Integrating doctors and hospitals may worsen cost control in health reform

Health reformers propose the proliferation of integrated health systems, like the Mayo Clinic or Kaiser Permanente, which, according to the Dartmouth Atlas, lead to better patient care and improved cost control.

To that end, Accountable Care Organizations have been a major part of health reform, changing the way health care is delivered.

Never mind that patients may not be receptive to the new model, but the creation of these large, integrated physician-hospital entities that progressive policy experts espouse comes with repercussions.

Monopoly power.

To prepare for the new model of health care delivery, physician practices have been consolidating.  In many cases, they’re being bought by hospitals.  Last year, I wrote how this is leading to the death of the private practice physician.

But with consolidation comes a tilt in market power.  Health insurers, desperate to control costs, are finding it more difficult to negotiate with hospital-physician practices that dominate a market.  And patients are going to side with the hospital — insurers that leave out popular doctors and medical facilities face a backlash from patients.  Witness the power that Partners Healthcare has in the Boston market that’s mostly driven by patient demand for big-reputation, high-cost Massachusetts General Hospital and Brigham and Women’s Hospital.

Merrill Goozner notes how consolidation in California actually raised prices:

A national study conducted for the Robert Wood Johnson Foundation found that after the merger wave between 1990 and 2003, 90 percent of large metropolitan area hospitals wielded excessive market power as defined by the Federal Trade Commission. The study suggested the mergers raised prices by anywhere from 5 to 40 percent (depending on how close the merged facilities were to each other) and probably led to lower quality.

The fear now is that “ACOs could make an existing problem marginally worse,” said Robert Berenson, a senior fellow at the Urban Institute, who conducted the California survey. “The issue is market power.”

Progressives face a conundrum.  They want doctors to practice in integrated health systems so that economies of scale can lead to better health IT integration, cost control, and better quality — or so says the Dartmouth Atlas data.

But in doing so, they’re promoting monopolies, where medical providers and hospitals can then dictate prices and have a greater say in health care pricing.  That is antithetical to progressive health policy dogma.

So, ironically, it may be because of health reformers’ zeal to integrate doctors and hospitals that may be the biggest impediment to cost control going forward.

 is an internal medicine physician and on the Board of Contributors at USA Today.  He is founder and editor of KevinMD.com, also on FacebookTwitterGoogle+, and LinkedIn.

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