Practice-Hospital Consolidation Increasing for Many Specialties

Kerry Dooley Young

July 13, 2018

The level of integration of certain primary care practices into health systems and hospitals more than doubled in recent years, with steeper increases seen in the fields of oncology and cardiology, according to research published in the July issue of Health Affairs.

Although so-called vertical integration has been much discussed in healthcare, little is known about which specialties are most affected. Therefore, Sayeh S. Nikpay, PhD, MPH, an assistant professor of health policy at Vanderbilt University in Nashville, Tennessee, and colleagues examined vertical integration in different specialties between 2007 and 2017 using data from an SK&A survey that covers 75% of all US office-based physicians in their practices.

Among multispecialty adult primary care practices, 21% reported being owned by a hospital or health system in 2007 compared with 44% in 2017. For single-specialty adult primary care practices, the proportion rose from 12% to 28%. For women's health practices, the level rose from 11% to 30%.

Still, Nikpay and her colleagues say there is a "more nuanced story" in these trends than has been suggested by media reports of hospitals "gobbling up" physician practices.

"While the number of adult primary care practices per hospitals increased substantially, hospitals acquired only one or two more specialty practices, such as oncology practices, over the decade," they write.

Lawmakers and the Centers for Medicare & Medicaid Services have been looking for many years at the increased vertical integration of physician practices. A "growing body of evidence"  suggests that it increases costs of medical care without a "discernible impact on quality," Nikpay and her colleagues write.

The Medicare Payment Advisory Commission, for example, has said that the federal health program paid $1.6 billion more in 2015 for evaluation and management (E&M) office visits in hospital outpatient departments than it would have if these services were covered at the same rate paid for care in freestanding practices. Congress has sought to curb the financial incentive for further vertical integration. It has moved to equalize prices between many new off-campus hospital outpatient departments and physician offices.

"Our results provide comprehensive estimates of vertical integration over one of the longest study periods in the literature," the authors write. 

Analysis by Specialty

"I kept reading interesting findings on the implications of vertical integration but could only find anecdotes about which specialties and how fast — so I answered my own question," Nikpay said in a July 9 tweet.

To study integration rates by specialty, Nikpay and her colleagues  examined practice-level data from 2007, 2009, 2011, 2013, 2015, and 2017.

Oncology, cardiology, and general surgery practices were among the most likely to have been integrated into hospital and health systems in recent years, with this trend toward so-called vertical integration also happening broadly across other specialties. Nikpay and her colleagues reported that more than 51% of the oncology practices that were independent in 2007 integrated into a hospital or health system by 2017. The level of vertical integration was above 40% for medical multispecialty, cardiology, and general surgery practices.

"In contrast, fewer than 10 percent of ophthalmology or dermatology practices that were independent in 2007 were vertically integrated ten years later," Nikpay and her colleagues said in the paper.

The federal 340B drug discount program has been seen as a driver of vertical integration, particularly in oncology. However, the new data "suggest that vertical integration is influenced by many factors and may reflect a larger trend in health care since we see vertical integration also occurring in specialties that shouldn't benefit from 340B — for example, surgery," she said in an email to Medscape Medical News.

In the paper, Nikpay and colleagues highlight what they called an "intriguing finding" regarding vertical integration of surgical practices. Surgeons have historically used their privileges to care for their patients under a "physician's workshop model" rather than become employees of hospitals, Nikpay and her colleagues said.

"We suspect that the change in the extent of vertical integration may have resulted from a preference for hospital employment among younger surgeons and the fact that reimbursements are higher for surgeries in hospital outpatient departments than for those in ambulatory surgery centers," they write.

Nikpay has disclosed no relevant financial relationships.

Health Aff. 2018;37:1123-1127. Abstract

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