Stanley Feld M.D.,FACP,MACE
For years practicing physicians knew that hospital outpatient clinics charges were 30-60 percent higher that physicians’ free standing clinics.
CMS didn’t know it or didn’t want to know it.
CMS administers Medicare and Medicaid. CMS was restricting payment for outpatient procedures and tests done in freestanding practicing physicians’ offices while paying higher fees for the exact same outpatient hospital procedures and tests.
As rules and regulations and the complexity of the business of practicing medicine in private freestanding outpatient clinics increased physicians sold their practices to hospital systems.
The government and the healthcare industry encouraged these sales by increasing the complexity of running a private practice.
The probable logic was they would only have to deal with one entity (the Hospital System) rather than 600 individual doctors or clinics using that hospital system.
The government’s excuse for cutting out freestanding individual practices and clinics was efficiency and patient safety.
The hospitals were overjoyed to be able to buy physician practices.
“As the Affordable Care Act attempts to steer people away from pricey hospital inpatient admissions, hospitals have begun buying up doctors’ offices in hopes of increasing their revenue and market share.”
The hospital systems’ then discovered they were losing money by buying physicians’ free standing practices.
In essence they were trying to buy physicians’ intellectual property and surgical skills because the traditional brick and mortar hospital building was becoming less profitable. Many surgical procedures were being done as outpatient procedures.
Physicians were less productive as hospital employees than they were when they owned their own practices. They were guarantied a salary.
Hospitals did not bother to calculate the money they made from doing the entire outpatient testing and procedures when presenting the loss to the government.
Hospital systems have been selective, first buying Primary Care Physicians’ freestanding office practices. Next they started trying to buy oncology practices.
“The number of oncology practices owned by hospitals increased by 24 percent from 2011 to 2012. By turning what used to be independent medical offices into so-called hospital outpatient centers, hospitals are creating networks that, critics say, give them the power to set prices and ultimately raise costs for private insurers and government programs such as Medicare.”
To further encourage physician owned clinics to migrate to hospital system owned practices the government and the healthcare insurance industry provided separate revenue codes to allow hospital systems to collect more for the same tests and procedures done in physicians’ free standing offices.
“The Medicare Payment Advisory Commission, which advises Congress, are sounding the alarm. In May, MedPAC Executive Director Mark Miller testified before a House panel that these price differences “need immediate attention.”
Medicare should align rates “to limit the incentive to shift cases to higher cost settings,”
The hospital systems’ excuse for the higher charges is it has higher operating costs than freestanding clinics such as running an emergency room.
Hospital systems receive higher reimbursement than private freestanding clinics doing the same procedure or delivering the same treatment.
The hospital system’s retail price is much higher than what it receives from CMS and the healthcare insurance industry. The discount price is somewhere around 50%
Even with the discount the hospital systems’ prices are 30-50% higher than the freestanding clinics’ prices.
The glossary of charges and discounts should be available to all consumers of healthcare. None of the prices are transparent. Patients’ have to fight hard to get the prices.
The focus or reports of prices has been on the outrageous prices for cancer drugs.
“A treatment of Herceptin, a breast cancer drug from Genentech, cost private insurers $2,740 when used in an independent clinic and $5,350 in a hospital outpatient setting, according to an analysis of 2012 claims by PricewaterhouseCoopers’ Health Research Institute.”
“The price of Avastin, another Genentech cancer drug, increased from $6,620 to $14,100, the Health Research Institute says.”
Echocardiograms in a hospital facility are reimbursed at twice the price as the reimbursement in a private physician owned facility.
If Medicare paid the lower office rate for 66 outpatient services even when they’re performed in hospital-owned facilities, the government would save $1 billion a year and lower Medicare patients’ bills by $200 million, MedPAC Executive Director Mark Miller said before the House panel. Medicare insured 49 million Americans at a cost of $573 billion in 2012.
This is an analysis of only 66 outpatient procedures. There are hundreds of outpatient procedures. Imagine the savings if all the procedures were captured.
“Hospital outpatient visits for echocardiograms jumped 33 percent from 2010 to 2012, MedPAC found, while visits to independent offices declined. Echocardiograms cost more than double in hospital-owned locations.”
As hospital system merge the price will go up even further. The hospital systems are now negotiating from a position of strength. Hospital systems are making the money as private physicians’ reimbursement shrinks.
The government and the healthcare insurance industry are finding their scheme to destroy private practice was a big mistake.
The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.
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