When Hospital Systems Acquire Private Practices, We All Pay More For Health Care

A growing number of private health care practices are being purchased by hospitals. And even if that practice remains changed in all other ways, you can expect that the costs for procedures and visits will increase dramatically.

Since 2000, the percentage of specialty physicians actually employed by the hospitals in which they see patients has soared from 5% to nearly 25%. For primary-care physicians, that number has jumped during the same time period from around 20% to 40%.

The Wall Street Journal looks at the impact that this trend has on everyone from the patients to the insurance company to employers.

One patient tells the Journal that after his cardiologist was snapped up by a hospital, the cost for an echocardiogram jumped from $373 to $1,605. And even though the insurance company foots some of the bill, the patient’s deductible left him with around $1,000 in out of pocket payments.

“Nothing had changed, it was the same equipment, the same room,” explained the patient. “I was very upset.”

For the doctors, it’s a good deal, as they generally make more being part of a hospital system than they do on their own. But those tests and services that cost less to perform outside a hospital system will likely now be billed at hospital rates.

The insurance companies place some of the blame for recent rate increases on the growing number of private practices being absorbed into hospitals. Some believe that these higher costs are also to blame for an increase in Medicare spending.

From the Journal:

Medicare pays substantially more for certain services if they are performed at hospital facilities. A 15-minute doctor visit, for instance, cost the program about $70 last year at a free-standing practice, but the same visit ran about $124 if it was billed as hospital-outpatient, according to the Medicare Payment Advisory Commission. That difference can bump up reimbursements after an acquisition, if a hospital system upgrades a clinic to become an outpatient facility, or moves services into a hospital site.

Insurance companies see similar increases.

Blue Shield of California tells the Journal of a private practice whose rates increased by 140% after being bought by Sutter Health, while another group of formerly private doctors had their rates jump up 95% after becoming part of the UCLA Health System.

The journal points to a letter from insurance giant WellPoint to Nevada physicians that lists the cost of a spine MRI at anywhere from $319 to $742 at an independent service, while the same scan costs between $1,591 and $2,226 at a hospital-owned facility.

Same Doctor Visit, Double the Cost [WSJ.com]

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  1. Coffee says:

    Part of the reason this is happening can be blamed on the insurance companies themselves. The amount they’re willing to reimburse on most services in a GP’s office is laughably low, so any doctor who doesn’t want to run a patient mill end up with very little in the way of revenue after overhead – especially insurance, which can be a huge expense – is paid. My mother is a family practice physician, and for a while, she also worked at the emergency room for the local hospital. The revenue she made working four twelve-hour shifts a month in the ER matched what she made working 40 hours per week at the practice she owned.

    • luxosaucer13 says:

      I respectfully disagree with your statement. THE reason why this is happening is because for-profit hospitals buy up private practices and jack up costs because they are, by definition, for-profit institutions. Those that are so-called “non-profits” just move their money around to make it look like they’re not making a killing on care. The only way to end this fleecing of the American public by the health-care industry is to nationalise the whole industry and make it not-for-profit.

      Canada, Australia, and Western European countries have been doing this for decades and there aren’t mass reports of shortages of medical personnel and modern equipment, doctors and nurses bitching or “walking out” because they’re not being paid enough, people “dying in hospital beds” waiting for treatment, “waiting months to get essential care,” or any of the other scare tactics opponents of universal care use to try to convince us that the American system is the “best.”

      Point of fact: the American system is so messed up, that a higher number of patients per capita wait until it’s too late to treat conditions that would result in vastly easier and less expensive treatments in countries with universal healthcare. Two reasons for this: rationing and preventative care.

      1. There is more “rationing” in the American system, compared to universal healthcare systems, because of those who don’t or can’t seek care at a physician’s office, while their condition is still manageable, because they can’t afford it. Instead they go to the emergency room after their condition progresses to the point that they HAVE to seek care because emergency rooms can’t legally refuse to treat patients in need, thereby driving costs up significantly, both for the patient and the general public.

      2. Countries with universal health care spend far less on administrative costs and far less on care per capita because they focus on preventative care and people don’t have to worry about cost (or losing their homes because they can’t pay the hospital bills AND mortgage payments). People can actually “afford” to go see their primary doctors for checkups to make sure there isn’t a problem, and if there is, it’s usually caught early enough that the treatment isn’t prohibitively expensive.

      • Loias supports harsher punishments against corporations says:

        “I respectfully disagree with your statement. THE reason why this is happening is because for-profit hospitals buy up private practices and jack up costs because they are, by definition, for-profit institutions. ”

        You’re stating exactly what was stated in the article.

        • JEDIDIAH says:

          However, the fact remains that insurance companies short-change doctors.

