Hospital consolidations are increasing, with 428 mergers occurring from 2018 to 2023. Although mergers are often pitched as a way to improve efficiency, reduce costs, and keep struggling providers in business, a substantial body of evidence shows that the reality is much different: hospital consolidations increase prices with no clear increases in quality. 

Consolidation is not only happening among large institutions. Smaller, sub-specialty practices—surgery, oncology, gastroenterology, cardiology, radiology, etc.–are consolidating too. However, smaller mergers often occur under the government’s radar because they do not meet the $119.5 million pre-merger reporting threshold set by the Hart-Scott-Rodino Antitrust Improvement Act (HSR). HSR, enacted in 1976, requires large mergers to be reported to the Federal Trade Commission and the Department of Justice.  Although less data exists from these smaller mergers, the data that is available—mostly reported by private equity firms’ (PE) acquisition of specialty physician practices—should raise the same concerns about prices and quality that larger hospital system mergers do.

These PE acquisitions have been increasing steadily from 75 physician practices in 2012 to over 480 in 2021. These acquisitions have resulted in a substantial amount of market consolidation across the country. In 28 percent of metropolitan statistical areas (MSAs), a single PE firm controls over 30 percent of the physicians' market share, though firms differ between locales. Even worse, in 13 percent of MSAs, a single PE firm is responsible for more than 50 percent of full-time physicians practices.

Across the United States, PE-backed acquisition of health care practices tracks with substantial price increases, ranging from 4 percent in dermatology to 16 percent price increases in oncology. In areas where PE controls at least 30 percent of the market, price increases vary from 13 percent in dermatology to 18 percent in gastroenterology

Current evidence suggests that these costs reach patients, too. Among 12 studies examining PE-acquired physician practices, nine found that patients faced higher costs when receiving care from PE-owned practices. Although there is a lack of data on the quality of care at smaller practices that fall below the HSR threshold, studies examining PE-backed hospital consolidation have documented significant increases in the number of falls and infections throughout the hospital, highlighting serious safety concerns that accompany cost-cutting measures.

Policymakers at the state and federal level can ensure that when consolidation occurs, it will benefit patient care. As an initial solution, policymakers should lower the HSR threshold so that more data is available on the number and size of acquisitions occurring in the specialty physician sector. Having such data will allow for more targeted monitoring of quality metrics to assess whether PE acquisitions truly add value for patients. Second, federal and state governments should add resources to audit mergers that fall below the HSR threshold to better understand how smaller consolidations affect pricing and quality.

Available data suggests that consolidation of smaller, sub-specialty physician practices increases prices. Based on the data from PE-acquired hospitals, there is reason to suspect that these facilities deliver a lower quality of care to patients, too. Lowering the HSR threshold and providing additional resources to study smaller physician practice consolidations are essential first steps to equip policymakers with the data they need to understand the true effects of mergers among small specialty physician practices.