The impact of provider consolidation on physician prices

Abstract

When a clinic system is acquired by an integrated delivery system (IDS), the ownership change includes both vertical integration with the hospital(s), and horizontal integration with the IDS's previously owned or "legacy" clinics, causing increased market concentration in physician services. Although there is a robust literature on the impact of hospital market concentration, the literature on physician market concentration is sparse. The objective of this study is to determine the impact on physician prices when two IDSs acquired three multispecialty clinic systems in Minneapolis-St Paul, Minnesota at the end of 2007, using commercial claims data from a large health plan (2006-2011). Using a difference-in-differences model and nonacquired clinics as controls, we found that four years after the acquisitions (2011), average physician price indices in the acquired clinic systems were 32-47% higher than expected in absence of the acquisitions. Average physician prices in the IDS legacy clinics were 14-20% higher in 2011 than expected. Procedure-specific prices for common office visit and inpatient procedures also increased following the acquisitions.

Keywords: health care markets; horizontal integration; physician prices; vertical integration.