Consolidation comes at a cost — about 21%, in fact. 

Cardiologists and gastroenterologists employed by hospitals or private equity firms charge about one-fifth more for their services than do those in independent practices, new data show. 

The study is the first direct comparison of negotiated prices across hospital-owned, private equity-owned, and independent specialty practices, the researchers noted. They focused on cardiology and gastroenterology because these specialties attracted increasing private equity investments in recent years and feature a large share of physicians historically employed by hospitals, they said. 

“Hospital and private equity affiliation of specialist physicians has the potential to increase the cost of care for the same services,” said Yashaswini Singh, PhD, assistant professor of health services, policy, and practice at Brown University in Providence, Rhode Island, who helped conduct the analysis. “At the same time, prior research has shown that there is no evidence that these trends benefit patients or physicians.” 

Singh and her colleagues published their findings online October 6 in Health Affairs. 

Hospitals Still Dominate Landscape

Hospital systems employed 72% of cardiologists and 57% of gastroenterologists in 2023. 

Singh and colleagues looked at costs among four major insurance companies — Aetna, BlueCross BlueShield, Cigna, and UnitedHealthcare — for the 10 highest volume cardiology and gastrointestinal procedure codes using claims data. 

Negotiated prices were higher for physicians working for hospitals or practices owned by private equity firms, regardless of the insurer.

“This suggests that large national insurers may not be using their bargaining power to negotiate lower prices that improve the affordability of care,” Singh said.

Hospital-affiliated specialists charged more for the same cardiology procedures — an average of $17.72 (16.3%; 95% CI, 15.66-19.78; P < .01) — than did independent specialists. Likewise, in gastroenterology, commercial healthcare costs were $122.85 (20.7%) more (95% CI, 109.30-136.39; P < .01) for doctors affiliated with hospitals vs independent practices.

Overall, the researchers estimated healthcare savings of $2.9 billion if both types of hospital-affiliated specialists lowered their prices to match their independent colleagues. 

The Private Equity Picture

The research also revealed regional differences in practice ownership. In general, there were more hospital-owned practices in the northern United States and more private equity-owned practices in the West and South.

The states with the highest proportion of hospital-affiliated specialists were Minnesota (98%) and Wisconsin (95%). States with the highest proportion of specialists with private equity affiliations were Arizona (16%) and Nevada (11%).

The private equity-backed specialty groups negotiated prices that were 6% higher for cardiology interventions and 10% more for gastroenterology procedures. If these physicians charged the same as independent doctors, overall commercial health care spending would decrease by $156 million, the researchers estimated.

The Big Picture: All Physicians

The study is not the first to compare employed vs independent physicians. For example, a 2022-2023 update from the nonprofit Physician Advocacy Group showed the trend toward employment continues to rise across the United States. The report found 19,100 additional physicians became employees of hospitals or other corporate entities over these 2 years, a 5.1% increase. 

During that time, hospitals and other corporations acquired 8100 additional physician practices, a 6% increase in the proportion of hospital or corporate-owned practices.

Annual expenditures per patients for physicians affiliated with hospitals and health systems ranged from 10.3% to 14.6% higher than outlays for independent physicians, a 2018 study in the Southern Medical Journal reported. 

Numbers from the American Medical Association’s annual Benchmark Survey show 2016 was the turning point when fewer than half of all physicians remained in private practice. The 2024 survey revealed 42% of US physicians reported working independently.

Why the Higher Prices? 

Negotiated prices are “more likely to be driven by relative market power between commercial insurers and physician organizations and less likely to be driven by quality,” Singh’s group wrote. Higher prices reported at hospital-affiliated practices also could be a result of higher complexity patients, they noted. 

Another factor: Companies seeking profits look for profitable investments. 

“Private equity firms and hospitals don’t purchase slack practices,” said Lou Rossiter, PhD, a retired research professor in health economics at the Raymond A. Mason School of Business at the College of William & Mary in Williamsburg, Virginia. “So managed care could be paying more for higher quality and physicians they need to have in their network to attract membership.” 

“It is impressive that they were able to capture data for the nation and the largest insurers’ negotiated rates,” added Rossiter, who authored the Southern Medical Journal study but was not affiliated with the current work. 

“Given the size and the methods, it is a well-done study,” he said. 

“On the other hand,” Rossiter added, “you can see that the confidence intervals for every price difference overlap — so a 10% difference or a 6% difference, in my opinion, is not substantial from a statistical or policy standpoint.”

Arnold Ventures, the Commonwealth Fund, the Robert Wood Johnson Foundation, and Patient Rights Advocates supported the study. The Health Data for Action program provided funding for data access. Singh’s research is supported by the National Institute for Health Care Management, Arnold Ventures, and The Commonwealth Fund.

Damian McNamara is a freelance contributor to Medscape Medical News. He worked full-time for Medscape and WebMD from 2018 to 2024. Damian has a BA in chemistry and an MA in science, health, and environmental reporting/journalism. He works out of a home office in Miami, with a 100-pound chocolate lab known to snore under his desk during work hours.