Hospitals' physician practice acquisitions reduce competition, raise prices, analysis finds

A recent empirical analysis of hospitals’ physician practice acquisitions and employment is the latest to suggest provider consolidation has brought an increase in prices.

The working paper analysis, published this month by the National Bureau of Economic Research, focuses on the window between 2008 and 2016 when the share of physicians integrated with a hospital rose from 27.5% to 47.2%.

Specifically, the analysis’s sample looked at 276 practice acquisitions and 66 “hospital integration events,” or one-year periods during which the share of physicians practicing at a hospital increased sharply. Of note, nearly all practice acquisitions were small and did not meet federal regulators’ market control threshold cutoff for mandatory antitrust reporting and investigation, researchers wrote.

Looking at claims from a large insurer found average hospital price increases of 3.3% ($475) and average physician price increases of 15.1% ($502) for privately covered labor and delivery services two years after an integration event—price increases the researchers said were robust across model tweaks and when including controls.

Subsequent analyses outlined in the working paper point to 9% price increases among physicians already integrated with a hospital after that hospital acquired additional physicians in their specialty. Combined with evidence that quality measures remained unchanged, the researchers wrote that this increase is explained by lessened competition stemming from the acquisitions.

Further statistical tests conducted under the researchers’ model pointed to larger price effects under various market circumstances—such as when an acquiring hospital has more power than its local insurance network—they said reinforce the broader link between reduced competition and higher prices.

“Taken together, our results support three anticompetitive effects of physician–hospital mergers,” the researchers wrote. “We find evidence that physician–hospital mergers often increase prices and, when they do, they do so in ways consistent with: (1) greater foreclosure of rivals, (2) improving negotiating parties’ outside options through recapture, and (3) increasing concentration in physician markets.”

The researchers added that their findings “pose a challenge for antitrust enforcement agencies,” which primarily take action in horizontal mergers involving two large, head-to-head competitors (i.e., a pair of hospital systems in the same market). Based on these data, numerous small physician acquisitions have collectively brought consumer harm “similar in magnitude” to those larger deals, they wrote.

The trend away from private practices and toward hospital employment has only continued in the years since 2016.

Recent annual survey data from the American Medical Association found 42.2% of physicians worked in private practice, down from 46.7% in 2022 and 60% in 2012. More than a third work in a hospital-owned practice as of 2024, and 12% were either directly employed or contracted by a hospital. Surveyed doctors often cited inadequate payment rates, costly resources and burdensome regulatory and administrative requirements as key factors in the decision to sell practices to hospitals (or other owners like private equity firms or insurers).

Another recent report commissioned by the Physicians Advocacy Institute and conducted by Avalere Health suggested that independent physicians and practices are becoming increasingly less common in rural areas.

The nonprofit group has argued that such increasing “corporatization” prioritizes increased profit over quality care delivery and harms patients. The hospital lobby has historically underlined the greater stability and resources a health system can offer practices, especially those struggling to pay their bills. 

This month’s analysis isn’t the first to link physician practice acquisitions to higher prices. A study published in JAMA Health Forum earlier this year, for instance, highlighted negotiated price differences for evaluation and management office visit charges at hospital-affiliated primary care physicians as recently as 2022.