Vertical integration reshaping US healthcare: Impact on cost, access

Editor's Note

A growing trend toward vertical integration in US healthcare is leading to significant changes in how care is delivered and billed, according to a new study by Brown University researchers published on September 16. Vertical integration refers to the consolidation of physician-owned practices into larger health systems, a shift that has seen over half of US physicians employed by hospitals or healthcare systems, rather than maintaining independent practices.

Led by Christopher Whaley, associate professor at Brown, the study examines how this consolidation affects healthcare costs, patient access, and market competition. A key finding highlights how services performed in hospital outpatient departments (HOPDs) are reimbursed at much higher rates—often double—compared to the same procedures conducted in ambulatory surgery centers (ASCs) or independent physician offices. For example, Medicare reimburses ASCs $805 for a colonoscopy with a biopsy, while HOPDs receive $1,371 for the same service.

Whaley’s team found that increased physician-hospital integration could drive up Medicare costs by $315 million and patient costs by $63 million for just two procedures—arthroscopies and colonoscopies. Additionally, the study suggests that integrated physicians may refer patients to more expensive hospital settings, even when nearby, lower-cost options are available, which could reduce access to care and increase travel times for patients.

The study also found no significant improvement in care quality or coordination due to consolidation. In some cases, care quality worsened. Whaley emphasizes the need for regulators to monitor these incremental acquisitions more closely, as small consolidations over time could alter market dynamics and reduce competition, potentially requiring greater oversight.