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Study: Employing physicians raised prices

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Hospital ownership of physician practices from 2001 to 2007 was associated with higher prices and spending for the nonelderly privately insured, according to a new study.

Authored by three Stanford University professors who work with the National Bureau of Economic Research, the newly released study said, "Such integration can reduce health spending and increase the quality of care by improving communication across care settings, but it can also increase providers’ market power and facilitate the payment of what are effectively kickbacks for inappropriate referrals." 

The authors reported that integration did reduce the frequency of hospital admissions, but that the effect was relatively small. Their conclusion: "Our results provide a mixed, although somewhat negative, picture of vertical integration from the perspective of the privately insured."

Critics of the study's findings have noted that the time studied was before health care reform and the advent of many accountable care organizations and other pay-for-performance arrangements, which are supposed to increase coordination and reduce cost in the health care system. Most of those programs are still fledgling, however.

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