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Medical Prices Higher In Areas Where Large Doctor Groups Dominate, Study Finds

Prices for many common medical procedures are higher in areas where physicians are concentrated into larger practice groups, according to a new study.

The October Health Affairs study examined the average county prices paid by preferred provider insurance organizations in 2010. It focused on  15 high-volume, high-cost medical procedures across a variety of specialties, including vasectomy, laparoscopic appendectomy, colonoscopy with lesion removal, nasal septum repair, cataract removal and knee replacement. The prices studied reflected the negotiated prices between the PPOs and the physician groups, including payments made by both the plan and the patient. The average price ranged from $2,301 for a total knee replacement to $576 for a vasectomy.

The researchers also used an index to measure competition among physician practices at the county level that is based on the number and size of practices. They then examined the association between procedure prices and the concentration of physicians in larger practices.

In 12 of the 15 procedures, prices were 8 to 26 percent higher in counties with the highest average physician concentration compared to counties with the lowest average concentration, the study found. The three procedures where there was no significant relationship between physician competition and price were intensity-modulated radiation therapy, shoulder arthroscopy and kidney stone fragmentation.

Although larger practices may have the resources to provide benefits to patients through better care coordination or access to new technologies, among other things, these practices’ greater market power may enable them to charge higher prices than smaller practices, the study authors said.

This study adds to the growing body of research that demonstrates wide variation in medical prices for the same procedure or test based on a number of factors, including where a procedure is performed and who performs it.

For consumers, who increasingly face medical deductibles of $1,000 or more — in addition to copayments and coinsurance — the price of a procedure may be important in determining where to have it performed, says Laurence Baker, chair of the department of health research and policy at Stanford University and co-author of the study.

“Prices for procedures that people commonly get vary a lot,” he says. “To the extent you have time, there are plenty of cases where you can save thousands of dollars” by shopping around.

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