Hospital Consolidation Is Increasing Patient Costs

Hospital consolidation for the purpose of improving patient care coordination and reducing cost of care is backfiring, according to a study published in the Journal of the American Medical Association.

Researchers led by James Robinson, PhD, MPH, professor and head of health policy and management at UC Berkeley’s School of Public Health, found that as hospitals acquire physician groups and medical practices, the cost of patient care has increased.

“The intent of consolidation is to reduce costs and improve quality, but the problem with all this is that hospitals are very expensive and complex organizations, and they are not known for their efficiency and low prices,” lead study author Dr Robinson said in a statement.

The authors analyzed data from 2009 to 2012 on 158 major medical groups and 4.5 million patients in California and found that per patient expenditures for physician groups in multi-hospital systems were 19.8% compared with physician-owned organizations. Per patient costs for groups owned by local hospitals were 10.3% higher.

During the time period studied, hospital-owned physician organizations in California reported higher costs for commercial health maintenance organization enrollees for professional, hospital, laboratory, pharmaceutical, and ancillary services when compared with physician-owned organizations.

Physician-owned organizations had mean expenditures of $3066 per patient in 2012 compared with $4132 for hospital-owned organizations and $4776 for organizations owned by multihospital systems.

Dr Robinson conjectured that the increased costs after consolidation may be the result of physicians being expected to admit patients to the high-priced hospital. For instance, hospital-owned medical groups are expected to conduct procedures at the parent hospital’s outpatient departments, but freestanding, non-hospital ambulatory centers are less expensive, he said.

“Hospitals are an essential part of the health care system, but they should not be the center of the delivery system,” Dr Robinson said. “Rather, physician-led organizations based in ambulatory and community settings are likely to be more efficient and provide cheaper care.”