The Boston Globe, October 20, 2015
The cost of visiting the doctor is climbing as hospitals scoop up a growing number of physicians’ groups, according to a Harvard Medical School study. Researchers found that when small doctors’ practices join large hospitals, their patients pay an average of $75 more every year for outpatient services like check-ups, even though the number of appointments stays the same. With data from cities across the United States, the study is the first to document the cost of physician acquisitions by hospitals on a national scale.
With data from cities across the United States, the study is the first to document the cost of physician acquisitions by hospitals on a national scale.
But for Stuart Altman, chair of the Massachusetts Health Policy Commission, a board set up by the state to track health care costs, the story is a familiar one for the Boston area, where huge hospital systems have been buying both hospitals and doctors’ offices.
“Even if the physicians continue to do their activities in their own offices, the insurance companies would have to pay them more,” Altman said.
Economists have known for decades that when hospitals merge, prices go up. If you’re the only shop in town, you can charge whatever you like, and insurance companies have no choice but to accept those prices. But it wasn’t clear what happens when smaller doctors’ offices join hospitals.
Hannah Neprash and her colleagues from the Harvard Medical School Department of Health Care Policy tracked how many doctors switched from private practices to hospitals in 240 American cities between 2008 and 2012, linking those numbers to the health care spending records of more than 7 million Americans with private insurance.
They saw no significant change in the price of inpatient services. But the more that doctors joined hospitals, the more expensive outpatient visits became.
Patients weren’t getting more services, however. They were simply paying more for each visit. And the authors, who reported their findings Monday in the journal JAMA Internal Medicine, point the finger at doctors and hospitals for the higher costs.
It’s normal for outpatient services to be priced a bit higher in a hospital than they are in an independent doctor’s office. Because hospitals have higher overhead costs, Medicare, the federal insurer of the elderly and people with disabilities, pays an average of $68 more for an outpatient service performed in the hospital than for a service performed in a doctor’s office.
But if a hospital wants even more money, it’s out of luck — these prices aren’t negotiable. “Medicare can usually call the shots,” said Elizabeth Bradley, a professor at the Yale School of Public Health who specializes in health care costs.
Private insurers don’t have as much power as Medicare. They have to negotiate prices with each health care provider. And if a hospital employs most of the doctors in a city, then insurance companies don’t have much choice but to accept the hospital’s prices, even if they are higher than what Medicare is willing to pay.
The same goes for physicians who join big hospitals. They suddenly gain the institution’s bargaining power, and can charge more.
All this helps explain why costs go up — and why physicians have been flocking to hospitals in droves. Over the past quarter-century, the percentage of US physicians who own their own practice has declined by about 2 percent every year.
The steady march of doctors into hospitals could continue thanks to the Affordable Care Act. That law encouraged the integration of different parts of the health care system in the hope that it will reduce costs. But Neprash warns that it could unintentionally have the opposite effect.
“There’s concern that this trend may accelerate as providers reorganize to meet the challenges of new payment models,” she said.