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Overcoming the Market Dominance of Hospitals

Educational Objective
To identify the key insights or developments described in this article
1 Credit CME

Amidst remarkable uncertainty for its future, one of the most concerning and constant trends in US health care has been the increasing consolidation of health delivery organizations. In health care, 2 main forms of consolidation exist. Horizontal consolidation occurs when hospitals or physician groups merge together, enabling the combined entity to increase its market share. For example, in 2015, Stanford Health Care merged with ValleyCare Health System, combining a 2-hospital 613-bed academic medical system with a 242-bed hospital. After hospitals merge, a market often becomes less competitive because of decreased hospital competition. Vertical consolidation occurs when a hospital increases its employed physicians by acquiring a physician practice. Between July 2016 and January 2018, hospitals acquired 8000 medical practices, and 14 000 physicians left private practice to become employed by hospitals.1 This process makes the physician market less competitive by reducing the number of physicians vying for patients.

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Article Information

Corresponding Author: Robert P. Kocher, MD, Stanford University School of Medicine, 291 Campus Dr, Stanford, CA 94305-5450 (bkocher@venrock.com).

Published Online: February 19, 2021. doi:10.1001/jama.2021.0079

Conflict of Interest Disclosures: Dr Kocher reported working at Venrock, a venture capital firm where he invests in health care businesses, and serving on a board for Premera. Mr Shah reported receipt of personal fees from The Advisory Board Company outside the submitted work. Dr Navathe reported receipt of grants from Hawaii Medical Services Association, Anthem Public Policy Institute, the Commonwealth Fund, Oscar Health, Cigna Corporation, the Robert Wood Johnson Foundation, Donaghue Foundation, the Pennsylvania Department of Health, Ochsner Health System, United Healthcare, and Blue Cross Blue Shield of North Carolina; other from Integrated Services (board member; not compensated) and Embedded Healthcare Equity; and personal fees from the following: Navvis Healthcare and Agathos (advisor services); Navahealth (principal); University Health System-Singapore and the Social Security Administration-France (advisor and travel); Elsevier Press (honorarium for editorial role); the Medicare Payment Advisory Commission (commissioner and travel); and the Cleveland Clinic (speaker fees and travel) outside the submitted work.

References
1.
Physicians Advocacy Institute.  Updated physician practice acquisition study: national and regional changes in physician employment 2012-2018. February 2019. Accessed January 3, 2021. http://www.physiciansadvocacyinstitute.org/Portals/0/assets/docs/021919-Avalere-PAI-Physician-Employment-Trends-Study-2018-Update.pdf
2.
McKinsey and Company.  Physician employment: the path forward in the COVID-19 era. July 17, 2020. Accessed November 22, 2020. https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/physician-employment-the-path-forward-in-the-covid-19-era#
3.
Merritt Hawkins.  Survey of America’s Physicians: COVID-19 Edition. August 19, 2020. Accessed February 17, 2021. https://www.merritthawkins.com/trends-and-insights/article/surveys/survey-of-americas-physicians-covid-19-edition/
4.
Beaulieu  ND , Dafny  LS , Landon  BE , Dalton  JB , Kuye  I , McWilliams  JM .  Changes in quality of care after hospital mergers and acquisitions.   N Engl J Med. 2020;382(1):51-59. doi:10.1056/NEJMsa1901383PubMedGoogle ScholarCrossref
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Capps  C , Dranove  D , Ody  C .  The effect of hospital acquisitions of physician practices on prices and spending.   J Health Econ. 2018;59:139-152. PubMedGoogle ScholarCrossref
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Schwartz  K , Lopez  E , Rae  M , Neuman  T .  Kaiser Family Foundation website. What we know about provider consolidation. Published September 2, 2020. Accessed December 5, 2020. https://www.kff.org/health-costs/issue-brief/what-we-know-about-provider-consolidation/
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PricewaterhouseCoopers Health Research Institute.  Medical cost trend: behind the numbers 2021. Accessed November 22, 2020. http://www.pwc.com/us/en/health-industries/behind-the-numbers/index.jhtml
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American Hospital Association.  Trendwatch Chartbook 2018. Table 2.1: Number of community hospitals, 1995–2018. Accessed January 3, 2021. https://www.aha.org/system/files/media/file/2020/10/TrendwatchChartbook-2020-Appendix.pdf
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Kocher  B , Emanuel  EJ .  Overcoming the pricing power of hospitals.   JAMA. 2012;308(12):1213-1214. PubMedGoogle ScholarCrossref
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