When private practices merge with hospital systems, costs go up

Summary

Historically, physicians worked independently of—if in partnership with—hospitals. But increasingly, doctors are selling their practices to hospital systems, as well as private equity firms and insurance companies. What does it mean for patients and what they pay for healthcare when their doctors are employed by a hospital system?‌The effects of hospital systems acquiring physician practices are hard to determine, because until now, there has been no comprehensive source of data about these mergers and the effects of integration on pricing can be hard to isolate. New research by Yale SOM economist Fiona Scott Morton tackles these challenges, determining the scale of hospital-physician mergers and examining their effects on pricing. In their study, Scott Morton and her co-authors—Yale economist Zack Cooper; Stuart V. Craig and Ashley T. Swanson of the University of Wisconsin–Madison; Aristotelis Epanomeritakis of Harvard University; Matthew Grennan of Emory University; and Joseph R. Martinez of the University of California, San Francisco—found that these integrations significantly increase prices for consumers, because competition decreases.To Scott Morton, these findings are a wake-up call for regulators. “States haven’t been enforcing [antitrust laws] to the extent that they could,” she says. “I think there’s a lot of good that could be done with some incremental enforcement.”‌ Hey, I’m AInsights Ask me questions about the article and its underlying research. Let’s chat! Ask Insights powered by AI ... Mergers between hospital systems and physicians in private practice are what antitrust experts call “mergers of complements” or “non-horizontal mergers.” These aren’t horizontal mergers, because doctors aren’t competing with hospitals, but they aren’t quite vertical either, because doctors aren’t suppliers to hospitals. ‌In general, scholars expect mergers of complements to have positive effects. Imagine, for example, a car maker decides it wants to own the software t...