Hospital buyouts of medical practices raise prices and reduces
competition
A government panel says it costs Medicare $1.8 billion a year
A government commission and courts agree that hospitals buying out medical practices
ultimately increases costs and reduces competition in health care.
"These developments, "have all led to higher prices for insurers, resulting in consumers
paying higher premiums, deductibles, and co-pays." ," said the attorneys general of 16
states”
A federal judge in Idaho said the way to improve hospital quality is to work closely with
independent doctors, not try to buy up their practices.
A decade ago, about one-fourth of medical practices were owned by hospital systems. By
last year, that number shot up to 50 percent. Reports have shown that hospitals purchasing
medical practices has not led to either improved quality or lower costs.
“When the boardroom gets in the middle of the exam room, it drives up costs without
improving care,” said Dr. Jeffrey Hessing, chairman of the board of the Independent Doctors
of Idaho.
A University of California Berkeley study published last fall said that spending per patient
was 20 percent higher for hospital-employed doctors than for independent doctors. It also
found that hospital-employed doctors can face pressure to refer patients to more expensive
specialists and imaging clinics within hospital system, instead of less expensive
independent practices.
In March, Congress’ commission charged with overseeing Medicare asked lawmakers to
level the playing field. It said Medicare should stop paying hospitals higher prices for tests
and procedures that independent doctors perform for far less.
The move would save the government $1.8 billion per year, according to the 17-member
Medicare Payment Advisory Commission.
The commission stated that the price of medical care only goes up when hospital systems
buy up practices. Medicare often pays more than twice as much for the same service,
according to its report to Congress. Hospitals also charge an extra facility fee, often totaling
more than $100, once a doctor goes to work for a hospital even if the medical office is not
located on hospital grounds.
“This payment difference creates a financial incentive for hospitals to purchase freestanding
physicians offices and convert them to Hospital Outpatient Departments without changing
their location or patient mix,” the commission said in a report.
The report gave an example. In this instance, a hospital purchased a cardiologist’s practice.
If the same doctor performed an identical test in the same office with the same equipment,
the bill would more than double after the hospital purchased the practice: $492 versus
$228.
A 15-minute doctor visit cost Medicare about $70 last year at an independent medical office.
The same visit came to $124 if it was provided on a hospital-outpatient basis, even if the
medical office was located offsite.
All of these added costs are passed on in one form or another to taxpayers.
The Federal Trade Commission is also keeping a close eye on buyouts and challenging them
when they are not in consumers’ best interests. In Illinois, the Federal Trade Commission
filed suit against a merger that it said would “eliminate vigorous competition” among
hospitals and primary care doctors
“The FTC. has shown that the merger would likely lead to higher prices,” said the judge,
Frederick J. Kapala of the Federal District Court in Rockford. The hospitals have since given
up their plans to merge.
Experts say Medpac’s recommendation and the antitrust cases will make hospital systems
around the country hesitate before buying physicians’ practices.
“Healthcare costs are far out of control. We are spending three times more on our health
care than other industrialized countries,” Hessing said. His independent doctors group
began two years ago to support doctors who stay independent. IDID demonstrates that
independent practices are a viable option and helps make the community aware of the
advantages of choosing an independent doctor. Referrals to about 200 doctors may be
found on the IDID website at www.independentdocsid.com.
“You have to ask yourself what is the price of consolidation,” he said.