When Hospitals Buy Doctors’ Practice, Patients Clear Losers

Follow up research on yesterday’s post regarding hospitals buying formerly independent physician practices and  charging significantly higher fees for the exact same tests, yielded a bevy of news stories about patients caught in a  pricing game in which patients are blind-sided by medical bills they never expected. 

The articles uncover THREE DISTINCT WAYS PATIENTS LOSE when hospitals own a majority of physicians in a community or a region.

  1. Hospitals strong-arm physicians  to send all referrals  for testing and procedures to other hospital owned physicians by way of veiled or not-so-veiled threats of nonrenewal of their contract.
  2. Once hospitals gain a critical mass of employed physicians they bully insurance companies to agree to their fee increases or  the insurance company risk losing the hospital’s entire group of doctors as covered provider in their network
  3. When outpatient facilities are taken over by a hospital, suddenly hospital facility fees that can added onto the patients charges as a separate fee for “increased cost of doing business”.

A sampling of these stories from newpapers and publications across the U.S. in just the past four months follows with the publication name, date, selected excerpts from the articles and a link to the full piece.  

 Boston Globe: 1/26/2013

A hospital fee minus just one thing: A hospital          

http://www.boston.com/lifestyle/health/2013/01/27/lahey-clinic-charges-hospital-fees-patient/i1FaIMloLZ1gI4taz8ydSK/story.html

Robert Reed’s visit to a suburban dermatologist’s office last year seemed ordinary: He was led into a small exam room with a scratchy paper-covered table, where the doctor inspected his skin and squirted liquid nitrogen onto three pre-cancerous spots.

The statement he received a month later appeared anything but ordinary: It included $1,525 in “operating room’’ and hospital “facility’’ charges. Surely, Reed thought, it must be a mistake. There had been no hospital, no anesthesia, no surgical nurse.

This practice is common and has become more widespread in the past several years as hospitals across the United States buy up physician practices in the community.

An independent agency that advises Congress concluded last year that the charging of facility fees at hospital-owned medical practices is costing Medicare millions of dollars a year.

The facility fee can cause an even larger difference for some procedures, the Medicare Payment Advisory Commission found. Laser eye surgery, for instance, costs Medicare 90 percent more — $738 — in a hospital-owned facility than in an independent doctor’s office.

 

Orlando Sentinel: 1/19/2013

Patients lose when hospitals take over doctors   

http://articles.orlandosentinel.com/2013-01-19/business/os-beth-kassab-hospitals-buying-doctors-20130118_1_orlando-health-big-hospital-chain-hospital-payroll

When a big hospital chain buys an independent doctor’s office, we often hear the move will “enhance care,” “integrate care” or “improve health-care efficiency.”

Spare us the euphemisms.  Patients are the losers in these deals.

We pay higher costs. We get fewer choices because doctors are pressured to refer patients only to providers who also work for the hospital.

Hospitals can big-foot rate negotiations with insurance companies.

If Claims-R-Us Insurance tries to hold out for lower rates (which means lower costs to be passed along to employers who offer the plans and employees who pay premiums), they will be crushed by Sasquatch Hospital Inc.

The ability of hospitals to throw their weight around is why, for example, an echocardiogram administered by a hospital-affiliated doctor costs $647 under one of Cigna’s plans. The same test administered by an independent doctor under the same plan would cost the insurance company just $238.

Another woman I talked with, who didn’t want to be named for privacy reasons, said a relative she helps care for now pays double for blood tests and pacemaker checks by her cardiologist since he joined a hospital payroll.

Same office. Same equipment. Same humbling paper gown. But twice the cost.

Welcome to the insanity of our medical system.  So what is a patient to do?

If your doctor’s office is owned by a hospital (ask if you’re not sure), don’t be afraid to ask for one or two referrals outside the hospital system so you know all of your options.

It may be that the surgeon or radiologist connected with the hospital is the best choice, but there’s nothing wrong with seeing what else is available.

In this new world of consolidated hospital power, it’s more important than ever for patients to look out for themselves.

 

Charlotte Observer: 12/17/2012

As doctors flock to hospitals, bills spike for patients

http://www.charlotteobserver.com/2012/12/17/3728676/as-doctors-flock-to-hospitals.html

Hospitals are increasingly buying doctors’ practices, then sending bills for routine services that are significantly higher than those charged by independent doctors.

