There is an excellent article in the February 24th, 2014 issue of Medical Economics entitled “Monopolizing Medicine-Why hospital consolidation may increase healthcare costs”.
The article summarizes the recent trend of hospitals buying physician practices and merging together at a rapid pace in an effort to (1) control more patient referrals and (2) increase prices.
Here are some statistics from the article:
- More than 105 hospital mergers occurred in 2012, double the rate from 5 years earlier.
- 58% of family practice physicians and 50% of general internists are employed by hospitals rather than private practices.
- Hospitals can charge Medicare an additional facility fee in addition to a professional fee for services performed at a physician practice that it has bought—claiming that practice to be part of its ‘Outpatient Department.’
- Reimbursement by Medicare to a hospital owned practice is 80% higher than an independent practice because of this additional facility fee.
- In 2011, Medicare paid out an additional $1.5 Billion on just two services—office visits and echocardiograms—because of hospitals billing the additional facility fee.
- The Robert Wood Johnson Foundation analyzed hospital mergers and found the following results: (1) hospital consolidation results in 20% higher prices in a given market and (2) hospital purchase of physician practices has not led to increased quality or reduced costs—there seems to be a lack of clinical integration following mergers or the purchase of physician practices.
Why all this activity now? Buying physician practices and merging hospitals started increasing in 2008 and really took off after the passage of Obamacare. PPACA and regulatory uncertainty seems to play a major part.
What does this mean for employee benefits professionals and healthcare consumers?
- Once a healthcare consumer sees a PCP, he or she may be ‘locked in’ to a particular hospital system. So knowing associated costs for test and procedures in advance will be critical when choosing a physician.
- The number of independent physician practices will likely continue to decline and the physician landscape will look very different 5 years from now than it does today.
- Referrals to specialists or from specialists to PCPs are going to be less based on quality, convenience or price for the healthcare consumer—but rather based on the doctor being a part of the same hospital system. If you are referred, just be aware of what is going on ‘behind the scenes.’
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