As PCPs Integrate With Health Systems, Steering Increases Costs

A new study out of Harvard University links vertical relationships between primary care physicians (PCPs) and health systems to “steering,” in which providers refer patients to specialists and other care providers within the system. This steering led to higher utilization and spending on patient care, researchers found.

The study recently published in JAMA Health Forum analyzed more than 4 million observations of commercially insured patients in Massachusetts treated by physicians newly aligned with a health system either through ownership, joint contracting, or affiliation and physicians who did not have a vertical relationship or were already employed by a health system at that time.

The comparison revealed a link between vertical relationships between PCPs and health systems and a 22.64 percent increase in specialist visits per patient-year. There was also a $356.67 increase in total medical expenditures per patient-year, a 6.26 percent increase compared to the other group.

Within the health system of the attributed PCPs, there was also a 29.83 percent increase in the number of specialist visits, a 14.19 percent increase in emergency department visits per patient-year, and a 22.36 percent increase in the number of hospitalizations compared to the control group.

However, there was no difference in readmission outcomes between newly integrated PCPs and other physicians studied.

“These findings raised concern that the steering of care corresponded with insurers paying more for the same types of care visits and that this form of consolidation may be associated with overall higher costs,” researchers wrote in the study. “Moreover, we found that vertical relationships were associated with increased specialist visits within large health systems, which warrants further study to ascertain whether these visits represent low-value care or improved access to specialists.”

Researchers acknowledged that steering “is not necessarily a factor in lower-quality care,” and can result in “better coordination (eg, via shared medical records) and less redundancy when care across the continuum is delivered within a health system, which could be associated with higher quality and reduced costs.”

The results may also suggest wider access to specialists when PCPs are part of a health system, they stated.

But, the similarity of readmission outcomes between both groups indicates limited benefits or gains from increased care coordination. Researchers also pointed to other studies that found no change in process measures or quality and hospital-level outcomes following vertical integration.

“Overall, vertical relationships appeared to be no panacea to health care access or coordination,” they wrote in the study, later suggesting “a portfolio of countermeasures to limit the adverse implications of vertical relationships for the total cost of care.”

“These countermeasures include antitrust enforcement, adoption of transparency and patient steering tools that encourage patients to seek care from lower-cost physicians and hospitals, and alternative payment models that reward use of lower-priced care,” they explained.

The number of physicians who have gone from working in independent practices to working in hospitals and health systems has doubled in the past decade, according to data from the American Medical Association (AMA).

Just recently, the AMA reported that 44.0 percent of physicians were owners in 2022, 49.7 percent were employees, and 6.4 percent were independent contractors. In 2012, 53.2 percent of physicians were owners, and that percentage was even higher at 61 percent in the early and mid-2000s.

Physicians have sold their practices to hospitals and health systems to gain power when it comes to negotiating payment rates with commercial payers. Physicians have also cited the need to access costly resources and better manage regulatory and administrative requirements.

Vertical integration may come with some benefits depending on the relationship between physicians and health systems and financial incentives. However, the impact this type of consolidation has on quality of care and costs remains to be conclusive.