          Insurance companies are bad but medicare/medicaid is worse to the point where most doctors don’t want to take it. THAT is your vision of “single payer socialized medicine” in America. It’s a system where doctors can’t afford to be your doctor anymore.

          This is a problem that often gets overlooked when people start whining about the cost of medical care.

          • highfructosepornsyrup says:

            Uh no. THAT is YOUR vision of “single payer socialized medicine” is. The US just has a shitty half-assed implementation of the idea. Hence, it’s a good idea to see how other countries are doing things better than the US.

          • JJFIII says:

            Really? No doctor is forced to take ANY insurance plan ever. They are not required to take medicare or medicaid patients. Guess what, THEY ALL DO. If being a doctor is so horrible, QUIT. Guess what, life is tough out there. Why do doctors think they deserve to make more than a teacher or police officer or firefighter?
            I see MANY doctors who work in the truest socialized medicine facilities in the country. The VA is 100% SOCIALIZED medicine. Not just single payer private practices, but single payer, GOVERNMENT run and paid for doctors. Guess what, patient satisfaction surveys rate the VA higher than ANY private insurance company in the country. By the way, the number two rated in patient satisfaction, Medicare.
            Funny how the right wing only wants happy patients who are in the military or old.

            • Pre-Existing Condition says:

              I keep reading about how good the VA is but my experience has been mixed — The facilities tied to major installations (Ft. Benning, etc.) are usually very modern and nice. The ones that aren’t, are the stereotypical VA experience.

              “The VA is 100% SOCIALIZED medicine. Not just single payer private practices, but single payer, GOVERNMENT run and paid for doctors. ”

              I’m not sure how it was in the past but for non-service related disabilities, you have to pay out-of-pocket on a sliding scale. Unless you’re destitute, prices are on par or more expensive than a private practice.

            • philcolby says:

              I am not sure where you get your information, but I respectfully disagree. I am a former VA physician who has been at multiple facilities who now works in private practice. The VA does fairly well when it comes to well visits, immunizations, and preventative care. Specialty care and inpatient care can be severely deficient in many areas. There can be long wait times, very limited visits, and substandard choices brought on by a crushing and painfully slow to adapt bureaucracy.

              Currently, as an interventional cardiologist, I see patients who maintain a VA connection in order to get their medications for free or at reduced cost. But they would never dream of getting their subspecialty care done within that system. Personally, I was disgusted by an institutionalized work ethic and a “not in my job description” attitude held by numerous individuals in the system. Patient care was frequently compromised.

              Now regarding your issue regarding particular insurance choices. My group does take Medicare as it represents 65% of our patient population. We have to take it, or go out of business, despite paying 50% of what commercial payers are willing to offer. Medicaid is even worse which is why we have dropped it completely. The cost of doing business is higher than what we get from Medicaid which makes the model unsustainable. I do have Medicaid patients, but I see them pro bono if I have an established relationship.

              Our group has sold to the hospital as the technical revenues continue to be cut by CMMS for outpatient equipment, thus making it impossible to sustain the overhead to run a large practice. While this means less income, we are better prepared for the inevitable continued drop in reimbursements, while offloading overhead on to the hospital. What the hospitals will charge for my procedures is ridiculous, and does concern me. For patients who are responsible for 20% and on fixed incomes, it is nearly impossible to pay.

              Finally, with regard to your comment as to why doctors think they deserve to make more than those in other equally important professions, I will simply mention this. Between undergraduate, graduate, and professional education, I have about $500000 in educational debt. Most have at least $250000 or more after finally entering the workforce at the age of 35. I do not know of any other field in which such crushing educational debt burden is so commonplace. Fortunately, as a subspecialist, I make just enough to provide comfortably for my family and pay my debts. I am by no means rich, but I enjoy taking care of patients. Many of my primary care colleagues do not make as much and are leaving the field as they cannot afford to keep up. Until this country stops the stupid practice of burdening future doctors with extreme financial obligations, and continuing to pay less than minimum wage through 3-10 years of post-graduate training after medical school, then we will never address the worsening physician shortage.

      • aerodawg says:

        LOLZ, spoken like somebody who has NO idea. EVERY hospital is buying up practices and employing physicians, even non-profit and gov’t owned hospitals. It’s called setting up a “unified health system”

        I say this as the spouse of a family practice physician who works for a PUBLICALLY owned hospital, the reason most doctors are selling out to hospitals is the huge amount of BS that goes along with trying to run a private practice. Most of them want to show up, be doctors and treat patients but with the huge pile of rules and regulations, not just for practicing medicine but for running a business, you can’t do that unless you offload it all to somebody else, namely a hospital.

        They generally also need someone else willing to absorb the losses when their practices are over run with medicaid patients and their associated low reimbursement rates. Hell before my wife sold her practice, financially it was borderline better to just leave an appointment slot open rather than book a medicaid patient in it….

