Hospitals Buying Up Private Practices May Actually Raise Patient Costs

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STB-thumb1There are two distinct and indisputable trends in today’s healthcare market: First, an increasing number of physicians are selling their practices to hospitals. Second, more and more hospitals are merging with each other.

These trends are developing because physicians and hospitals are looking to cut operational costs, avoid the burgeoning mountain of paperwork, and save money and time in an age of declining reimbursements. However, these trends may also be to the detriment of the patient, CNBC’s Dan Mangan reports.

A recent study from Pricewaterhouse Cooper’s Health Research Institute (HRI) indicates this industry consolidation, while benefiting physicians, could actually raise healthcare costs for patients even as overall healthcare spending slows.

“Over half of hospitals plan to acquire physicians practices in 2014,” HRI said. “Studies suggest that consolidation in concentrated markets can drive prices up as much as 20 percent.”

One has to wonder, are these merely some of the growing pains that come with attempting to overhaul an entire nation’s longstanding healthcare system? Will consumer costs shoot up immediately only to fall again after the industry adjusts to mammoth consolidation?

Ceci Connolly, managing director for HRI, believes this is possible. “We do expect there to be some efficiencies that come out of consolidation…It’s less clear how long it will take to deliver those efficiencies. It certainly doesn’t happen overnight.”

Dr. Peter Angood, CEO of the American College of Physician Executives, thinks it could take three to five years “before we’re really seeing the return on investments. As healthcare systems continue to look for ways to integrate physicians into their delivery models, there will be upfront costs incurred, and it should not be expected that the return on investment will be immediate.”

There will also be an upfront impact on “traditional reimbursement practices,” Mangad writes. “Hospitals are able to charge Medicare a higher rate for some services that take place in a hospital setting compared with the rates doctors are able to charge in their independent practices. That means the same procedure performed in an independent doctor’s office on Wednesday might be charged to Medicare at a lower rate than for the same procedure in the same office after a hospital buys that doctors’ practice Thursday.”

According to a recent report to Congress from the Medicare Payment Advisory Commission, “Medicare pays 141 percent more for one type of echocardiogram when done in a hospital outpatient department than when it is done in a freestanding physician’s office. If Medicare pays a higher rate for a service in one setting over another, program spending increases and beneficiaries pay more in cost sharing without a corresponding increase in quality of care.”

Has your organization been buying up physician practices? If so, did these investments and consolidations have an impact on patient costs? Do you expect these costs to level out after a while? What are your patients saying?

-by Pete Fernbaugh

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