How Hospital Acquisitions of Doctors’ Practices Have Increased Treatment Costs

Hospitals have long been commonplace to purchase doctors’ practices or hire them directly. It has now almost been around for three decades. While access to a hospital’s infrastructure could occasionally lead to better treatment options, there may be a few potential downsides. One of them is that a rise in treatment costs is inevitable with such acquisitions.

Why Do Treatment Costs Rise When Hospitals Buy Out Doctors’ Practices?

The Affordable Care Act incentivizes hospitals to acquire doctors’ practices by encouraging providers to form ACOs.

What are ACOs?

It stands for Accountable Care Organizations. ACOs are voluntary associations of physicians, hospitals, and other healthcare professionals who work together to provide Medicare patients with coordinated, seemingly high-quality care.

When hospitals acquire medical practices, they expand their power over the market and, as a result of increased demand, they raise the cost of treatments that in the past might have been provided by those same doctors independently and at a lower cost.

This can be backed by a study published in the Journal of Health Economics, concluding that prices for services rendered by physicians rose by an average of 14.1% after being acquired by hospitals.

Another Downside: Hospital Acquisition of Doctors Does Not Always Translate into Higher Quality of Treatment

Hospitals acquiring doctors’ practices results in a lack of competition. This does not help because it removes incentives to provide high-quality care to patients. Thus, it can be inferred that hospitals and physicians are collaborating to significantly increase their profits at the expense of proper treatments and, inevitably, the health of their patients.

Such Consolidation of Providers Is Not a Recent Occurrence

Buying out medical practices is not a new practice. As was previously mentioned, it has existed for at least thirty years. Recently, they have broadened the scope of their acquisitions from other hospitals to include doctors.

As COVID spreads worldwide, more and more struggling doctors joined the club and established partnerships with hospitals to increase their profits.

In light of the lack of competition and the decline of high-quality healthcare, the government should take away incentives for hospitals to acquire doctors’ practices to have their monopoly broken up. A rise in independent medical practices would improve everyone’s access to quality healthcare.

While hospitals reduce competition among independent practices, insurance providers have been known to fight hard to provide high-quality healthcare at reasonable costs.

Contact our professionals here at ISU Wissink Agency immediately to obtain a personalized health insurance policy that will protect you and offer you high-quality care at reasonable costs.