NCPA - National Center for Policy Analysis

Hospital Consolidation Has a Price

December 16, 2014

Hospital and physician practice consolidation can better coordinate care, but it also increases costs, reports Kenneth Artz for the Heartland Institute.

The idea behind coordinated care is that bringing independent medical practices within the control of a hospital system would deliver services to individuals more efficiently than those practices standing alone. According to a study recently published in the Journal of the American Medical Association, when local practices are owned by local hospital systems, care may be better coordinated than it would otherwise be. However, that consolidation comes with a cost -- literally. Artz offers some numbers:

  • From 2009 to 2012, organizations owned by local hospitals had costs that were 10 percent higher per patient than organizations owned by the physicians themselves.
  • Per patient expenditures in practices owned by multihospital systems were 20 percent higher.

Why are costs higher? According to NCPA Senior Fellow Devon Herrick, the same services are reimbursed at much higher rates when performed as outpatient hospital services than when performed in a doctor's office. Consolidation allows hospitals to charge those higher prices. Artz notes that provisions within the Affordable Care Act encourage the consolidation of physician practices.

Source: Kenneth Artz, "Coordinated Care Increases Health Care Costs," Heartland Institute, December 15, 2014. 


Browse more articles on Health Issues