The growing trend of hospitals scooping up formerly private physician practices and employing their doctors could be a contributor to the greatest problem plaguing the U.S. health system today — rapidly rising costs, according to a new study.
And while hospitals’s purchases of physician practices typically come with the promise of better-integrated, higher-quality care, those promises don’t always materialize, according to a report from the Washington, D.C.-based policy group Center for Studying Health System Change.
With the U.S. health system widely regarded as faring worse than other industrialized countries in terms of both quality and cost, the implications of the report shouldn’t be lost on policymakers — what’s good for hospitals isn’t always what’s good for the American people.
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The major reasons why the trend toward hospitalists (the name for physicians employed by hospitals) leads to higher costs are:
— Physicians are typically paid via the fee-for-service model that promotes volume over quality of care and hospitals sometimes pressure physicians to order expensive (and lucrative) tests
— Hospitals often charge “facility fees” for office visits and outpatient procedures performed in formerly independent physicians’s offices
— As the market consolidates, hospitals gain greater negotiating leverage over insurers and demand higher payments
— Some specialists, such as cardiologists, are able to spark negotiating wars between hospitals for their services, and turn that competition into higher salaries, in some cases as much as $1 million
From a consumer perspective, perhaps the most insidious of those factors are the facility fees. As the report notes: “It is possible for a physician practice to be acquired by a hospital, not change locations or even practice operations, yet the hospital now receives significantly higher Medicare payments” as a result of tacking on outpatient facility fees. The practice often leads to higher costs for private insurers as well as Medicare, according to the report.
From a hospital’s perspective, the rationale behind employing former private-practice physicians is obvious: It helps them make more money, acquire more patients and grab more market share. But at a time when the U.S. is at risk of a double-dip recession, higher health costs represent a particularly big threat to U.S. economic growth and crowd-out investment that could and should go toward more productive ends.
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Also troubling is that hospitals’s purchases of formerly independent physician practices not only increases costs, but frequently doesn’t lead to improvement in the quality of care. The thinking behind the hospitalist movement is that tighter integration between doctors and hospitals will lead to better communication and greater efficiency. But the communication part can be tricky.
“Communication between inpatient and outpatient providers, even between those employed by the same hospital system, continues to be a problem,” according to the report. (Note that Cleveland Clinic was the only hospital in the report to earn individual recognition. The Clinic was lauded for having made more progress than most health systems in exchanging clinical information between inpatient and outpatient doctors, largely thanks to its electronic medical records system.)
The report was based in part on site visits to 12 “nationally representative” U.S. markets and 550 interviews that researchers conducted along with those visits.
The report concludes by warning that the hospitalist trend could hold serious consequences for the U.S. health system if some fundamental changes to the model don’t happen.
“The recent acceleration in hospital employment of physicians runs the risk of raising costs and not improving quality of care unless broader payment reform reduces incentives to increase volume and creates incentives for providers to change care delivery to achieve real efficiencies and higher quality,” the report said.