Physician Practice Affiliation Drives Site of Care Cost Differentials: An Opportunity to Reduce Healthcare Expenditures

The continued migration of physicians from independent practice to affiliation with larger entities has garnered significant scrutiny. These affiliation models include hospitals and health systems, payers and corporate entities, and management services organizations, which may or may not be private equity (PE)-backed. Data on the impact of different physician affiliation models on cost of care is limited. We examined the relationship between provider affiliation model, site of care (SOC), and cost of care for certain high-volume procedures in procedure-intensive specialties for both Medicare and commercial insurance. We found that hospital-affiliated physicians are least likely-and PE-affiliated physicians are most likely-to provide care in lower-cost settings. For both Medicare and commercial insurance, SOC contributes meaningfully to procedure unit price, which is consistently greater in hospital-based settings. These findings suggest that the physician affiliation model and associated SOC cost differentials contribute materially to healthcare expenditures. As the Medicare cost differentials are set by statute and regulations, strategies such as site-neutral payments are needed to mitigate the monetary impact of historical and future physician practice migration.