  2. Applekid says:

    It’s also a good way to steal from the employees supporting the doctor. The practice my mother is employed by just got purchased and there was a “compensation review” where the hospital determined she gets paid too much and has too much vacation. She was given take-it-or-leave-it terms, and a few of her coworkers already left with much gnashing from the doctor because he knows how hard they work and that hospital will likely fill the vacancies with a bunch of entry levels that will slow down the office staff with training.

  3. Loias supports harsher punishments against corporations says:

    ” while another group of formerly private doctors had their rates jump up 95% after becoming part of the UCLA Health System.”

    A group of private doctors find a system that works for everyone, hospital buys it and fucks it up.

    Yeah, our health care system works just fine!

    • StarKillerX says:

      Well if it worked fine for everyone maybe the doctors wouldn’t have sold?

      The problem is largely to blame on insurance, medicaid, medicare and private, having different reimbursement rates for hospitals and doctor’s offices. Most will pay a higher rate for a test or procedure done in a hospital then they will for one done in an office and yet the costs in most cases are actually more at the office.

      On top of this as medicaid and medicare reimbursements drop more and more dr’s and hospitals need to look for ways to decrease costs and/or increase income in one area to subsidize the loss in another.

      • Loias supports harsher punishments against corporations says:

        We both read the part about how it’s good for doctors because they make more money, right?

        So doctors make it work on their own, but the hospital comes around and says “work for us and you’ll make more money!” Well, of course they are tempted. But then their fees double. How else are they going to get paid more?

        • StarKillerX says:

          While on the surface more is always better but if you look below the surface you will find that many doctors don’t want to sell their group, as it takes the power to run the group out of their hands, but are forced to do so by rising prices and declining reinbursements.

          Over the years I”ve known, and/or worked with, hundreds of doctors and less then a dozen ever wanted to be employed directly by a hospital, even fulltime ER doctors prefered to work for a third party company then for the hospital itself, largely because they did not want to loose their independance.

  4. Sarek says:

    This is happening in my area. The local (and not so local) hospitals now seem to own most of the local physician practices, especially in primary care. And many of the physicians who seemingly remain independent now have offices in the hospitals.

  5. Sean says:

    Since when does someone get 15 minutes with a doctor? When I go to see my regular family practice doctor it is probably about 5 minutes unless it is the yearly physical.

    • Pre-Existing Condition says:

      And you’re still paying for a 15-minute appointment slot. The standard BC/BS rate in my state, for a 15-min appointment, as an established patient is $82.50. That’s a lot of money for 5 minutes.

      • aerodawg says:

        As the spouse of a doctor, that 5 minutes you spend on the front end, entails at least 3X that much on the back end with charting and note requirements so that BC/BS will actually pay that money. Add in the ridiculous overhead associated with operating a private practice and $82.50 isn’t a lot of money.

        • Pre-Existing Condition says:

          It may not be but when you’re paying $82.50 for a 15-minute slot, it’s a lot for 5 minutes of a doctor’s time. It’s even worse to pay $180 for a 30-minute slot and still only get 5 or 10 minutes.

          “so that BC/BS will actually pay that money…”

          In my case, BC/BS doesn’t give her any money. They just negotiate the rate and I cut a check.

          • erinpac says:

            Last time we went in, paid $135 for an appointment, waited 2 hours in the appointment room (AFTER the waiting room time, saw one other person there the whole time). Then a nurse tossed a prescription form from the doctor at us and sent us out. Nobody talked to us – they only read the complaint on the check in form.

  6. Mr_Magoo says:

    One of my doctor friends says this has been driven largely by Medicaire. Many hospitals now have ‘hospitalists’ who are randomly assigned, hospital-employed doctors that act as your health advisor. When you’re admitted, you get assigned a hospitalist who wanders by every day or two, looks at your chart, pretends to remember you from the day before, and gives you test results and advise. Medicaire pays for this hospitalist when it pays the hospital bill. If you have a family doctor who isn’t employed by the hospital, but comes by to see you when you’re in the hospital, Medicaire won’t pay his bill, because they already paid for a hospitalist.

    • agent888 says:

      Use of Hospitalists are a very good, growing trend though. While you might not get the same personal touch as your primary care physician, you get far better quality. The hospitals main goal is to get patients well with the best quality at the lowest cost. Your primary care physician could really care less about the hospital goals and costs though, because…its not like they are employed by the hospital. Think of them as a third party with a very loose relationship with the hospital.

      Generally your primary care physician groups have agreements with hospitals so that while you are admitted, the hospitalist is doing the daily rounds on you. You are the customer though, and you need to have this conversation with your physician. There are some physicians who love the use hospitalists because the physician gets to sit in their office and see as many patients a day that they can. That’s where the physician makes his money, in his office and not doing rounds in a hospital.

