SAUSALITO, CA (NCP-ASSN.ORG)-- The number of medical practices acquired by hospitals has more than doubled in recent years, but higher health-care costs may be one offshoot of those pairings, some experts say.

Around the country, the number of hospital-owned practices grew from 25 percent to 55 percent between 2005 and 2009, with 65 percent of established physicians and 49 percent of new doctors going to work for hospitals in 2009.

Greenville Hospital System is on its way to employing more than 700 doctors, for instance, while AnMed Health has 114. And Bon Secours St. Francis Health System now employs more than 200 physicians in its Bon Secours Medical Group — 44 of them hired last year alone.

Employing physicians enables hospitals to increase market share and revenues by enhancing lucrative service lines, such as cardiac and orthopedic care, and capturing physician referrals, according to the Center for Studying Health System Change, a nonpartisan health policy research organization in Washington, D.C.

Doctors see benefits such as lower overhead costs, malpractice insurance premiums picked up by hospitals, access to expensive information technology and better work-life balance, the center reports.

Initially, hospitals focused on specialists but are also hiring primary care physicians, according to the center, which based its new report on site visits to Greenville, Indianapolis, Phoenix and nine other cities around the country it’s been tracking for 15 years.

In fact, the center reports that one observer characterized Greenville as “a mad grab to hire primary care physicians.”

Center researchers said this trend can lead to higher health-care costs because larger institutions can negotiate higher hospital and physician rates from insurers, rates independent doctors generally can’t get.

Also, they said, the productivity-based compensation used by some hospitals reinforces the procedure-reimbursement environment that drives up costs; hospitals may charge facility fees for visits to practices that were previously independent; and hospitals outbid one another in hiring high-priced specialists – cardiologists paid more than $1 million a year in Indianapolis, for example.

“The acceleration in hospital employment of physicians risks raising costs and not improving quality of care unless payment reforms shift provider incentives away from volume toward higher quality and efficiency,” said HSC senior health researcher Dr. Ann S. O’Malley.

But hospitals say the trend leads to better and more efficient care and less duplication.

At GHS, for example, it’s not about market share, said Dr. Jerry Youkey, vice president for medical and academic services. It’s about becoming an integrated delivery system — a network of providers that offers a continuum of health-care services that it otherwise might not be able to do, he said.

“By having physicians working together and with the hospital, we can concentrate on improving the quality of care,” he said, noting GHS’s market share has been 65 percent to 70 percent for years. “That leads to standardization of care and evidence-based medicine.”

Youkey added that GHS doctors aren’t expected to order more procedures. In fact, he said, an integrated system leads to better utilization and less duplication of services as electronic medical records let physicians see previous tests and physician income is no longer tied to procedures.

Youkey and Garrick Chidester, vice president for network operations and business development at AnMed Health in Anderson, said employing physicians isn’t driving up the cost of health care.

Chidester said while having 114 doctors and a 77 percent market share could impact negotiations with insurers, it also enables AnMed to recruit more physicians and provide more services for the community.

“It’s up to insurance companies whether they want to increase insurance premiums or not,” he said. “We’re doing what we can to achieve revenue generation to support our organization and taking care of a lot people who are unable to pay.”

The hospital and physicians now have shared goals, Chidester said, adding that AnMed doesn’t encourage high-cost or unnecessary tests either, instead enjoying economies of scale.

“I think integration of the delivery system and changing reimbursement is the key to managing costs and utilization,” he said. “Practicing evidence-based medicine…. should reduce costs in the long run.”

“Where we need to transform is to change the mechanisms of reimbursement to reward quality and cost efficiency and not procedures,” Youkey said. “But you can’t deliver on that without an integrated delivery system.”

And Mark Nantz, CEO of Bon Secours St. Francis Health System, also sees employing physicians as the key to more efficient and effective health care.

“At the end of the day, we’ll be able to bring utilization down,” he said. “We will put together a continuum of care, and that will eliminate costs in the system.”

Nantz said that while increasing the number of physicians and patients increases the hospital’s clout with insurers, that influence is limited by the fact that there are competing hospitals that insurers can sign with and by contracts that are typically negotiated every three years.

But center researchers said that while employing physicians may stimulate integration and ultimately improve efficiency, it’s more likely to increase costs in the short term. And employing physicians doesn’t guarantee clinical integration, according to the center, which reports that communication, even in the same system, is still a problem.

Columbia health consultant Lynn Bailey says there are other concerns as well, including so much consolidation that a hospital can cherry-pick insurers, limiting patients’ options.

“Suppose you have colon cancer…but the only colorectal surgeons are employed by one of the two or three health systems in your community. Further, these surgeons are out-of-network and operate only at one hospital also out-of-network. Your out-of-pocket costs as a patient will be higher,” she said.

“When you control a market, that’s definitely anticompetitive behavior.”

Bailey said the state should require health systems to obtain a Certificate of Public Advantage when employing a large number of doctors — all those in a certain specialty, for example — to protect patient access to care and their out-of-pocket costs as well as ensure public input.

Youkey said that typically, if one hospital in an area offers a specialty, the other hospitals in that area will too, with the exception of some subspecialties that don’t have the patient volume to support them, such as pediatric endocrinology, which GHS offers but no one else in the area does.

He said that hiring all the physicians in a particular specialty to sew up the market doesn’t make sense and added that it’s up to insurers to decide who’s in-network or out-of-network.

“There’s no way we would over hire based on our programmatic needs or our volume needs because it wouldn’t make any business sense,” he said.

 

Copyright 2011- National College of Physicians (NCP-ASSN.ORG)-All Rights Reserved