Unintended Obamacare Consequence:  Increased Charges for Services of Hospital-Employed Doctors

Same Doctor Visit, Double the Cost: Insurers Say Rates Can Surge After Hospitals Buy Physician Practices; Medicare Spending Rises, Too

Anna Wilde Mathews,  headline, Wall Street Journal,  August 27, 2012, Marketplace Section Article

August 27, 2012 – In my book The Health Reform Maze: Blueprint for Physician Practices (Greenbranch Publishing, 2011), I devote a number of chapters  to an unintended consequence of Obamacare - higher costs across the board.  

One of these consequences is twice the rate of charges of hospitals for employed doctor services  as independent doctors for procedures or visits  performed by the same doctor, for the same procedure , for the same visit ,  often in the same location  where the doctor previously practiced independently. 

This  same-o rise-o is becoming commonplace. More than half of physicians are now hospital employees, and, according to Merritt Hawkins, the big physician recruiting  firm, the number of employed doctors may grow to 75% of all physicians in the next decade.  Charges for physician services, in other words, are likely rise for 75% of physician services.

In the words of the WSJ article.

"As physicians are subsumed into hospital systems they can get paid for services at the systems’ rates, which are typically more generous than what insurers pay for independent doctors.  What’s more, some services that physician previously performed at independent facilities, such as imaging scans , may start to  be billed as hospital outpatient procedures, sometimes more than doubling the costs."

Here are five examples: of these increased costs:

One, diagnostic colonoscopy,  doctor’s office, $402,86, hospital facility, $876.45,  118% increase

Two, electrocardiogram, doctor’s office, $19.06, hospital facility, $35.28, increase 85%

Three,  cardiac nuclear imaging, doctor’s office, $503.41, hospital facility, $749.65, increase 49%

Four,Chest x-ray with dye,  $292.72, hospital facility, $361.35, increase 23%

Five,   Medicare charge for 15 minute doctor visit,  $70, for hospital-outpatient visit, $124, increase, 77%

Source:  Advisory Board Co.

How can this be?  After all, Renown Health, a hospital system in Reno,  Nevada, says of its owned cardiologists, hospital employment helps “eliminate duplication, improve coordination, and reduce hospitalizations.  With more proactice management for patients with heart disease, we are working to improve the health and well-being of our patients.”

Such much for good intentions.   This point of view  overlooks the obvious:  under Medicare, hospitals charge a “facility fee: ” for maintaining the buildings and grounds,  for covering  the cost of losing services and uninsured patients, for  the administrative infrastructure required to meet government regulations, for paying Medicre penalties for 30-day readmisions All of this  costs money. 

Besides, a hospital with dominant market share with monopolistic facilities and doctors can negotiate higher prices.  Also hospitals recognize that  doctors working for a hospital tend to work shorter hours with higher benefits and in general and tend to be less productive than they were in independent private practice. Hospitals insist that  even with increased prices, they must struggle to break even on acquired physicians and may end up by decreasing physician incomes

The moral of this story may be: With health reform, the more things change, the more they remain the same and the more they cost.

Tweet:   As hospitals acquire more physician practices,  the higher the costs of physician services become.