Over the course of the past decade the medical industry has witnessed a trend that has disturbed many health insurers and health economists concerned with the health care spending for privately insured patients: An ever-growing number of hospitals are purchasing physician practices. Hospital representatives and other advocates of this move insist that hospital ownership of physician practices represents a means to better control healthcare costs and coordinate patient care. Opponents, however, have long argued that hospitals harbor decidedly less altruistic motivations, and instead are engaged in a monopolistic bid to increase admissions and negotiate higher prices with insurance companies.
A new study entitled “The Payment Reform Paradox” and published in the journal Health Affairs gives legitimacy to opponents’ fears. Through an analysis of 2.1 million hospital claims filed between 2001 and 2007, the authors, all researchers at Stanford University, witnessed a hike in healthcare costs when hospitals purchased physician practices. For many privately insured patients, this means that the cost of care—be it inpatient surgery, outpatient neurology care, or any other form of medical treatment—may be higher now than in previous years owing to hospitals’ expanding ownership of physician practices.
At present, the Federal Trade Commission (FTC) exercises relatively lax oversight where physician-hospital collaborations are concerned, typically intervening only in cases in which a single entity controls such a large number of practices in one area that competition is at risk. According to many experts, such as University of Southern Carolina health policy professor Paul Ginsberg, however, the present study illustrates the need for more rigorous oversight of hospital-physician relations, and may spur the FTC to cast a more critical eye upon hospitals engaging in this practice.
The American Hospital Association has responded to the study with criticism. Arguing that the study is outdated and, likewise, fails to consider physician costs and expenditures, they deny the accusation that hospital acquisitions of physician practices reflect a desire to raise healthcare costs. According to the association’s vice president, Caroline Steinberg, the practice of purchasing physician practices actually represents part of an endeavor to engage doctors in up-to-date, convenient payment methods, as well as to adhere to the guidelines of anti-kickback and federal antitrust laws.
Even so, it would appear as though the FTC had begun to recognize the dangers of too much purchasing power even prior to the present study’s May 2014 publication. In January of 2014, the FTC helped to successfully block Idaho’s most expansive hospital system from purchasing the largest physician practice in the state. In doing so, it prevented this entity from controlling in excess of 80 percent of the doctors practicing in Nampa, Idaho.
Significantly, the authors of the study note that the integration of hospitals and physician practices does not always give rise to such issues. They do, however, hope that their efforts will help to raise awareness of the potential for even the most well-meaning mergers to negatively impact patients.
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