Market concentration may offer some efficiencies but that doesn’t guarantee savings. An analysis published in the Oct. 22/29 issue of JAMA found that insurers paid higher prices when physicians faced less competition.
Solo and small practices are the exception today as more physicians choose partnerships that share equipment, personnel and other resources such as EHRs. Theoretically, larger practices can leverage these assets to provide streamlined and coordinated care. But with limited options, payers might be at a disadvantage when negotiating prices.
Lawrence C. Baker, PhD, of Stanford School of Medicine in California, and colleagues wanted to explore this market dynamic with a national study that assessed cardiology and nine other specialties. They used Truven Analytics data and 10 common Current Procedural Terminology (CPT) codes to assess claims and prices by county and specialty. They focused on prices paid by private preferred organizations for the study.
For the market analysis, they developed methods based on the Hirshman-Herfindahl Index (HHI), a measure of economic competition. The lower the score, the more competitive the market.
Cardiology practices faced more competition than did seven other specialties, with only internal medicine and family practice with lower HHI scores.
Prices varied across percentiles in all specialties. Cardiology, for instance, ranged from $57.97 to $93.27 for an office visit (CPT code 99213). Overall, in cardiology the mean office visit prices were 14.6 percent higher in the 90th percentile HHI counties than in the 10th percentile HHI counties.
“Across all 10 types of office visits, this difference in HHI was associated with mean prices for office visits 8.3 percent to 16.1 percent higher,” Baker et al wrote. A more conservative model placed prices between 3.5 and 5.4 percent higher. “This is consistent with the hypothesis that greater market power allows physicians to bargain for higher prices from private insurance companies.”
They observed that their study showed a great deal of market concentration. If this market concentration doesn’t lead to better care, patients and the healthcare system are left only with higher costs, they cautioned.