Are Hospital-Owned or Physician-Owned Organizations More Costly?

Provider organizations are increasing in complexity, as hospitals acquire physician practices and physician groups grow in size. Greater integration should increase care coordination and limit redundancies, which could lower costs. However, larger provider groups have greater negotiating power with insurers, which could raise prices. We analyzed insurance claims from Blue Cross Blue Shield of Texas (BCBSTX) for 2014 through 2016 in the four largest Texas metropolitan areas (Austin, Dallas, Houston, and San Antonio) to compare annual health expenditures for patients treated by doctors in hospital-owned versus physician-owned practices. We calculated annual spending (payments by the insurer plus out-of-pocket) for patients attributed to physicians, then determined the ownership status of physicians based on their recorded network for reimbursement in the BCBSTX internal database. The comparisons adjust for age, gender, comorbidities, number of patients enrolled in each group, and a geographic adjustment factor. Preliminary estimates suggest that patients with 12 months of continuous enrollment in a preferred provider organization incur spending which is 3 to 10 percent higher when treated by doctors in hospital-owned versus physician-owned practices. The spending difference appears attributable to greater inpatient and outpatient hospital use.