Physician Practice Acquisitions and Market Concentration

By September 20, 2017 Commentary

One of the most concerning trends in health care is the ongoing massive acquisition of physician practices by large health systems and by larger physician groups.  An article in Health Affairs reviews this aspect of market concentration.   (HA Article)   The number of doctors practicing in large groups and in an employed setting has steadily risen, while the number owning or belonging to a small, independent practice is in decline.  Prices are higher in more concentrated physician markets, and there is no support for the idea that quality improves.  Because acquisitions of physician practices are typically small, they are under the levels required for notice and review by the federal antitrust regulators.  State regulators are typically not well equipped to analyze and protect against anticompetitive mergers, and they may be more subject to political pressure to ignore them.  And antitrust regulators are typically examining mergers one-by-one.  This means that while one acquisition of a 100 doctor group might get antitrust review, 20 acquisitions of five-person practices is very unlikely to get scrutiny of any of the 20 transactions.

The authors looked at data from 2007-13 to ascertain levels of acquisitions of physician practices.  They examined changes in provider tax identification numbers from a claims database.  By 2013 22% of physician markets were deemed to be highly concentrated and 21% were moderately concentrated.  In 64% of the highly concentrated markets, one physician group had a market share of 50% or more.  Practices with 11 or more physicians at the start of the study period grew larger by the end of it, while those with ten or fewer shrank.  The larger the group, the faster it tended to grow, but the acquisitions were almost all of small doctor groups.  So the consolidation effectively did fly under the radar.  In addition to acquisitions, these larger groups were also hiring more physicians, adding to their market power.  The data verified that very few purchases of doctor practices would hit the federal size triggers for notification and scrutiny.  While special rules could and should be enacted regarding physician practice mergers or acquisitions, it is realistically too late for this to have an impact on the pernicious effects of provider consolidation.

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