Softer Alignment of Medicare ACOs May Still Lead to Higher Prices for Office Visits

Allison Inserro

The researchers created a model that simulated what would happen when health systems and providers began working together in Medicare accountable care organizations (ACOs) in arrangements that did not extend to outright mergers or acquisitions.

A softer form of health care consolidation, where independent primary care practices align in certain Medicare accountable care organizations (ACOs) to negotiate with payers, may lead to higher prices, but not to an overwhelming extent, according to a new study published Monday in Health Affairs.

Researchers focused their work on independent practices joining ACOs led by health systems as allowed under the Medicare Shared Savings Program (MSSP). With these arrangements, there are no outright mergers or acquisitions, but the authors said not much is known about the extent to which arrangements lead to price increases.

To that end, the researchers used claims and enrollment data from a large national commercial insurer that included negotiated payment rates with independent practices from 2010 to 2016, and created a model that simulated what would happen when health systems and providers began working together, hypothesizing “that joint negotiation with health systems would raise nonsystem practices’ prices substantially and abruptly.”

They created an annual price jump indicator for when office visit prices rose by more than 20% over the previous year; they chose 20% because that is the higher baseline price in ACO vs non-ACO practices, they said.

Besides examining the effect of MSSP participation on commercial fee-for-service office visit prices for physician practices that remained independent after joining an ACO, the study also examined the extent to which the health systems’ bargaining position might be strengthened by these arrangements. Potential gains in systems’ primary care market share were also examined.

While there were some larger price jumps, on average, practices joining system-led ACOs saw 4% higher prices, spurred by 7.4% of practices in the model receiving a 49.3% average price increase.

Rather than a major shift of market power, the results may have come from an extension of pricing power from health systems to the independent practices, implying that participation in health system–led MSSP ACOs helped to create higher prices even without outright mergers or acquisitions.

The results are “cautionary evidence” that such arrangements may need closer monitoring, the authors said.

Reference

Lyu PF, Chernew ME, McWilliams JM. Soft consolidation in Medicare ACOs: potential for higher prices without mergers or acquisitions. Health Aff (Millwood). 2021;40(6):979-988. doi:10.1377/hlthaff.2020.02449