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Hospital Ownership of Physician Groups Leads to Higher Costs

Hospitals and health systems may want to rethink their plans to acquire physician practices.  A new study finds that hospitals who own physician groups in California led to a 10 to 20 percent increase in overall costs.

The study revealed findings that contrasted both the hope and expectation, that by hospital and health systems who own physician groups can coordinate better care, which would result in lower costs.

The latest study was published in the Journal of the American Medical Association and was conducted to determine whether total expenditures per patient were higher in physician group organizations owned by local hospitals or health systems compared or physician groups owned by participating physicians.

The researchers analyzed data of 4.5 million patients treated in California between 2009 and 2012.

Definitive Healthcare’s physician group database tracks 189,760 physician groups of both the large and small size.  Out of the larger physician groups, Definitive Healthcare tracks 4,133 physician groups that are affiliated with a health network and include both a hospital and health system affiliation.  Additionally, Definitive Healthcare tracks 3,170 physician groups that are known of co-locating at a hospital.

It was found that the average expenditure per patient across all physician organizations increased by 16.5 percent between the three years (2009-2012) from $2,954 to $3,443.

The breakdown of this increase was as follows: $3,066 per patient in physician owned organizations, $4,312 in local-owned hospital organizations, and $4,776 in multinational system-owned organizations (health systems).

This increase in price reveals that hospital and health systems cost hospitals more per patient than patients from independent physician group organizations.

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