The percentage of U.S. doctors employed by hospitals has doubled over the past decade.  As a result, the cost of many routine medical tests and services has soared, according to an analysis of Medicare data and insurance claims.

The same service performed in the same location by the same doctor can cost more than double what it did before the hospital acquired the practice.

“Prices are increasing often for no other reason than the sign on the door changed,” said Robert Zirkelbach, spokesman for America’s Health Insurance Plans, a trade group representing the insurance industry.

Hospital officials contend they deserve to be paid more because they have expenses and obligations not shared by independent physicians. Experts agree that hospitals should be reimbursed for the extra services they provide.

But there’s a limit, said Robert Berenson, an analyst at the Urban Institute’s Health Policy Center. Hospitals get about 80 percent more Medicare revenue than independent doctors for many routine services, he said. But the additional expenses for a hospital don’t justify that kind of payment difference, he said.

Gay Miller thought she knew what to expect when she received a heart test earlier this year – until she got the bill.

Following a heart valve replacement eight years ago, she has been getting periodic echocardiograms at her cardiologist’s office in Shelby to ensure the valves still work properly. Under her insurance plan, the tests used to cost her a $60 co-pay.

This year, during Miller’s checkup at the Sanger Heart & Vascular Institute in February, her doctor told her she would need to go to nearby Cleveland Regional Medical Center for her echocardiogram.

At the hospital, Miller received the usual 30-minute test. And the usual technician conducted it.

But there was nothing typical about the bill: Miller wound up owing $952.

 

New York Times: 11/30/2012

A Hospital War Reflects a Bind for Doctors in the U.S.  

http://www.nytimes.com/2012/12/01/business/a-hospital-war-reflects-a-tightening-bind-for-doctors-nationwide.html?partner=rss&emc=rss&_r=0

Many of the independent doctors complain that both hospitals, but especially St. Luke’s, have too much power over every aspect of the medical pipeline, dictating which tests and procedures to perform, how much to charge and which patients to admit.

“Hospitals are constructing compensation in ways that are based on productivity and performance,” said Steve Messinger, president of ECG Management Consultants, which advises on physician acquisitions.

But the consolidation of health care may be coming at a hefty price. By one estimate, under its current reimbursement system, Medicare is paying in excess of a billion dollars a year more for the same services because hospitals, citing higher overall costs, can charge more when the doctors work for them. Laser eye surgery, for example, can cost $738 when performed by a hospital-employed doctor, compared with $389 when done by an unaffiliated doctor, according to national estimates by the independent Congressional panel that oversees Medicare. An echocardiogram can cost about twice as much in a hospital: $319, versus $143 in a doctor’s office.

Doctors at numerous hospitals said it was often difficult to criticize the policies instituted by hospitals or investor-owned physician groups because, as employees, they could easily be fired.

In Boise, doctors are pressured to refer only within their own system, according to St. Alphonsus in its complaint. It reported a 90 percent drop in admissions to its hospitals by physicians employed by St. Luke’s. In one community, independent doctors often send patients 40 miles away for CT scans because prices at St. Luke’s are 60 percent higher, the complaint said.

Bloomberg: 11/19/2012

Hospital Medicare Cash Lures Doctors as Costs Increase

http://www.bloomberg.com/news/2012-11-19/hospital-medicare-cash-lures-doctors-as-costs-increase.html

Medicare, the U.S. government’s health program for the elderly and disabled, pays a hospital $400 for an echocardiogram, $180 for a cardiac stress test and more than $25 for an electrocardiogram, according to data from the American College of Cardiology. At a private physicians office, Medicare pays $150 for an echocardiogram, about $60 for a cardiac stress test and $10 for an electrocardiogram.

Jay Alexander, a cardiologist who co-owned a practice in Lake County, Illinois, said his Medicare revenue dropped 35 percent over two years causing him to fire workers, cut salaries and borrow money to stay open. The revenue loss drove him to sell his practice to a local hospital in 2010.

The cuts he faced, though, didn’t apply to hospitals, which saw Medicare reimbursements rise over the same period under a different set of government formulas, according to ACC. After selling his practice to a hospital in 2010, Medicare now pays Alexander three times as much for doing the same tests and procedures he did in private practice.

