity conditions (from $914 per visit in 2008 to $1637 per visit in 2015).

CONCLUSIONS AND RELEVANCE

From 2008 to 2015, total acute care utilization for the treatment of low-acuity conditions and associated spending per member increased, and utilization of non-ED acute care venues increased rapidly. These findings suggest that patients are more likely to visit urgent care centers than EDs for the treatment of low-acuity conditions.

Physician Market Structure, Patient Outcomes, and Spending: An Examination of Medicare Beneficiaries

OBJECTIVE

To understand the impact of changes in physician market structure on clinical outcomes and health care utilization.

DATA SOURCES

2005-2012 Medicare fee-for-service claims and enrollment data.

STUDY DESIGN

We consider the effect of cardiology market structure on utilization and health outcomes for four patient populations. We estimate the risk-adjusted impact of competition using multivariate regression models.

PRINCIPAL FINDINGS

The study finds that an increase in consolidation leads to statistically and economically significant increases in negative health outcomes. For example, we find that moving from a zip code at the 25th percentile of cardiology market concentration to one at the 75th percentile would be associated with 5 to 7 percent increases in risk-adjusted mortality for three of the sample populations. We also found higher expenditures in more concentrated markets. For example, moving from a zip code at the 25th percentile of cardiology market concentration to one at the 75th would be associated with 7 to 11 percent increases in expenditures, depending on sample population.

CONCLUSIONS

Our estimates indicate that increases in cardiology market concentration are associated with worse health outcomes and higher health care expenditures. Some effects may be attributed to vertical as well as horizontal changes.

Health Care Market Concentration Trends In The United States: Evidence And Policy Responses

Policy makers and analysts have been voicing concerns about the increasing concentration of health care providers and health insurers in markets nationwide, including the potential adverse effect on the cost and quality of health care. The Council of Economic Advisers recently expressed its concern about the lack of estimates of market concentration in many sectors of the US economy. To address this gap in health care, this study analyzed market concentration trends in the United States from 2010 to 2016 for hospitals, physician organizations, and health insurers. Hospital and physician organization markets became increasingly concentrated over this time period. Concentration among primary care physicians increased the most, partially because hospitals and health care systems acquired primary care physician organizations. In 2016, 90 percent of Metropolitan Statistical Areas (MSAs) were highly concentrated for hospitals, 65 percent for specialist physicians, 39 percent for primary care physicians, and 57 percent for insurers. Ninety-one percent of the 346 MSAs analyzed may have warranted concern and scrutiny because of their concentration levels in 2016 and changes in their concentrations since 2010. Public policies that enhance competition are needed, such as stricter enforcement of antitrust laws, reducing barriers to entry, and restricting anticompetitive behaviors.

Data Resources for Conducting Health Services and Policy Research

Rich federal data resources provide essential data inputs for monitoring the health and health care of the US population and are essential for conducting health services policy research. The six household surveys we document in this article cover a broad array of health topics, including health insurance coverage (American Community Survey, Current Population Survey), health conditions and behaviors (National Health Interview Survey, Behavioral Risk Factor Surveillance System), health care utilization and spending (Medical Expenditure Panel Survey), and longitudinal data on public program participation (SIPP). New federal activities are linking federal surveys with administrative data to reduce duplication and response burden. In the private sector, vendors are aggregating data from medical records and claims to enhance our understanding of treatment, quality, and outcomes of medical care. Federal agencies must continue to innovate to meet the continuous challenges of scarce resources, pressures for more granular data, and new multimode data collection methodologies.

Do health insurers innovate? Evidence from the anatomy of physician payments

One of private health insurers' main roles in the United States is to negotiate physician payment rates on their beneficiaries' behalf. We show that these rates are often set in reference to a government benchmark, and ask how often private insurers customize their fee schedules away from this default. We exploit changes in Medicare's payments and dramatic bunching in markups over Medicare's rates to address this question. Although Medicare's rates are influential, 25 percent of physician services in our data, representing 45 percent of covered spending, deviate from the benchmark. Heterogeneity in the pervasiveness and direction of deviations suggests that the private market coordinates around Medicare's pricing for simplicity but abandons it when sufficient value is at stake.

Physician Competition in the Era of Accountable Care Organizations

OBJECTIVE

To calculate physician concentration levels for all U.S. markets using detailed data on integration and accountable care organization (ACO) participation.

DATA SOURCE

2015 SK&A office-based physician survey linked to all commercial and public payer ACOs.

STUDY DESIGN

We construct three separate Herfindahl-Hirschman Index (HHI) measures and plot their distributions. We then investigate how prevailing levels of concentration change when incorporating more detailed organizational features into the HHI measure.

PRINCIPAL FINDINGS

Horizontal and vertical integration strongly influences measures of physician concentration; however, ACOs have limited impact overall. ACOs are often present in competitive markets, and only in a minority of these markets do ACOs substantively increase physician concentration.

CONCLUSIONS

Monitoring ACO effects on physician competition will likely have to proceed on a case-by-case basis.

Antitrust and Accountable Care Organizations

The creation of Accountable Care Organizations (ACOs) under the Medicare Shared Savings Program has generated antitrust concerns. Utilizing a framework developed by the antitrust authorities for analyzing provider concentration for potential ACO participants, we examine the market for physician services, with a focus on the share of practices that could potentially be subject to antitrust scrutiny. Our findings suggest that while most physician practices would fall below the threshold that could raise anticompetitive concerns, this varies considerably by market and specialty. Furthermore, we find that the largest physician practice in most markets potentially remains at risk for antitrust review under the existing criteria.