The economics of market consolidation usually are clear: The fewer entities dominating a given market, the more power those players have in determining pricing and payment for their goods and services.
But when it comes to the health care industry and anesthesiologists in particular, the effects of market consolidation are far less straightforward. Recent research suggests that increasing consolidation among anesthesiology groups does not increase income.
“We wanted to look at this because this consolidation in health care markets is going to continue to happen,” said Eric Sun, MD, PhD, an anesthesiology resident at Stanford University, in Stanford, Calif., who led the study. “The Affordable Care Act encourages physicians to join together and form accountable care organizations [ACOs]. What we’re trying to look at is whether the benefits from improved coordination of care are outweighed by the ability of ACOs to potentially negotiate higher prices from insurers.”
Figure. Market concentration in anesthesiology, 2001-2007.
Dr. Sun and his colleagues examined more than 3.5 million claims from private insurers across nearly 400 regional markets throughout the United States, then compared payments for the most commonly billed anesthesia services between 2001 and 2007. In the six-year period, anesthesia groups generally became more consolidated, with more markets becoming dominated by a few large groups over time.
To control for regional differences and other possible confounders, Dr. Sun’s team compared payments within individual markets, using linear regression to determine the effect of increased consolidation on anesthesiologists’ payments.
They found that common economic principles do not seem to apply to anesthesiologists in particular. Compared with anesthesiologists in unconsolidated markets, payments were 2.3% lower in moderately consolidated markets (95% confidence interval [CI], –4.9% to 0.2%), 0.8% lower in highly consolidated markets (95% CI, –4.35% to 2.73%) and 2.4% higher in maximally consolidated markets (95% CI –2.3% to 7.2%).
“Overall, consolidation [within markets] increased over time, but we didn’t find an increase in the price for anesthetic services,” Dr. Sun said.
A possible explanation for this finding is that while other physicians and surgeons tend to have established relationships with patients, anesthesiologists rarely do. Patient demand for particular providers gives insurers and hospitals a strong incentive to negotiate with those individuals.
Lower patient demand means less ability to negotiate. “Because people don’t choose their anesthesiologists, we’re somewhat replaceable and we have less leverage,” Dr. Sun explained. “Hospitals and insurers may feel that it is easy to change the anesthesia groups they do business with, as patients may not notice the difference.”
Another factor may be that as physician groups have consolidated over time, so have hospitals and insurers, clouding the effects of consolidation within any one entity. “There are two types of consolidation that can occur,” said Anupam Jena, MD, PhD, assistant professor of health care policy and medicine at Harvard Medical School, in Boston. “One is the consolidation among providers such as hospitals. When hospitals consolidate, their prices rise because they have more market power,” Dr. Jena said. “On the other hand, increasing insurance concentration can act to offset provider concentration.”
Dr. Sun’s research also revealed that although anesthesiologists’ pay was not affected by increasing consolidation in medical markets, pay varied widely between markets—a 40% difference in pay between the upper and lower quadrants of the overall market. “Regional discrepancies in the time for different procedures could explain some of that difference, but not all,” he said. “It’s an area for further investigation.”
The outcome of increasing consolidation in health care markets for anesthesiologists is still unknown, particularly as the Affordable Care Act undoubtedly will shift the landscape. Dr. Sun said that as the law encourages the formation of ACOs, physicians’ pay will likely become increasingly based on patient outcomes rather than procedures performed. “Now that you are getting these large groups of doctors, they can negotiate together for higher payments. It’s a little unclear at the end of the day, what the net effect will be.”
The researchers presented their findings at the 2013 annual meeting of the American Society of Anesthesiologists (abstract 2060).
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