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Massachusetts scrutinizing health care consolidation

A study of vertical integration trends in the state found that it drove primary care prices to increase by as much as 12%.

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In a new study, researchers linked the growth of vertical integration with price increases for care in Massachusetts.


The study in Health Affairs noted that vertical integration—where physicians consolidate their services—has been seen as a way to integrate care and create efficiencies. In practice, though, several studies have shown that integration, especially with large health systems, is often linked with higher cost care.


Related: Infographic: Acquisition of independent physician practices heats up


The study comes after years of consolidation in the health care industry across the U.S. The report noted that the practice has led federal and state regulators to increasingly examine such mergers for antitrust issues. “An emerging literature has shown that integration between physicians and hospitals is usually associated with an increase in physician prices, as well as hospital prices,” the report said.


A case study in Massachusetts


This particular study looked at vertical integration and joint contracting between physicians and hospitals in Massachusetts between 2013 and 2017.


The findings showed that vertical integration and joint contracting among small and medium health systems in the state rose from 19.5% in 2013 to 32.8% in 2017 for primary care physicians. For specialists during the same time, such consolidation grew from 26.1% to 37.8% for specialists. The study found that the practice of vertical integration led to price increases during that time period as well, with primary care physicians seeing price increases from 2.1% to 12% for primary care physicians and from 0.7% to 6% for specialists.


The researchers concluded by saying that more work should be done studying the benefits of vertical integration, such as better care coordination, but that this study confirmed that such integration leads to higher physician prices.


The stakeholders strike back


The same week the report was released, word came that a coalition of stakeholders and a stage regulatory agency had helped block the state’s largest hospital system from an expansion plan.


The Massachusetts Health Policy Commission was created to study health care industry moves such as mergers, according to a story in Fortune. The agency withheld approval for Mass General Brigham (MGB) to expand into the suburbs around Boston. The health system withdrew its expansion proposal on April 1.


“That expansion would have increased annual spending for commercially insured residents by as much as $28 million, driving up insurance premiums and shifting patients away from lower-priced competitors, according to the commission,” the story said. “This marked the first time in decades that the state health department used its authority to block a hospital expansion because it undercut the state’s goals to control health costs.”


The story noted that other states are paying close attention to the regulatory model in Massachusetts, where state agencies required MGB to submit a cost-control plan after finding its prices and spending growth have exceeded those of other hospital systems.


“Several states have created or are considering creating commissions similar to the one in Massachusetts with the authority and tools to analyze the market impact of expansions and mergers,” the Fortune story said. “Oregon, for example, recently passed a law empowering a state agency to review health care mergers and acquisitions to ensure they maintain access to affordable care.”

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