When Private Practices Merge with Hospital Systems, Costs Go Up Private medical practices are increasingly being absorbed by large hospital systems, leading to reduced competition and higher prices for healthcare. This trend, explored in a study led by Yale SOM economist Fiona Scott Morton and colleagues, uncovers significant price increases and raises concerns about regulatory oversight. --- Key Findings Physician Employment Shift: From 2008 to 2016, the proportion of doctors employed by hospital systems rose from 27.5% to 47.2%. Price Increases: After integration with hospitals, prices rose notably for childbirth services (labor and delivery): Hospital prices increased by 3.3% on average (~$475) Physician prices increased by 15.1% on average (~$502) Quality Measures Unchanged: Despite price hikes, common quality metrics such as hospital readmission and C-section rates showed no improvement. Reduced Competition: The mergers reduce competition through several mechanisms: Foreclosure: Doctors tend to refer patients within their hospital system, limiting patient choice. Recapture: Integrated systems can leverage insurance network bargaining to retain patients, even when prices rise. Market Concentration: Acquiring multiple practices leads to horizontal consolidation, further driving prices up. --- Research Challenges & Methodology Data Gaps: Hospital acquisitions of private practices are typically too small to require regulatory reporting. Innovative Approach: The team developed a machine-learning algorithm analyzing Medicare data, hospital surveys, physician directories, and SEC filings to identify doctors who transitioned from private practice to hospital employment with 97% accuracy. Focused Analysis on Childbirth: Researchers compared pricing changes for OB-GYNs before and after mergers using data from a large private insurer. --- Implications & Recommendations Regulatory Oversight Needed: Scott Morton argues states have under-enforced antitrust laws related to these mergers and suggests: Requiring transparent reporting of medical practice ownership and affiliations. Instituting waiting periods before approvals to allow scrutiny. Creating federal task forces to aid state regulators in evaluating merger impacts. Economic Impact: Since healthcare spending is already a large share of GDP (~19%), even small percentage increases represent massive cost increases for consumers. --- Additional Context These mergers are categorized as “mergers of complements” — between entities not direct competitors nor straightforward suppliers — but in healthcare, such integrations behave uniquely by reducing competition and raising costs without clear benefits in quality. --- About the Study Authors Fiona M. Scott Morton, Theodore Nierenberg Professor of Economics at Yale School of Management, led the research team including economists from Yale, University of Wisconsin–Madison, Harvard University, Emory University, and University of California, San Francisco. --- Related Topics Competition Healthcare --- Further Reading Suggestions Would Stricter Antitrust Rules Have Stopped the Rise of Amazon? What Will It Take to Create Competitive Digital Markets? How Could the Lawsuit against Apple Shift the Smartphone Landscape? The FTC’s Antitrust Overreach Is Hurting U.S. Competitiveness and Destroying Value A Wave of Acquisitions May Have Shielded Big Tech from Competition --- Published September 26, 2025 Written by Susie Allen, Yale Insights --- Summary: The study calls attention to growing consolidation between private physician practices and hospital systems, leading to increased healthcare costs without quality improvements, urging stronger state and