 

Seattle Times: 11/3/2012

Why you might pay twice for one visit to doctor

http://seattletimes.com/html/localnews/2019600338_facilityfees04m.html?prmid=head_main

Joanne Silberner stood at the podium, about to referee a City Club panel on health-care costs.

As a former health-policy correspondent for National Public Radio, Silberner knows a lot.

But, she told the panelists and the audience, she was baffled when she got two bills after a recent visit to a dermatologist.

One bill, for $109, was for the doctor, who saw her in his office at the Roosevelt Clinic. Then, to her dismay, she got another bill — $228 — for using the space.

The costly trend has caught the attention of the Medicare Payment Advisory Commission. Facility fees for simple office visits, it estimated, will add $2 billion a year to Medicare spending by 2020. For a middle-range doctor’s office visit, such fees increase the total charge by more than 80 percent, the commission calculated.

For patients being urged to become choosy health-care consumers, the fees are not only perplexing, they’re one more out-of-pocket burden.

Patients with no insurance or with high deductibles may be stuck with the whole bill, which — for a routine visit or minor procedure — can be several hundred dollars.

Even those with insurance don’t skate: In addition to the typical flat co-payment of $25 or so for the doctor visit, they’ll pay co-insurance, typically 20 or 30 percent of the facility fee, which is often bigger than the doctor’s bill.

Over the past 2 ½ years, hospitals acquired many independent practices. In 2007, hospitals employed 2 percent of the state’s cardiologists, according to the American College of Cardiology’s state chapter. Today, hospitals employ 42 percent.

“The hospitals have been able to offer cardiologists compensation much higher than a free-standing medical group ever could,” says Denis McDonald, senior vice president of business services for The Polyclinic, a Seattle multi-specialty group owned by its doctors. “It’s a concern for everybody.”

For Group Health, such changes have been costly.

As an insurer, it formerly paid about $1,832 for a heart-catheterization procedure. But when one hospital bought a cardiology group, despite a drop in the doctor’s fee, the total rose to nearly $7,000 — an increase of more than $5,000.

An insured patient with a 20 percent co-insurance would pay an additional $1,000 out-of-pocket, noted Group Health’s Suzanne Daly, vice president of provider relations and network services.

“Nothing changed except ownership of the group.”

 

Columbus Telegraph: 10/23/2012

Hospitals charging fees for facility use

http://www.dispatch.com/content/stories/local/2012/10/23/hospitals-charging-fees-for-facility-use.html

If your doctor is employed by a hospital system, chances are you’ve paid a facility fee.

Ohio State University’s Wexner Medical Center alone collects about $17 million each year in facility fees from payers and patients, according to data provided to The Dispatch.

Those fees were based on 370,000 patient encounters, for an average of about $46 per encounter. Facility fees, also called “provider-based billing,” allow hospitals that own physician practices and outpatient clinics that meet certain federal requirements to bill separately for the facility, in addition to the physician services.

The fees, which have been allowed by Medicare for more than a decade, are becoming more common as hospitals employ more physicians, perform more outpatient procedures and look to shore up their finances

Facility fees for outpatient care frequently take patients by surprise. And such care is becoming more common.

Private-sector health insurers are concerned that facility fees add to the cost of health care without supplying any real value for consumers, said Miranda Motter, president and CEO of the Ohio Association of Health Plans, which represents the state’s health-insurance industry.

“It is even more troubling if cost-conscious consumers are discouraged from seeking primary care from employed physicians because of the potential of additional facility-fee costs,” Motter said.

 

News Observer: 10/12/2012

AG Roy Cooper will seek ways to curb N.C. hospital prices 

http://www.newsobserver.com/2012/10/06/2395213/ag-roy-cooper-will-seek-ways-to.html

Calling the state’s health care costs artificially high, state Attorney General Roy Cooper said he will examine whether to use antitrust laws or new legislation to reduce them.

“I’m concerned about this issue,” Cooper said in an interview. “Health care costs are high enough without artificial boosts that could come from lack of competition.”

A previous investigation by the two newspapers, published in April, showed that consolidation has given hospitals leverage to demand higher payments from insurance companies

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