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Hospital acquisition of practices drives up workers’ comp costs


Average payment 8% higher than before acquisition

When hospitals acquire physicians practices, the cost of providing care for workers’ compensation claims goes up, according to Impact of Medical Provider Consolidation on Workers’ Compensation Payments, a study from the Workers Compensation Research Institute.

“Medical markets are increasingly concentrated. This means that patients are more likely to be treated by physicians at sites owned by hospitals and health systems,” said John Ruser, WCRI president and CEO, in a statement. “This raises a policy concern that the increasing concentration of medical providers may lead to higher payments for medical care without corresponding improvements in patient outcomes.”

The study specifically looked at the effects of vertical integration in workers’ compensation. Prior studies, of group health markets, found evidence of increasing prices as one of the main outcomes of the growth in provider consolidation. According to WCRI, economists expect that increases in provider consolidation lead to higher bargaining power of these providers over prices and, in turn, result in higher payments for care. Furthermore, provider consolidation may lead to more instances of facility fees being included in medical bills for similar types of care that are provided by vertically integrated physicians.

Between 2012 and 2018, the percentage of hospital- or health system-owned primary care practices increased from 32% to 49%, according to the report, and from 18% to 35% for orthopedic surgeons.

This integration with hospitals and health systems resulted in an average increase in payment per procedure of 8%, averaging a $29 increase. The effects of this integration on medical payments were larger in the states that did not regulate payments for physicians through fixed-amount fee schedules. Vertical integration resulted in a $91 increase in the average payment per procedure in the non-fee schedule states.

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