By: Deepak A. Kapoor, M.D.
Recently, investigative reports have shed light on a serious yet underreported problem: hospitals’ role in perpetuating spiraling health-care costs. Differential reimbursement policies have enabled hospitals to acquire thousands of physician practices nationwide, consolidating their market control in many communities. For example, the American College of Cardiology reports that since 2007, the number of hospital employed cardiologists has more than tripled, while the number in private practice has fallen 23 percent. This trend extends to physician recruitment: recent surveys indicate that hospital employment is now preferred by new graduates over traditional private practice.
Historically, hospitals are the least efficient, most expensive site of service for medical care. Unfortunately, hospitals are rewarded for this inefficiency by being reimbursed at higher rates than physicians’ offices for providing exactly the same service. These increased costs are passed to patients and employers through higher insurance premiums; these costs also strain the solvency of state and federal health-care programs.
It has been reported that Medicare is paying more than a billion dollars annually for the same services because hospitals can charge more when doctors work for them. Whether for diagnostic imaging, surgical services, chemotherapy or therapeutic radiation, hospital reimbursement for outpatient services are often multiple times that for physician offices or ambulatory surgery centers. In fact, the Deficit Reduction Act capped reimbursement for medical imaging procedures in the physician office at the outpatient hospital rate — thus, all such procedures cost the same or less at physicians’ offices than hospitals. Unfortunately, no such constraints exist on bloated hospital charges.
Those advocating hospital takeover of community practitioners argue that this improves efficiency and outcomes, but such unrestrained acquisition can result in dangerous hospital monopolies. Reports indicate that some physicians working for Health Management Associates were pressured to increase revenues both by directing patient referrals to doctors working for the same hospital and by meeting emergency room admittance quotas. HMA, the fourth largest for-profit hospital chain in the U.S., with nearly half of its revenues coming from Medicare and Medicaid programs, was accused of setting arbitrary benchmarks for physicians admitting patients in order to increase profits, regardless of medical need. This unethical behavior puts ill patients at direct risk for hospital acquired infections and other complications, further reducing access and increasing costs.
Technological advances have enabled community-based physicians to offer integrated care in the independent
practice setting — which allows patients to be diagnosed and treated by different specialists under one roof or organized electronically into virtual groups — providing patients with efficient, accessible, high-quality services. These integrated physician groups are able to improve access and control costs while maintaining traditional doctor-patient relationships. These groups serve the added benefit of effectively counterbalancing hospital
healthcare monopolies, providing patients with an important community alternative to monolithic healthcare conglomerates.
If the disproportionate payment system presently in effect continues, such groups will have no choice other than to close their doors or sell their practices to hospitals; ultimately forcing patients into more expensive, less convenient sites of service.
Fundamental to the American ideal of fair play is the notion of equal pay for equal work. Indeed, the Medicare Payment Advisory Commission has embraced this by recommending fee parity for outpatient evaluation and management visits in both hospitals and physicians’ offices. The future of healthcare depends on controlling costs while preserving access and improving outcomes regardless of site of service; leveling the reimbursement playing field is an important first step in this direction.