Physician Compensation Supply of Medical Services

Health care market concentration

One question is whether more physician concentration is a good thing.  On the one hand, larger practices could lead to more efficient care. On the other hand, larger practices could give providers more market power and could drive up prices.

A separate question is whether federal authorities could do anything about increased physician market concentration.  According to a paper by Capps, Dranove, and Oby (2017), the answer is no.

Using proprietary claims data from states collectively containing more than 12 percent of the US population, we found that 22 percent of physician markets were highly concentrated in 2013, according to federal merger guidelines. Most of the increases in physician practice size and market concentration resulted from numerous small transactions, rather than a few large transactions. Among highly concentrated markets that had increases large enough to raise antitrust concerns, only 28 percent experienced any individual acquisition that would have been presumed to be anticompetitive under federal merger guidelines. Furthermore, most acquisitions were below the dollar thresholds that would have required the parties to report the transaction to antitrust authorities. Under present mechanisms, federal authorities have only limited ability to counteract consolidation in most US physician markets.

Concentrations levels among physicians, however, are lower compared to other providers.  A paper by Fulton (2017) finds that

In 2016, 90 percent of Metropolitan Statistical Areas (MSAs) were highly concentrated for hospitals, 65 percent for specialist physicians, 39 percent for primary care physicians, and 57 percent for insurers.



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