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Hospital acquisitions drive up costs for physician services — 7 findings

A study at Northwestern University's Kellogg School of Management in Chicago discovered the cost of physician services climbs as healthcare providers increasingly gain market power through mergers and acquisitions.

Here are seven findings.

1. Researchers analyzed insurance company claims that covered about 12 percent of the U.S. population. Almost 10 percent of physician practices in the dataset were acquired by a hospital from 2007 to 2013.

2. After acquisitions, prices for physician services rose 14 percent on average. Researchers attributed the increase to gained market power and the mechanics of contracts with insurers, which can allow hospitals to bill more for procedures than physician groups can.

3. Researchers found 22 percent of markets can be considered "uncompetitive" under federal guidelines, based on insurance-claims data. However, they report regulators are unlikely to break up large groups after the deals are finalized.

4. Only 28 percent of those high-concentration markets involved an individual acquisition that federal authorities would have considered anticompetitive, indicating individual deals don't draw much attention from antitrust regulators.

5. Research was conducted by David Dranove, a Kellogg professor of strategy; Christopher Ody, a research assistant professor of strategy at Kellogg; and Cory Capps of Bates White Economic Consulting.

"The way the laws are currently written and enforced, the antitrust agency is unlikely to even know about the increases in provider concentration," Dranove said.

6. The researchers acknowledged the difficulty of documenting post-integration costs: comprehensive data showing which physicians were acquired by which hospital, as well as the cost of the same physician services before and after the acquisition, isn't readily available.

7. The study didn't determine whether quality improved as a result of the market dynamics.

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