Association of financial integration between physicians and hospitals with commercial health care prices

Importance Financial integration between physicians and hospitals may help health care provider organizations meet the challenges of new payment models but also may enhance the bargaining power of provider organizations, leading to higher prices and spending in commercial health care markets. OBJECTIVE To assess the association between recent increases in physician-hospital integration and changes in spending and prices for outpatient and inpatient services. DESIGN, SETTING, AND PARTICIPANTS Using regression analysis,we estimated the relationship between changes in physician-hospital integration from January 1, 2008, through December 31, 2012, in 240metropolitan statistical areas (MSAs) and concurrent changes in spending. Adjustments were made for patient, plan, and market characteristics, including physician, hospital, and insurer market concentration. The study population included a cohort of 7 391 335 nonelderly enrollees in preferred-provider organizations or point-of-service plans included in the Truven Health MarketScan Commercial Database during the study period. Data were analyzed from December 1, 2013, through July 13, 2015. EXPOSURE Physician-hospital integration, measured using Medicare claims data as the share of physicians in an MSA who bill for outpatient services with a place-of-service code indicating employment or practice ownership by a hospital. MAIN OUTCOMES AND MEASURES Annual inpatient and outpatient spending per enrollee and associated use of health care services, with utilization measured by price-standardized spending (the sum of annual service counts multiplied by the national mean of allowed charges for the service). RESULTS Among the 240 MSAs, physician-hospital integration increased from 2008 to 2012 by a mean of 3.3 percentage points, with considerable variation in increases across MSAs (interquartile range, 0.8-5.2 percentage points). For our study sample of 7 391 335 nonelderly enrollees, an increase in physician-hospital integration equivalent to the 75th percentile of changes experienced by MSAs was associated with a mean increase of $75 (95%CI, $38-$113) per enrollee in annual outpatient spending (P <.001) from 2008 to 2012, a 3.1%increase relative to mean outpatient spending in 2012 ($2407 [95%CI, $2400-$2414] per enrollee). This increase in outpatient spending was driven almost entirely by price increases because associated changes in utilization were minimal (corresponding change in price-standardized spending, $14 [95%CI,-$13 to $41] per enrollee; P =.32). Changes in physician-hospital integration were not associated with significant changes in inpatient spending ($22 [95%CI,-$1 to $46] per enrollee; P =.06) or utilization ($10 [95%CI,-$12 to $31] per enrollee; P =.37). CONCLUSIONS AND RELEVANCE Financial integration between physicians and hospitals has been associated with higher commercial prices and spending for outpatient care.