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 Study Confirms Wide Variation In Medical Prices For The Same Procedure, PPOs Tend To Charge Higher Prices

Long term care providers that currently or in the future plan to partner with large physician practices may need to pay heed: Physician practices that do not have many other competing practices in the area are often paid higher prices by private preferred-provider organizations (PPOs) for many common medical procedures compared with practices that have a lot of regional competition, according to a new study published in the October issue of Health Affairs.
 
Solo and small-group physician practices are going by the wayside, making way for larger practices, observers say. These larger practices may be better equipped to coordinate care by multiple providers, to implement changes to processes and technologies, and to figure out new ways to treat more patients. But the trade-off is the potential for monopolies that could drive up prices if they go unchecked by regulatory agencies or other market forces.
 
“There are benefits and challenges associated with fewer of the large physician organizations,” says study co-author Laurence Baker, PhD, a professor of health research policy and chief of Health Services Research at Stanford University, Calif. “The question for the health care system is how do we determine the right size of organization… and get the right size that offers the most value of real patient care.”
 
Baker and his research group used data from Medicare along with a claims database containing information from private PPOs to look at the relationship between physician competition and prices paid by PPOs for 15 common, high-cost procedures in 2010. These procedures spanned a total of nine surgical and medical specialties, including cataract removal, knee replacements, and coronary artery stents.
 
The less competition a practice had, the higher the prices, the study found. Counties that had the least competition had prices 8 percent to 26 percent higher than prices in counties with more competition, with differences of $94 to $291 per procedure.
 
Cataract removal varied from $626 to $1,283, knee replacements from $1,551 to $3,184, and coronary artery stents from $865 to $1,789.
 
“Increased health care expenditures attributable to higher prices without improved outcomes for patients would generate inefficiency in the U.S. health care system at a time when the opposite is badly needed,” the study said in its conclusions. “Policies that balance any benefits of larger organizations with the potential for problematic price increases, possibly including appropriate antitrust oversight, are needed as the country seeks to ensure efficient, high-quality patient care.”
 
Jackie Oberst is Provider’s managing editor. Email her at joberst@providermagazine.com. Follow the magazine on Twitter @ProviderMag and @ProviderMyers.
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