Physician Integration May Drive Costs Up

Since 2009 health industry consolidation is up 50%, and is only expected to continue this year and next. And while hospitals are acquiring physician practices in the belief that it would reduce costs, increase efficiency and streamline patient care, that might not be what actually happens.

According to poll results from the American College of Physician Executives (ACPE), the health industry’s move toward physician integration may actually drive up costs.

A third of respondents said costs went up after a hospital or health system bought a group or practice. Only 5% said costs decreased, while 16% said costs remained the same. The remainder either weren’t sure or said that situation wasn’t applicable to their organization.

Some respondents felt that the cost increase may be outweighed by the other benefits the come about as a result of integration.

"Our costs and charges are indeed higher with physician employment than without," David McDermott, MD, the director of emergency services at Mayo Regional Hospital in Dover-Foxcroft, Maine, commented in the survey response. "However, in rural Maine, if there was not hospital employment of physicians, the physicians would not be here. Costs have risen but we now have access."

The cost increase also is temporary, ACPE’s respondents pointed out and the situation will change when value and quality of care overtakes the current volume-based reimbursement model in health care.

"The increasing trend to physician employment and related efforts towards successful physician integration are issues that affect many physicians at ACPE," Peter Angood, MD, ACPE's chief executive officer, said in a statement. "Understanding the long-term consequences of these trends is important not only to physician leaders but also to the future of health care as a whole."