The consolidation of primary care physicians into affiliations with integrated health systems has been accelerating, as has the consolidation of hospitals into large, existing systems, according to the findings of a study published in the September issue of Health Affairs.
In their article, “Consolidation of Providers Into Health Systems Increased Substantially, 2016-18,” Michael F. Furukawa, Laura Kimmey, David J. Jones, Rachel M. Machta, Jing Guo, and Eugene C. Rich, looked at the ongoing phenomenon of primary care physicians joining integrated systems, as well as the acceleration of hospitals into larger and larger health systems.
The authors write that “The consolidation of hospitals and physicians has been changing the landscape of health care delivery in the United States. Prior literature on consolidation has focused on hospital systems, vertical integration, and market concentration from the hospital or physician perspective. Less attention has been devoted to provider consolidation from the system perspective and the diverse mix of vertically integrated health systems that vary by size, ownership type, and geographic scope.”
Thus, they write, “Building on prior work, this study addressed several questions: How did the consolidation of providers into health systems change from 2016 to 2018? How did the number of systems and system size change? How did the landscape of health systems vary by ownership type in 2018? Using national data, we found that the share of primary care physicians affiliated with vertically integrated health systems increased from 38 percent to 49 percent, or 11 percentage points, from 2016 to 2018. In 2018 more than half of all physicians and 72 percent of hospitals were affiliated with one of the 637 health systems identified in the Compendium of US Health Systems from the Agency for Healthcare Research and Quality (AHRQ).”
Michael F. Furukawa is acting director of the Division of Healthcare Delivery and Systems Research in the Center for Evidence and Practice Improvement, Agency for Healthcare Research and Quality, in Rockville, Md. Laura Kimmey is a senior researcher at Mathematica in Raleigh, N.C. David J. Jones is a senior researcher and associate director of research at Mathematica in Cambridge, Mass. Rachel M. Machta is a researcher at Mathematica in Oakland, Calif. Jing Guo is a staff fellow in the Center for Evidence and Practice Improvement, Agency for Healthcare Research and Quality. And Eugene C. Rich is a senior fellow at Mathematica in Washington, D.C.
With regard to physicians, the researchers write that “The consolidation of physicians into vertically integrated health systems increased substantially from 2016 to 2018. The share of physicians affiliated with health systems increased by 11 percentage points, from 40 percent in 2016 to 51 percent in 2018. In 2018, 49 percent of primary care physicians were affiliated with systems—an increase from 38 percent in 2016.” With regard to hospitals, “The horizontal consolidation of hospitals into health systems grew modestly between 2016 and 2018. The share of hospitals affiliated with health systems increased by 2 percentage points, from 70 percent to 72 percent. In 2018, 91 percent of hospital beds were in system-affiliated hospitals—an increase from 88 percent in 2016.”
What’s more, they note, “Health systems’ size, based on the number of physicians, increased from 2016 to 2018. Among the 556 systems operating in both years, the median number of physicians increased by 29 percent, from 285 to 369 (exhibit 4). The largest percentage change was in the median number of primary care physicians, which increased by 32 percent, from 106 to 140. Health systems’ size based on the number of hospitals did not change over the two years, remaining at a median of two. Median hospital beds increased modestly, from 449 to 455 (1 percent).”
Further, they state, “We found substantial consolidation of physicians and hospitals into vertically integrated health systems from 2016 to 2018. The share of physicians affiliated with health systems increased from 40 percent to 51 percent in just two years. In 2018 the majority of physicians were affiliated with one of the 637 health systems in the US. The shares of hospitals and hospital beds in systems increased slightly in 2018, to 72 percent and 91 percent, respectively.”
In addition, they report, “Substantial consolidation among health systems as a result of mergers or acquisitions at the system level also occurred from 2016 to 2018. Most of the deals for health systems involved larger multistate systems acquiring smaller metro-based systems. This pattern of consolidation could complicate local and national efforts to regulate provider organizations to ensure that community needs are met. We also found substantial variation in system size and geographic scope by ownership type. We identified several hundred small nonprofit and public systems operating in a single metropolitan area or state. In contrast, there were smaller numbers of church-operated and for-profit systems, with much larger system size and broader scope. The increases in system size among for-profit systems was partially attributable to system mergers and acquisitions (for example, between LifePoint Health and RCCH HealthCare Partners9 and between Steward Healthcare and IASIS Healthcare). The size and scope of the largest health systems may have implications for antitrust enforcement.”
Not surprisingly, “Provider consolidation into integrated systems may lead to highly concentrated markets along both horizontal and vertical dimensions. Future research should examine the drivers of consolidation and variation in performance by ownership type; geographic variation in the extent of health system penetration across local health care markets; and the ramifications of increased consolidation on cost, access, and quality of care,” they conclude.