Same ‘Ol, Same ‘Ol, Except the Price

Imagine you’re a Medicare patient, and you go to your doctor for an ultrasound of your heart one month. Medicare pays your doctor’s office $189, and you pay about 20 percent of that bill as a co-payment.

Then, the next month, your doctor’s practice has been bought by the local hospital. You go to the same building and get the same test from the same doctor, but suddenly the price has shot up to $453, as has your share of the bill.

Margot Sanger-Katz, “When Hospitals Buy Doctors’ Offices, and Patient Fees Soar,” New York Times, February 6, 2014

In the example cited above, the Medicare patient’s fee for an ultrasound goes in one month from $37.80 to $90.60 – a 140% jump.

What’s going on here?

As a Medicare patient, you go to the same building, proceed to the same office, get the same test, receive the same level of service, and the prices goes up nearly 2 ½ times.

What’s going on is something called the “facility fee.” Under Medicare rules, something done in a hospital “facility,” even if that facility is far removed from the hospital grounds, is entitled to a larger fee than in an independent physician’s practice. And the cardiologist is entitled to a larger fee too.

But how could this be? It isn’t fair.

Well, back in 2009, Medicare cut what it paid cardiologists by about one-third for procedures done in the office. But it paid the same cardiologist more if a hospital employed the cardiologist. Medicare simply assumed that hospital care, by definition, costs more than independent care, wherever it was done.

So what did cardiologists do? Logically, they went to work for hospitals. From 2009 to 2014, the number of cardiologists in independent practice fell from 59% to 36%, Another 31% are engaged in merger talks with hospitals. Other specialists are migrating to hospital employment as well.

The Obama administration has calculated it could save Medicare $30 billion if it charged the same for ambulatory hospital doctor-owned cardiologist practices as independent practices. An administration’s budget proposal would essentially end different prices for the same services. Medicare would pay the same for any visit, test or procedure offered by doctors who work in private practice and by those who work in off-campus practices owned by hospitals. Doctors who work in the hospital building could still be paid the higher hospital rate. But the free-standing practice that suddenly changes hands would not continue to be paid more.

Consolidation, in federal logic, is OK for the same procedure if it is done within the hospital, but not if it occurs outside hospital walls.

Will this federal proposal save money? I doubt it. I can easily envision hospitals building tall buildings to accommodate new and old physician employees. I can also see this switch might cost more than the present arrangement.

It’s a trade-off, but it sounds logical from the top-down. There will be contrary views, of course, from the bottom-up from hospitals and cardiologists. But as Tweedle-dee said, “Contrawise, it is was so, it might be; and if it were so, it would be; But if it isn’t, it ain’t. That’s logic. (Lewis Carroll, Through the Looking Glass.)