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Physician-hospital financial integration associated with higher prices

The JAMA Network Journals

Physician-hospital integration appears to be associated with increased spending and prices for outpatient care but without the accompanying changes in utilization that might suggest more efficient care from better coordination and economies of scale, according to an article published online by JAMA Internal Medicine.

Hospital employment of physicians and ownership of physician practices has increased in the past decade. Financial integration with physicians can boost hospital referrals for health care systems and for physicians, the resources and economies of scale of a hospital can be attractive compared with independent practice. The price-increasing effects of hospital mergers are well documented but less is known about the effect of consolidation among physicians and between physicians and hospitals.

J. Michael McWilliams, M.D., Ph.D., of Harvard Medical School, Boston, and coauthors looked at the association between changes in physician-hospital integration from 2008 through 2012 and changes in commercial spending and prices. Physician-hospital integration was measured using Medicare claims data in metropolitan statistical areas (MSAs). The study sample included nearly 7.4 million nonelderly enrollees in preferred-provider organizations or point-of-service plans from a commercial database.

The authors report that physician-hospital integration increased by an average of 3.3 percentage points from 2008 to 2012 among 240 MSAs. Increased physician-hospital integration in MSAs was associated with an average increase of $75 per enrollee in annual outpatient spending from 2008 to 2012. Average annual spending per enrollee in 2012 was $2,407 for outpatient care. This increase in outpatient spending without an increase in utilization suggests that the spending increase was driven almost entirely by price increases. Changes in physician-hospital integration were not associated with significant changes in inpatient spending, according to the results.

"Changes in the structure of health care provider markets and in spending should be monitored, particularly as payment systems shift away from fee-for-service, and may require additional regulatory measures to control," the authors conclude.

(JAMA Intern Med. Published online October 19, 2015. doi:10.1001/jamainternmed.2015.4610. Available pre-embargo to the media at

Editor's Note: An author made a conflict of interest disclosure. This study was supported by a grant from Changes in Health Care Financing and Organization, from the Robert Wood Johnson Foundation. Please see the article for additional information, including other authors, author contributions and affiliations, financial disclosures.

Commentary: Hospital Acquisition of Physician Groups

In a related commentary, James D. Reschovsky, Ph.D., and Eugene Rich, M.D., of Mathematica Policy Research, Washington, D.C., write: "Given the possibilities for better-integrated care, the purchase of physician groups by hospitals would be expected to improve efficiencies and save costs. But overall this does not seem to be the case. The article by Neprash and colleagues in this issue of JAMA Internal Medicine shows that hospital purchase of physician practices was linked to greater net costs between 2008 and 2012. This confirms previous research, but for the first time, the findings are based on national commercial insurance data."

(JAMA Intern Med. Published online October 19, 2015. doi:10.1001/jamainternmed.2015.6183. Available pre-embargo to the media at

Editor's Note: Please see the article for additional information, including other authors, author contributions and affiliations, financial disclosures.


Media Advisory: To contact study corresponding author J. Michael McWilliams, M.D., Ph.D., call David Cameron at 617-432-0441 or email To contact corresponding commentary author James D. Reschovsky, Ph.D., call Christal Stone Valenzano, MPH at 202-250-3520 or email

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