The Patient Protection and Affordable Care Act, or Obamacare, is bringing many changes in the healthcare space and few are as subtly transformative as the rapid increase in cross-industry consolidation.  A record breaking 115 mergers and acquisitions among hospitals and health systems occurred in 2017, an increase of 13 percent from 2016.

These mega-deals can feel removed from a patient’s daily life, but according to an April 7 New York Times examination, “the new deals involving major corporations loom over doctors’ livelihoods, intensifying pressure on small practices and pushing them closer to extinction.”  Many doctors are concerned that these large corporations could mean the loss of continuity of care and the close doctor-patient relationship.

Three examples of how Obamacare is changing healthcare includes the creation of Accountable Care Organizations (ACO), banning the expansion of physician-owned hospitals, and the growth of express clinics and possible deals between insurers and drug-store chains and big-box stores, like Aetna and CVS Health or Humana and WalMart.

ACOs are groups of doctors, hospitals, and other healthcare providers, who come together voluntarily to give coordinated high-quality care to their Medicare patients.  When an ACO succeeds in providing good care and spends its healthcare dollars wisely, it gets to share in the savings to the Medicare program.  But, how ACOs are organized and utilized can make a difference.

According to a July 2016 Wall Street Journal Op-Ed by Bob Kocher, one of Obamacare’s architects, stated that data from the Centers for Medicare and Medicaid Services shows that independent physician-led ACOs outperform the ACOs of large healthcare systems.  Kocher said, “Small, independent practices know their patients better than any large health system ever can” and that these small businesses “can learn faster without holding weeks of committee discussions and without permission from finance, legal and IT departments to make a change.”  He lamented the bill’s encouragement of healthcare consolidation and said, “What I know now, though, is that having every provider in healthcare ‘owned’ by a single organization is more likely to be a barrier to better care.”

Obamacare also banned physician-owned hospitals from expanding and any new physician-owned hospital cannot receive government reimbursement from Medicare or Medicaid.  These hospitals tend to be smaller and specialize in certain procedures, such as hip or knee replacements.  A July, 2017 Washington Examiner article pointed out these hospitals allowed the doctors to have more control in management, such as what equipment would provide the best results or how long a patient should stay in the hospital.  Because the doctors were vested both financially and willing to share the risks, these hospitals improved care, improved population health, and reduced costs.

Under Obamacare, physician-owned hospitals are being crushed.  The Examiner reported that 37 planned physician-owned hospitals were not built, 40 nearly finished construction projects were stopped, and 20 major expansion projects have been halted.  It is estimated that the ban resulted in a loss of $200 million in tax revenue and 30,000 jobs that were never created.

According to the Examiner, supporters of the ban, among them nonprofit community and for-profit hospitals, argued for years that doctors at these hospitals improperly referred patients to facilities in which they have a financial interest.  However, the article noted that the evidence is mixed about whether doctor-owned hospitals were engaged in troubling practices.   Experts in healthcare delivery, such as Harvard University Professor of Business Administration Regina Herzlinger, questioned the ban and said, “I personally believe that the people most likely to make healthcare delivery both cheaper and better are clinicians" and that, “There have to be other remedies for dealing with the overuse problem.”

Incentivized by Obamacare, large insurers, pharmacy chains, and big-box retail stores are employing primary care doctors to offer services through express clinics and other immediate care facilities.  Independent physicians and physician groups can’t compete with the advertising and facilities of these large facilities, even if their services are markedly different.

The quick treatment centers are convenient and fast, which makes them popular, but they lack the personalized care of a primary physician.  Patients who choose express clinics will likely lose the individual treatment and familiarity that comes from a long-term relationship with their doctor, the kind of relationship that allows physicians to more readily diagnose ailments and help patients stay healthier over time.

Could the increase use of large retail clinics be increasing costs?  The NY Times argues they might.

While the retail clinics over all charge less, particularly compared with emergency rooms, they may increase overall healthcare spending.  Consumers who not long ago would have taken a cough drop or gargled with saltwater to soothe a sore throat now pop into their nearby retail clinic for a strep test.

When it comes to consolidation in the healthcare industry, bigger is not necessarily better.  Obamacare has accelerated the process, encouraging healthcare companies to go large, collect more federal dollars, and take advantage of the skewed market.  Whether this will lead to fewer options, higher prices, and poorer care, only time will tell.