A steep rise in U.S. hospitals buying up private physician practices has triggered a substantial increase in prices for medical care with no discernible effect on quality, according to a new study co-authored by Yale economists. And this trend is posing a challenge to federal regulators, who lack the resources to review the thousands of mergers occurring annually, the authors find.
Using novel data and machine-learning techniques, a research team featuring Yale's Zack Cooper and Fiona Scott Morton show that hospital ownership of physician practices spiked 71.5% from 2008 to 2016, nearly doubling the share of physicians working for hospitals. By 2016, hospitals owned 47.2% of private practices.
The results are published in a National Bureau of Economic Research working paper.
Focusing their analysis on childbirths, the researchers found that two years after a hospital acquires an OB-GYN practice, hospital prices for labor and delivery grew by an average of $475, an increase of 3.3%. Physicians' prices for the same services rose by $502, or 15.1%. The study found that reduced competition caused the price increases.
The researchers estimate that 99.9% of the acquisitions they analyzed fell below federal reporting thresholds for business mergers, meaning a massive transformation of the health-care industry occurred with virtually no antitrust scrutiny.
"The sharp increase in hospital-physician mergers has reshaped the $1 trillion-dollar physician industry, significantly raising prices for patients and insurers without improving the quality of care," said Cooper, an associate professor of health policy at the Yale School of Public Health and of economics in Yale's Faculty of Arts and Sciences. "Unfortunately, there is no reason to believe that the pace of acquisitions has or will slow down.
"There are hundreds of thousands of small physician practices and federal regulators are not in a position to keep up with the rapid pace of transactions."
In addition to the Yale co-authors, the study included leading economists from the University of Wisconsin-Madison, Harvard University, the University of California, San Francisco, and Emory University.
