Annual Spending per Patient and Quality in Hospital-Owned Versus Physician-Owned Organizations: an Observational Study

BACKGROUND: Recent studies that compared patient spending in hospital-owned physician practices versus physician-owned groups did not compare quality of care. Past studies had incomplete measures of physician-hospital integration, or lacked patient-level data. OBJECTIVE: To measure the association between physician-hospital integration and both spending and quality using patient-level data and explicit physician-hospital contracting information. DESIGN: Retrospective review of claims data from 2014 through 2016. Adjustments were made for patient, physician, and regional characteristics. PATIENTS: Patients aged 19 to 64 enrolled in a Blue Cross Blue Shield Texas Preferred Provider Organization in the four largest metropolitan areas in Texas who could be attributed to a physician practice based on claims. MAIN OUTCOMES AND MEASURES: Annual spending per patient was compared for patients treated by a physician practice that is billing through a hospital, versus billing through an independent physician practice; spending was also subdivided by BETOS category, by site and type of care, and percent of patients with positive spending by subcategory. Quality measures included readmission within 30 days of discharge for hospitalized patients, appropriate care for diabetic patients, and screening mammography for women ages 50–64. RESULTS: Estimates suggest that patients in a preferred provider organization incur spending which is 5.8 percentage points higher when treated by doctors in hospital-owned versus physician-owned practices (95% CI 1.7 to 9.9; p = 0.006). Spending is significantly higher for durable medical equipment, imaging, unclassified services, and outpatient care. The spending difference appears attributable to greater service utilization rather than higher prices. There was no consistent difference in care quality for hospital-owned versus physician-owned practices. CONCLUSIONS AND RELEVANCE: We find that financial integration between physicians and hospitals raises patient spending, but not care quality. Given that higher spending raises the price of health insurance, policy makers should carefully consider policies that limit consolidation of hospitals and physicians. ELECTRONIC SUPPLEMENTARY MATERIAL: The online version of this article (10.1007/s11606-019-05312-z) contains supplementary material, which is available to authorized users.