{"id":34594,"date":"2025-06-13T11:57:34","date_gmt":"2025-06-13T15:57:34","guid":{"rendered":"https:\/\/advisory.avalerehealth.com\/?p=34594"},"modified":"2025-06-25T09:42:46","modified_gmt":"2025-06-25T13:42:46","slug":"white-paper-health-system-consolidation-and-employer-payer-considerations","status":"publish","type":"post","link":"https:\/\/advisory.avalerehealth.com\/insights\/white-paper-health-system-consolidation-and-employer-payer-considerations","title":{"rendered":"White Paper: Health System Consolidation and Employer-Payer Considerations"},"content":{"rendered":"<p>Read the full <a href=\"https:\/\/advisory.avalerehealth.com\/wp-content\/uploads\/2025\/06\/AH-Chicago-Provider-Market-Trends-Considerations-for-Employers_06.2025.pdf\">white paper<\/a>.<\/p>\n<h2>Background<\/h2>\n<p>Over the last several decades, the United States healthcare landscape has seen a significant shift of formerly independent physician practices joining health systems, as well as mergers and acquisitions between health systems. While similar healthcare consolidation trends have been present in Chicago, Illinois, a unique confluence of regional factors, including the presence of several large health systems and a dominant commercial payer, has disproportionately impacted the Chicago market. These factors, as demonstrated in this paper, have resulted in high healthcare costs for the region\u2019s employers and beneficiaries and underutilization of community-based physicians, who represent more cost-effective and accessible care. At the same time, physician reimbursements from Medicare have declined 33% from 2001 to 2025 after adjusting for inflation in practice costs\u2014further exacerbating the challenges physicians face to remain independent.<\/p>\n<p>This analysis uses multiple sources of claims data to derive market-level learnings\u2014including analyses of (1) total Medicare fee-for-service (FFS) expenditures and quality metrics by specialty, as well as (2) site-of-care differentials for the most common and expensive services in the commercial market\u2014to detail the impact of health system consolidation in the Chicago healthcare market on employers and its implications for provider contracting and benefit design.<\/p>\n<h2>Key findings<\/h2>\n<p><strong>Chicago market<\/strong><\/p>\n<ul>\n<li>The significant number of large health systems in the Chicago metropolitan area has contributed to a higher proportion of specialty physicians affiliated with hospital systems than nationally (58% in Chicago versus 45% nationally, across five specialties analyzed). The greatest difference is in gastroenterology (GI): 65% of specialists in Chicago are affiliated with hospitals, compared to 32% of specialists nationwide.<\/li>\n<li>On the payer side, the confluence of Health Care Service Corporation (HCSC)\u2019s market dominance \u2013 controlling nearly 75% of Illinois\u2019 individual market and 80% of the group market \u2013 and the predominance of large, self-insured employers likely shape market dynamics in Chicago. However, the impact of these dynamics warrants further study, as this analysis focuses on providers.<\/li>\n<\/ul>\n<p><strong>Medicare results<\/strong><\/p>\n<ul>\n<li>The 2023 single-specialty analysis shows that Duly beneficiaries had lower total risk-adjusted annual Medicare expenditures by an average of $7,777 (24.8%) across specialties compared to beneficiaries of hospital-affiliated physicians. The difference ranged from 17.1% ($6,190) lower in gastroenterology to 32.1% ($19,510) lower in oncology.<\/li>\n<li>Beneficiaries attributed to Duly physicians had 14.8% fewer inpatient (IP) days, 12.3% fewer emergency department (ED) visits, and a 4.5% reduction in all-cause readmissions than beneficiaries attributed to hospital-affiliated physicians. They also had 5.1% more follow-up visits within 14 days of discharge. All results are risk-adjusted.<\/li>\n<li>Beneficiaries who received coordinated (Duly primary <em>and<\/em> specialty) care saw further reductions in risk-adjusted total Medicare expenditures. For example, in addition to the 17.1% difference between hospital and Duly GI cohorts, patients of Duly PCP <em>and<\/em> GI physicians saw an additional 36.1% savings (a total of $17,021) compared to hospital-affiliated GI patients. Across specialties, they also had fewer IP days, ED visits, and a lower rate of all-cause readmissions, as well as more follow-up visits within 14 days of a discharge.<\/li>\n<\/ul>\n<p><strong>Commercial results<\/strong><\/p>\n<ul>\n<li>In 2024, utilization of hospital settings for core services such as screenings, joint replacements, and imaging was consistently higher in Chicago than nationally, inflating employer costs in already-expensive areas such as GI and musculoskeletal (MSK) care.<\/li>\n<li>For example, colonoscopies were about 20% more likely to be performed in a hospital setting compared to the national average. In 2024, a hospital outpatient department (HOPD) visit for a diagnostic colonoscopy cost, on average, two to three times more than a visit to an office ($2,159 vs. $577, respectively), as shown in Figure 1. A visit to an ambulatory surgical center (ASC) for the same service was $1,345, still only two-thirds of the HOPD procedure.<\/li>\n<li>Imaging services, which are critical for the health of employed populations and can be performed in low-cost settings, were performed in hospitals more than 70% of the time in Chicago, despite being more expensive compared to the office setting. For example, a bilateral mammogram screening in the HOPD ($343) is 55% more expensive compared to the office ($222). Similar trends occur across other high-volume imaging procedures.<\/li>\n<\/ul>\n<h2>Key takeaways for employers and policymakers<\/h2>\n<p>Comparative analyses of Medicare and commercial data highlight that non-hospital, multispecialty groups can offer more cost-effective, coordinated care, reducing overall healthcare expenditures.<\/p>\n<p>Employers, payers, and policymakers can influence how and where care is delivered to curb cost growth in Chicago. While the current system steers patients toward costly hospital settings, evidence indicates that private practices deliver the same or better outcomes at significantly lower costs. Employers and payers may consider developing innovative provider-level partnerships, while policymakers and researchers can continue to study the merits of site-neutral payments and greater price transparency to support lower costs for employers, employees, and taxpayers.<\/p>\n<p>Read the full <a href=\"https:\/\/advisory.avalerehealth.com\/wp-content\/uploads\/2025\/06\/AH-Chicago-Provider-Market-Trends-Considerations-for-Employers_06.2025.pdf\">white paper<\/a>.<\/p>\n<p><em>Funding for this research was provided by Duly Health and Care. Avalere Health retained full editorial control.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Read the full white paper. Background Over the last several decades, the United States healthcare landscape has seen a significant shift of formerly independent physician practices joining health systems, as well as mergers and acquisitions between health systems. While similar healthcare consolidation trends have been present in Chicago, Illinois, a unique confluence of regional factors,&hellip;<\/p>\n","protected":false},"author":31,"featured_media":28811,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[1035],"content-categories":[143],"class_list":["post-34594","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-insights","tag-trending","content-categories-value-based-care","entry","has-media"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>White Paper: Health System Consolidation and Employer-Payer Considerations | Avalere Health Advisory<\/title>\n<meta name=\"description\" content=\"This paper details the financial impact to employers on health system consolidation, using the Chicago 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