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Little Evidence Exists To Support The Expectation That Providers Would Consolidate To Enter New Payment Models

Author: Hannah T. Neprash, Michael E. Chernew, J. Michael McWilliams
$15.00

Provider consolidation has been associated with higher health care prices and spending. The prevailing wisdom is that payment reform will accelerate consolidation, especially between physicians and hospitals and among physician groups, as providers position themselves to bear financial risk for the full continuum of patient care. Drawing on data from a number of sources from 2008 onward, we examined the relationship between Medicare’s accountable care organization (ACO) programs and provider consolidation. We found that consolidation was under way in the period 2008–10, before the Affordable Care Act (ACA) established the ACO programs. While the number of hospital mergers and the size of specialty-oriented physician groups increased after the ACA was passed, we found minimal evidence that consolidation was associated with ACO penetration at the market level or with physicians’ participation in ACOs within markets. We conclude that payment reform has been associated with little acceleration in consolidation in addition to trends already under way, but there is evidence of potential defensive consolidation in response to new payment models.

Provider consolidation has been associated with higher health care prices and spending. The prevailing wisdom is that payment reform will accelerate consolidation, especially between physicians and hospitals and among physician groups, as providers position themselves to bear financial risk for the full continuum of patient care. Drawing on data from a number of sources from 2008 onward, we examined the relationship between Medicare’s accountable care organization (ACO) programs and provider consolidation. We found that consolidation was under way in the period 2008–10, before the Affordable Care Act (ACA) established the ACO programs. While the number of hospital mergers and the size of specialty-oriented physician groups increased after the ACA was passed, we found minimal evidence that consolidation was associated with ACO penetration at the market level or with physicians’ participation in ACOs within markets. We conclude that payment reform has been associated with little acceleration in consolidation in addition to trends already under way, but there is evidence of potential defensive consolidation in response to new payment models.

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