By Elizabeth Rowe, Ph.D, M.B.A.
A recent study in JAMA (Journal of the American Medical Association) has addressed directly for the first time, the effects of hospital ownership of physicians’ groups, including hospital facility fees, compared to physician owned groups on costs for HMO programs. And it is the first study to include ALL of the costs per patient including testing, hospitalizations and other services received by the patients in addition to physician services and hospital facility fees. Studies are underway involving the even more pronounced increased cost effects on systems less restrictive than HMO’s. An even more recent study showed hospital consolidation, yet another unintended consequence of Obamacare, is generating a system “too big to fail,” reminiscent of the problems of the financial industry during the run-up to the great recession beginning 2008. Hospital Consolidation Makes Systems vulnerable and “too big to fail,” though they can
The JAMA study ( http://jama.jamanetwork.com/article.aspx?articleid=1917439 ) compared the costs for patients seen by hospital owned physician groups compared to physician owned groups in California for 4.5 million HMO patients, for the time period 2009-2012. They included 158 medical groups that were owned by physicians, local hospitals, and larger healthcare systems with multiple hospitals. For physician services, expenditures for care were measured as the monthly capitation payments from the insurers to the organization to cover primary care and specialist physician services, plus the expenditures for laboratory tests. Expenditures by the insurers on hospital services, ambulatory surgery, subacute care, diagnostic imaging, pharmaceuticals, and other nonphysician services were also included.
The researchers found that for physician groups owned by local hospitals, the average cost per patient was 10.3% higher than for physician groups owned by physicians. Even more important for the issue of the effects of hospital consolidation on healthcare costs was the finding that the average cost per patient for physician groups owned by large healthcare systems with multiple hospitals was 19.8% higher than the cost for the physician owned groups.
This study strikes at the very heart of the premises embedded in healthcare reform in general and the ACA in particular. As stated by the authors of the study “These findings are in contrast to the hope and expectation that organizational consolidation of physicians with hospitals would result in greater coordination, and hence lower expenditures.” It also belies the widely held belief that fee for service payments to physicians are the cause of rising healthcare costs, since this study covered only the restrictive HMO environment where physicians are not paid in proportion to their services provided.
This powerful study only considered HMO patients; it will be very important for a similar study to be conducted that includes all forms of payment for healthcare services. It seems likely that much greater differences will be found for hospital owned physicians’ groups compared to physician owned groups when the fee for service system is included; it is already well documented that hospital owned physician groups are paid considerably more than private practice physicians for identical services, when hospital facility fees are included.(See www.Medpac.gov/March 2014 Report to Congress)
