Hospital systems buying up medical practices cite integration efforts and payment reform as a justification. Now, though, payers might rightly be concerned about where the trend can lead at local levels.
Several years into this physician-hospital consolidation trend, University of California, Berkeley researcher James Robinson and colleagues tried to get a sense of whether total per patient spending is higher in hospital-owned physicians organizations or independent medical groups.
They analyzed expenditure data on 158 major medical groups and 4.5 million commercial HMO patients in California from 2009 to 2012; the results, published in the Journal of American Medical Association, might serve as a price warning for insurers and paying patients.
In general, hospital-owned physician practices had total spending on average at least 10 percent higher than independent practices, across professional, hospital, laboratory, pharmaceutical, and ancillary services.
After adjusting for patient severity, Robinson and colleagues found that local hospital-owned practices' spending were 10 percent higher than physician-owned organizations, while multi-hospital systems' spending was almost 20 percent higher. In 2012, the physician-owned practices in the cohort had average expenditures of $3,066 per patient. Hospital-owned practices had average per patient spending of $4,312, and multi-hospital systems $4,776.
"The intent of consolidation is to reduce costs and improve quality, but the problem with all this is that hospitals are very expensive and complex organizations, and they are not known for their efficiency and low prices," Robinson said in a media release.
While the study focused on California, the findings do support skepticism of hospital-physician consolidation and the argument for de-emphasizing the hospital as a major center of healthcare, Robinson said.
"Hospital-owned medical groups usually are expected to conduct ambulatory surgery and diagnostic procedures in the outpatient departments of their parent hospital, but hospital outpatient departments are much more costly and charge much higher prices than freestanding, non-hospital ambulatory centers," he said.
The issue of consolidation and reimbursement power is largely a local issue. Still, the wave of provider consolidation raises concerns concerns over the potential for commensurate higher billing, such as outpatient facility fees that appear on claims from office-based physicians that were acquired by hospital systems,
In one unique and fractious market, though, the largest insurer recently started fighting back.
This past April, Highmark Blue Cross started refusing to pay hospital outpatient fees to University of Pittsburgh Medical Center office-based oncology practices, in a bid to "restore more rational payments."
The insurer said it and its members combined could save as much as $200 million per year by "eliminating markups" for infusion chemotherapy and other cancer drugs.
A Highmark-insured cancer patient could save as much as $3,500 for a single treatment, "depending on the drugs being used and how the costs are applied to the member's insurance deductible," said the insurer's chief medical officer, Donald Fischer, MD.