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Vertical integration in healthcare is happening more, but at what cost to patients?

September 13, 2023

More than ever before, physicians in the U.S. are practicing in hospital and health system environments. In fact, according to the American Medical Association, the number of physicians who have left independent practice for a larger health care system has doubled in the past decade. (Bailey, 2023)

This shift has created a vertical relationship between primary care physicians (PCPs) and large health systems and is the focus of a recent study out of Harvard University that links these vertical relationships to “steering,” a practice where providers refer patients to specialists and care providers within the system. The authors conclude that steering has led to higher utilization and spending on patient care. (Sinaiko, 2023)

A case-controlled study, recently published in JAMA Health Forum, included 4,030,224 insured individuals (53.3% female; mean age; 35.07 years) in Massachusetts treated by physicians newly aligned with a health system and physicians who did not have a vertical relationship or were already employed by a health system at that time. (Sinaiko, 2023)

The study suggests that vertical relationships resulted in the following key findings:

Increased specialist visits. Vertical relationships between primary care providers and health systems were correlated with a significant increase in specialist visits per patient-year. Compared to the control group, those in the study saw a 22.64% rise in specialist visits, indicating a higher likelihood of receiving specialized care within the associated health systems. (Sinaiko, 2023; Shyrock, 2023)

Escalated medical spending. Patients whose PCPs had established a vertical relationship with large health systems experienced an uptick in total medical expenditures to the tune of $356.67 per patient-year, representing a 6.26% surge in health care spending compared to the control group. (Sinaiko, 2023; Shyrock, 2023)

Increased hospitalizations and emergency department visits. The number of hospitalizations increased by 22.36% and ED visits 14.19% per patient-year as compared to the control group. (Sinaiko, 2023; Shyrock, 2023)

The study’s authors see the increase in specialist visits as “steering,” something that could impact patients’ options for care; however, the authors acknowledged that the practice does not necessarily lead to lower-quality care and may instead result in improved care coordination. (Sinaiko, 2023)

Vertical relationships do appear to result in higher spending on patient care, but there is no evidence that this results in improved patient outcomes or reduced readmissions. The researchers recommend that policymakers and healthcare stakeholders carefully consider strategies to mitigate adverse effects of vertical consolidation on health care costs and access. (Sinaiko, 2023)

Sources:

Bailey, V. (2023, Jul 17). Revcycle Intelligence. AMA: Physicians have moved from private to hospital-owned practices. https://revcycleintelligence.com/news/ama-physicians-have-moved-from-private-to-hospital-owned-practices

Shyrock, T. (2023, Sept 7). Medical Economics. Primary care physicians that are part of large health systems lead to increased spending and specialist visits. https://www.medicaleconomics.com/view/primary-care-physicians-that-are-part-of-large-health-systems-lead-to-increased-spending-and-specialist-visits

Sinaiko, Anna D., et al. (2023, Sept 1). JAMA Health Forum. Utilization, steering, and spending in vertical relationships between physicians and health systems. https://pubmed.ncbi.nlm.nih.gov/37656471/