Vertical Integration Driving Costs Higher

medical-moneyA recent study in the State of Texas revealed that when health systems acquire physician practices, patient costs go up. The study was in response to a wave of consolidations across all facets of healthcare, from institutions to individual physician practices. Results showed that the share of physician practices owned by hospitals in Texas rose from 14% in 2012 to 29% in 2016.

When two years of claims data was analyzed, it showed that PPO members spent nearly 6% more when treated by doctors in hospital-owned practices, versus physician-owned practices. A breakdown revealed that higher costs were attributable to additional services being provided rather than higher fees. Higher costs for imaging, durable medical equipment and operating and recovery room use were common contributors, with no evidence of improved quality shown.

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