---
type: source
title: "Hospital- and Private Equity-Affiliated Specialty Physicians Negotiate Higher Prices Than Independent Physicians (Health Affairs 2025)"
author: "Health Affairs"
url: https://www.healthaffairs.org/doi/pdf/10.1377/hlthaff.2025.00493
date: 2025-10-15
domain: health
secondary_domains: []
format: peer-reviewed study
status: processed
processed_by: vida
processed_date: 2026-04-26
priority: high
tags: [physician-consolidation, private-equity, hospital-employment, commercial-insurance-prices, cardiology, gastroenterology, rent-extraction]
extraction_model: "anthropic/claude-sonnet-4.5"
---

## Content

Published in Health Affairs, 2025. Study examining commercial insurance negotiated prices for hospital-affiliated, PE-affiliated, and independent specialty physicians (cardiology and gastroenterology).

**Core finding:**
Hospital- and PE-affiliated physicians negotiate systematically higher prices than independent physicians for equivalent specialty procedures.

**Price premium by consolidation type:**
- Hospital-affiliated cardiologists: **+16.3%** vs. independent
- Hospital-affiliated gastroenterologists: **+20.7%** vs. independent
- PE-affiliated cardiologists: **+6.0%** vs. independent
- PE-affiliated gastroenterologists: **+10.0%** vs. independent

**Counterfactual spending analysis:**
- If hospital-affiliated specialists charged equivalent to independent prices: commercial health care spending would decrease by approximately **$2.9 billion/year**
- If PE-affiliated specialists charged equivalent to independent prices: additional **$156 million/year** savings
- Total counterfactual savings: ~**$3.05 billion/year** in commercial sector alone

**Specialty focus:** Cardiology and gastroenterology. These are chosen for their high consolidation rates and Medicare reimbursement complexity. Findings may not generalize equally to all specialties.

**Note:** This study focuses specifically on commercial insurance negotiated prices — not Medicare rates (which are set administratively) and not total spending (which would include volume effects). The price premium is for equivalent procedures, isolating the negotiating power effect of consolidation from volume increases.

## Agent Notes
**Why this matters:** This is the direct rent quantification for Belief 3's structural misalignment argument. The $3B/year commercial premium from hospital and PE consolidation is a concrete rent measure — and this is just two specialties. The study complements the GAO-25-107450 report by providing the mechanism: consolidation gives physicians more negotiating leverage with insurers, allowing price extraction without quality improvement.

**The structural logic:**
- Hospital systems consolidate physicians → physicians gain hospital's negotiating leverage
- Hospital leverage comes from market concentration (often the only hospital in a region)
- Patients can't easily travel; insurers must accept the hospital's (and now affiliated physicians') terms
- This is textbook market power from consolidation, not value creation

**What surprised me:** The PE-affiliated premium (6-10%) is smaller than hospital-affiliated (16-21%), but it's still material. PE's model is shorter-horizon extraction — raise prices to PE-level premium, exit via sale to hospital system (at which point prices rise further to hospital level). The sequential extraction path is notable.

**What I expected but didn't find:** Quality-adjusted pricing analysis. The study doesn't show whether the price premium is associated with better outcomes. The GAO report confirms quality evidence is "mixed/no change" — suggesting the premium is pure rent, not value exchange.

**KB connections:**
- [[proxy inertia is the most reliable predictor of incumbent failure because current profitability rationally discourages pursuit of viable futures]] — the $3B/year price premium IS the proxy whose inertia blocks VBC transition
- [[four competing payer-provider models are converging toward value-based care with vertical integration dominant today but aligned partnership potentially more durable]] — hospital-affiliated vertical integration commands the highest price premium, making it the dominant AND most rent-extractive model simultaneously
- [[value-based care transitions stall at the payment boundary because 60 percent of payments touch value metrics but only 14 percent bear full risk]] — the commercial price premium explained here is part of WHY full risk models are resisted: consolidated systems extract more from FFS

**Extraction hints:**
- Primary claim: "Hospital-affiliated specialty physicians negotiate 16-21% higher commercial insurance prices than independent physicians — generating ~$3 billion/year in excess commercial spending with no corresponding quality improvement"
- Could pair with GAO-25-107450 for a comprehensive consolidation claim covering extent + price effect + quality effect

## Curator Notes
PRIMARY CONNECTION: [[four competing payer-provider models are converging toward value-based care with vertical integration dominant today but aligned partnership potentially more durable]]
WHY ARCHIVED: Quantifies the commercial insurance rent premium from physician consolidation — the direct cost mechanism of Belief 3's structural misalignment. Pairs with GAO report for comprehensive consolidation evidence package.
EXTRACTION HINT: The $3B/year figure is the claim core — but emphasize it's commercial only, two specialties. The full-economy rent figure is likely 10-20x larger.
