Trends in acquisitions of physician practices and subsequent clinical integration: A mixed methods study

Rationale, aims, and objectives The US health care system is marked by a high degree of fragmentation in both delivery and financing. Some evidence suggests that attempts to reduce fragmentation have led to significant provider consolidation, including hospital acquisitions of physician groups, or “vertical integration.” The objective was to use time‐series data to quantify trends in and characteristics of hospital acquisitions of physician practices. A secondary objective was to use case studies to determine the motivations for these acquisitions and to identify what integration results from these transactions. Methods Data on annual hospital acquisition of physician practices was used to quantify trends and characteristics of acquiring hospitals between 2006 and 2013. Four in‐depth case studies, including structured interviews with hospital leadership, were then conducted of recent hospital acquisitions of primary care practices. Results Acquisitions of physician practices have been increasing over the last decade and peaked in 2011. Most acquisitions were of small primary care, multi‐specialty, or cardiology practices. The case studies revealed that the primary motivation for hospital acquisitions was to increase referrals and negotiate higher payment rates. These transactions resulted in very limited clinical integration, while all acquiring hospitals sought to integrate health information systems. Conclusions Among 4 case‐studies of hospital acquisition of physician practices, the primary motivation was financial and competitive motivations. This suggests that policymakers should be mindful of the potential negative effects of these acquisitions on health care costs, as well as the uncertainty of clinical benefits. Policymakers may need supplementary strategies to deliver the goals of reduced costs and improved quality of care.