(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

NEW YORK - America’s healthcare dysfunction is spreading in a new direction: vertically. Hospitals are snapping up doctors’ practices, and the result may be higher prices for patients and their employers. While antitrust regulators are focused on vertical integration in the technology sector, the healthcare version could be no less harmful.

While U.S. healthcare is full of monopolies in drug manufacturing, local hospitals, and health insurance, the market for physicians who act as the front line for non-urgent medicine has been competitive. That’s changing. The percentage of primary care doctors working in a hospital or health system increased over six years from 25% to 44%, according to a 2019 report by The Physicians Advocacy Institute and Avalere Health.

The problem is similar to one antitrust regulators and U.S. politicians level at companies like Alphabet and Amazon.com. European watchdogs fined Alphabet’s Google around $2.7 billion in 2017 for using its dominance of search to steer customers to its own online shopping offerings. In healthcare, hospitals could in theory use captive doctors and specialists to steer patients toward their own MRI machines, surgeons and beds.

Tech companies argue their vertically integrated model still gives customers low prices or free services. In healthcare, the opposite seems to be true. A study in the Journal of Health Economics found that when a hospital acquired doctors’ practices, its prices rose 3% to 5%. The authors suggest increased bargaining power over insurers and closures of rival hospitals that didn’t have their own stable of physicians probably bear the blame.

Insurers are fighting back, buying up their own phalanx of doctors’ practices. UnitedHealth now oversees around 5% of U.S. doctors. Such efforts by insurers, however, have been unpopular with consumers and doctors in the past.

When it comes to antitrust, efforts have largely focused on companies buying direct rivals. The Federal Trade Commission has limited legal powers over nonprofits, which covers nearly half of U.S. hospital operators. It also has around 40% fewer employees than it did in 1979.

If unchecked, the increasing concentration of U.S. healthcare is likely to hit consumers through inflating medical bills. Hospital spending accounted for 3.6% of GDP in 1980, and it’s now about 6%, according to Centers for Medicare and Medicaid figures. Combining hospitals and physicians threatens to worsen a chronic condition.

 

CONTEXT NEWS

- Hospital prices increase by up to 5% after mergers with local physician practices, according to a study in the Journal of Health Economics.

- There is little indication quality is higher and the change cannot be explained by changes in patient mix, the study claimed. Instead, the authors suggest vertical integration improves a hospital’s bargaining power with insurers and increases the closure rate of rival, non-integrated hospitals.

- The number of hospital-owned doctors’ practices increased from 35,700 in 2012 to more than 80,000 in 2018, according to a 2019 report by Physicians Advocacy Institute and Avalere. By 2018, 44% of doctors worked in a hospital or health system, compared with 25% in 2012.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe | Editing by John Foley and Amanda Gomez) ((robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))