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Hospitals acquired 5,000 physician practices in a single year

Since hospital-employed doctors tend to perform services in an outpatient setting, the trend increases costs for Medicare and patients.

Jeff Lagasse, Associate Editor

Hospitals have been scooping up physician practices at a record clip. Research conducted by Avalere for the nonprofit Physician Advocacy Institute shows hospitals nabbed 5,000 physician practices and employed 14,000 physicians between July 2015 and July 2016, an 11 percent uptick.

Since 2012, that's a 100 percent increase in hospital-owned physician practices, indicating those medical groups may be struggling to maintain independence in a healthcare landscape that is increasingly geared toward larger, integrated systems.

[Also: Study: Hospitals on doctor-buying spree raise legal questions]

That scenario increases costs for both Medicare and patients themselves, since hospital-employed physicians tend to perform services in a hospital outpatient setting. The researchers revealed higher costs for services such as colonoscopy and cardiac imaging.

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Increased physician employment by hospitals, in fact, caused Medicare costs for four healthcare services to rise $3.1 billion between 2012 and 2015, with beneficiaries facing $411 million more in financial responsibility for these services than they would have if they were performed in independent physicians' offices, the research showed.

[Also: Florida hospitals scaling back on acquiring physician practices, report finds]

From mid-2012 to mid-2016, the percentage of hospital-employed physicians increased by more than 63 percent, with increases in nearly every six-month time period measured over these four years. All regions of the country saw an increase in hospital-owned practices at every measured time period, with a range of total increase from 83 percent to 205 percent.

This trend, the authors said, shows government- and insurer-mandated payment policies favor larger health systems, creating a competitive disadvantage for independent physicians, many of whom are already struggling financially due to administrative and regulatory burdens. Independent physicians often find it prohibitively difficult to cut costs while maintaining clinical quality, and failure to maintain quality can result in federal reimbursement penalties.

The acquisition trend held true in every region of the country, but was most prevalent in the Midwest; it was least prevalent in the South.

PAI is examining these trends as part of an ongoing effort to better understand how physician employment and health care consolidation affects the practice of medicine and impacts patients.

Twitter: @JELagasse
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