Per Patient Spending Higher in Hospital-Owned Physician Groups Than in Physician-Owned Groups

Hospitals and multihospital systems have been acquiring medical groups and physician practices at a rapid pace. One cause is the financial incentives provided by Obamacare for physicians to join hospital-affiliated accountable care organizations (ACOs).

Advocates claim that consolidation builds integrated delivery systems (professional, facility, laboratory, and pharmaceutical services) that lead to care that is better coordinated. This reduces duplication of tests and treatment and lowers total expenditures. Health economist James C. Robinson investigated the latter claim using data obtained on total expenditures for care provided to 4.5 million between 2009 and 2012. These patients were covered by commercial HMO insurance and excludes individuals covered by commercial PPO insurance, Medicare, or Medicaid.

The table below presents trends in total expenditures per patient between 2009 and 2012.

Source: “Total Expenditures per Patient in Hospital-Owned and Physician-Owned Physician Organizations in California” from JAMA

Although Obamacare introduces a bias towards hospitals rolling up physician groups to develop ACOs, Robinson’s findings do not support proponents of hospital integration. The hospital-owned organizations represented in this study failed to translate any improvements in coordination to lower expenditures per patient. Between 2009 and 2012 the total expenditures for care per patient were $1173 (ten percent) higher in groups that were owned by a local hospital and $1576  (20 percent) higher in groups owned by a multihospital system than in physician-owned organizations.

In a post-Obamacare world, patients will control their healthcare dollars, and providers must be free to organize themselves to satisfy patients’ needs, not government preferences. That is the only way to lower expenditures.

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