Concentration In Orthopedic Markets Was Associated With A 7 Percent Increase In Physician Fees For Total Knee Replacements

Physician groups are growing larger in size and fewer in number. Although this consolidation could result in improved patient care, the resulting increase in market concentration also could allow larger groups to negotiate higher physician fees from private insurers. We examined the association between market concentration and physician fees in the case of total knee arthroplasty by calculating market concentration for orthopedic groups practicing in a given market and by analyzing administrative claims data from Marketscan. In the period 2001-10 the average professional fee for total knee arthroplasty was $2,537. During this time, in markets that moved from the bottom quartile of concentration to the top quartile, physician fees paid by private payers increased by $168 per procedure. The increase nearly offset the $261 decline in fees that we observed, absent changes in market concentration. These findings suggest that caution should be used in implementing policies designed to encourage further group concentration, which could produce similar effects.