Two analyses of U.S. healthcare market concentration are getting extensive coverage through their publication in the September issue of Health Affairs. The analyses, by different sets of healthcare researchers, look at some of the policy and market complexities around accelerating market consolidation, among hospitals, physicians, and health insurers. And there are a lot of implications of the current shifts taking place in the landscape, for how healthcare IT leaders should respond, strategically and operationally.
As Brent D. Fulton writes in his introduction to the first article, “Health Care Market Concentration Trends in The United States: Evidence and Policy Responses,” “Policy makers and analysts have been voicing concerns about the increasing concentration of health care providers and health insurers in markets nationwide, including the potential adverse effect on the cost and quality of health care. The Council of Economic Advisers recently expressed its concern about the lack of estimates of market concentration in many sectors of the US economy. To address this gap in health care, this study analyzed market concentration trends in the United States from 2010 to 2016 for hospitals, physician organizations, and health insurers. Hospital and physician organization markets became increasingly concentrated over this time period,” Fulton notes.
“Concentration among primary care physicians increased the most, partially because hospitals and health care systems acquired primary care physician organizations,” Fulton writes. “In 2016, 90 percent of Metropolitan Statistical Areas (MSAs) were highly concentrated for hospitals, 65 percent for specialist physicians, 39 percent for primary care physicians, and 57 percent for insurers. Ninety-one percent of the 346 MSAs analyzed may have warranted concern and scrutiny because of their concentration levels in 2016 and changes in their concentrations since 2010. Public policies that enhance competition are needed, such as stricter enforcement of antitrust laws, reducing barriers to entry, and restricting anticompetitive behaviors.”
Meanwhile, the second article, “Physician Practice Consolidation Driven By Small Acquisitions, So Antitrust Agencies Have Few Tools To Intervene,” by Cory Capps, David Dranove, and Christopher Ody, looks at things from rather a different angle, noting the dramatic decline in small physician practices and the strong growth in large physician practices. “The decline of small physician practices and the growth of very large practices in the United States have been documented by several studies,” the authors write. “For example, the share of physicians practicing in groups of fifty or more increased from 30.9 percent in 2009 to 35.6 percent in 2011,1 while between June 2013 and December 2015 the share of primary care physicians practicing in groups of one or two fell by 5.7 percentage points and the share in groups of five hundred or more rose by 4.5 percentage points.2 Other research has found that prices are higher in more concentrated physician markets than in less concentrated ones, which suggests that the trend toward larger physician practices should be of concern to policy makers and antitrust agencies alike.”
In his article, Fulton does delve into policy prescriptions, making several recommendations, including that, “First, proposed mergers and acquisitions should be scrutinized by the federal and state governments to evaluate whether the net result is pro- or anticompetitive, as the DOJ and attorneys general from multiple states did in the previously proposed Anthem-Cigna and Aetna-Humana insurer mergers.” He also recommends that “policies that restrict market entry—such as hospital certificate-of-need laws, any-willing-provider regulations, and restrictive provider licensing and scope-of-practice regulations—should be evaluated to determine whether they enhance consumer welfare.” He also believes that, “[P]articuarly in markets where providers are already highly concentrated, anticompetitive behaviors should be restricted. Examples of these behaviors include anti-tiering clauses that force insurers to include a provider in the top tier and tying agreements that force insurers to contract with all hospitals in a system.” He further recommends that federal healthcare officials should rethink Medicare facility fees, as they encourage physician employment by hospitals; and he found that “At the insurer level, health insurance rate review and Marketplace active-purchaser states that use selective contracting have both been found to be associated with lower growth rates in premiums.”
On the physician group side, Capps et al found in their market analysis that “Twenty-two percent of the physician markets were highly concentrated in 2013, and an additional 21 percent were moderately concentrated. Not surprisingly,” they found, “market concentration and the market share of the largest provider tended to move together. For example, 64 percent of the highly concentrated markets had a single physician group with a market share of more than 50 percent. If these large groups maintained their shares, then these markets would remain highly concentrated regardless of the shares of the smaller groups.”