RESEARCH IN BRIEF

Many policymakers (including state attorney general offices, Medicaid program directors, insurance commissioners) worry about the effects of medical provider consolidation on spending levels and trends.

Medical provider consolidation’s impact on spending is an empirical question. On the one hand, consolidation may lead to the identification and dissemination of best practices and reductions in the use of unnecessary care, resulting in reduced spending. Alternatively, consolidation may allow outpatient practices and/or hospitals to gain bargaining power in negotiations with insurers, pushing up prices and/or changing the mix of treatments provided to patients, leading to increased spending

The hypothesized effects of medical provider consolidation on spending are likely disease-specific and dependent on the ability of local medical providers to control treatment use and associated prices. For example, drug-based cancer care is an area of medicine where providers have significant control over treatment selection and face financial incentives to choose resource intensive care.

The Health Care Cost Institute (HCCI) claims data is an indispensible resource for empirical evaluations of the effect of medical provider consolidation on disease-specific spending.

This project examines whether specialty medical provider consolidation increases per person spending among commercially insured patients using HCCI claims data in 2008 through 2013. We use HCCI claims linked to nationwide data on medical provider consolidation measured using the IMS Health SK&A provider survey. We use longitudinal data with market-level random effects to examine changes in inflation adjusted cancer-specific “chemotherapy” related spending in markets with increasing concentration of vertically integrated oncology practices accounting for secular trends in treatment-specific spending.

We find stakeholder concerns regarding the impact of provider consolidation on outpatient spending are warranted:

• We find statistically significant increases in consolidation among outpatient oncology providers and hospitals and/or health systems. These changes largely occurred in 2010 and 2011.
• Increased medical provider consolidation with hospitals and/or health systems results in increased spending on outpatient prescription drug-based cancer treatment.
• These results appear to be driven in part by increases in the prices charged for treatment (including facility fees that hospital outpatient departments are able to charge payers).
• Future work will investigate the extent to which the mix of treatments provided to cancer patients changes with increased provider consolidation.

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