Costs per patient $704 higher at multihospital vs. physician-owned practices

Patient costs can be as much as 20 percent higher in multihospital systems as opposed to physician-owned, physician-run organizations, a study published in the Oct. 22/29 issue of JAMA found. These findings contradict assumptions that larger organizations would be able to leverage size and integrated services for better pricing.

James C. Robinson, PhD, MPH, of the School of Public Health at the University of California, Berkeley, and colleagues accessed Californian health maintenance organization (HMO) insurance claims data from 2009 through 2012. They cross-referenced against information on physician organizations to see expenditures for care. They then structured their analysis with an eye to costs per patient per year for each of three types of care delivery groups: multihospital, local hospital-owned and physician-owned independent medical practices.

The research team noted that patients participating in HMOs reflected 21 percent of private health-insured patients in California and incorporated 3.9 million patients in 2012.

The landscape of healthcare in California changed from 2009 through 2012, Robinson et al found, with increasing reliance on hospital-owned organizations. These organizations grew and bought out smaller practices. In 2009, hospital-owned organizations represented 7.7 percent of HMO patients; by 2012, this had increased to 16.2 percent of patients in less than five years.

Annual per-patient spending increased for all organizations by 16.5 percent, they wrote. This related to a mean of $2,954 in 2009 to $3,443 by 2012. However, physician-owned organizations cost an average of $3,066 per patient in 2012, while local hospital-owned and multihospital-owned organizations averaged $4,312 and $4,776, respectively, after adjusting for condition, severity and locational differences.

Compared with physician-owned practices, total annual expenditures were significant. Local hospital-owned practices and multihospital systems incurred 10.3 percent and 19.8 percent higher costs as compared to physician-owned groups. Per patient, this meant $435 or $704 more, respectively, for local hospital-owned groups or multihospital-owned organizations as compared with physician-owned practices.

“The findings are not encouraging proponents of integration,” Robinson et al wrote. “Organizations owned by local hospitals and multihospital systems may better coordinate care than organizations owned by their participating physicians. For the hospital-owned organizations represented in this study, however, any resulting improvements in coordination were not associated with lower expenditures per patient.”

They cautioned that these results relate to HMOs in California only and may not be applicable in another state or to preferred provider organization insurance or to Medicare or Medicaid patients. However, Robinson et al wrote, regulations for acquisitions and conglomerations of medical groups must be carefully considered. “Antitrust law and policy need to find the appropriate balance between permitting hospital acquisitions that improve efficiency, on the one hand, and preventing acquisitions that increase expenditures, on the other.”

Further, payment reform discussions must include private insurers and Medicare, and consider focus on total expenditures made by physicians and facilities on behalf of patients to promote coordination but also decrease costs and promote efficiency, Robinson et al wrote.