      Sorry I’m a quality & cost performance analyst for hospitals. It’s hard to find any other trend that has made such a good impact as the adoption of hospitalists.

    • StarKillerX says:

      I worked in an ER for 9 years and trust me when I say that there are a lot of little tricks like that.

      For example, if you go to the ER with a cut and get stitches you have to go to you own doctor, or one we refer you to, to have them removed, but the insurance company, public or private, wont pay the physician for the suture removal because to them sutures are a single fee item and they claim that removal is part of the fee for putting them in.

      As I recall there was also a single “physician fee” for ER treatments, so if someone ends up in the ER and the ER doctor calls in their private physician they private doctor wasn’t paid because they insurance already paid for the Dr, although that only covers the ER doctor and the private physician called in sees nothing from it.

      • Pre-Existing Condition says:

        That’s pretty much the reason why I go out of my way to see our family doctor or my kid’s pediatrician for procedures that I would have gone to the ER for 10 years ago (broken bone, burns, stitches, etc.).

        That, and having a high deductible can really change one’s attitude, especially when you’re paying 100% out-of-pocket for everything.

    • aerodawg says:

      Nope, not really. If your doctor is seeing you in the hospital they get paid. Doctors don’t work for free any more than anybody else does.

      Hospitalists come into play mostly because your GP doesn’t feel like being on call and rounding on patients in the hospital. Somebody has to take care of you in the hospital and since your GP doesn’t want to, in comes the specialized hospitalist…

  7. CalicoGal says:

    Because we have Amazon Prime, we get packages about 2-3 times a week.
    ONE TIME a while back, the UPS tracking showed “Delivered,” but it was nowhere to be found. (We have a table on the porch where they always put the packages) Looked all over and finally found it IN OUR MAILBOX THE NEXT DAY!!

    No one could explain it, and It finally occurred to me that the MAYBE the UPS guy delivered it to the neighbor by accident, who then put it in my mailbox the next day.
    *shrug*

    Only happened once.
    However do not get me started on A1 Courier or LaserShip

    • CalicoGal says:

      OMG you are KILLING ME CONSUMERIST!!

      Ugh I feel like a dope !
      But it isn’t my fault!!!

      • StarKillerX says:

        So your saying Amazon Prime doesn’t give you special rates with your doctor? lol!

        • Coleoptera Girl says:

          That’s what I was thinking… I mean, I already have Amazon Prime so that kind of thing would be nice to know about…

  8. dush says:

    So bottom line, the govt subsidies of Medicare is increasing health care costs.

    • Necoras says:

      You don’t actually know what Medicare is do you? The government does not subsidize Medicare. The government pays 100% of Medicare costs. Medicare is a government program that is paid for by the government. It is not a private system that the government pays a portion of (ie: subsidizes).

      Over all, Medicare negotiations put a *downward* pressure on health care costs, not a rising one.

      • Evil_Otto would rather pay taxes than make someone else rich says:

        But but but MEDICARE BAD! SOCIALISM! END OF LIBERTY! DEATH PANELS!! etc.

      • agent888 says:

        I agree and disagree. Low reimbursement rates from Medicare drive hospitals to try to lower costs as much as possible, while trying to keep quality high. This also makes providers milk as much as they possibly can out of private insurance. So as a worker under the age of 65, not only am I funding Medicare now, I also see higher premiums because of Medicare.

      • aerodawg says:

        The only thing medicare and medicaid reimbursement rates put a downward pressure on is the supply of doctors willing to accept it in payment.

        Remember that when medicare has crammed down reimbursement rates to the point grandma can’t find a doctor that will accept it…

        • Pre-Existing Condition says:

          That’s definitely the case with Medicaid (virtually nobody takes it anymore) but it seems with Medicare, it’s possible to make a decent profit through volume and over treatment.

      • JJFIII says:

        So Medicare is driving down the costs of health care and private insurance is driving down the cost of health care, YET, health care costs continue to spiral out of control.
        Basically, this article talks about doctors making more money for the SAME WORK. I wonder how many of us in other fields would think that is right. Teachers have had to sacrifice, those working in almost every field have had to cut back on what they make, but doctors taking a pay cut is not an option? BULLSHIT!. Learn to live on less. It’s funny, all those that talk about private practice and doctors not making any money, why not let us all know your AGi last year. You basically have said you prefer to screw your patients, rather than take a pay cut. My doctor seems to have a new Mercedes every year. I don’t

        • dush says:

          Being a competent doctor is a high-value skill set. Especially a specialized physician. That’s great if some will work for less but the govt shouldn’t force that.
          The real problem to the rising cost of health care isn’t doctor pay. It’s the cumulative regulatory burden and govt subsidies which don’t allow for real market forces to work.

        • StarKillerX says:

          I always read about these pay cuts teachers have taken, and yet locally teacher salaries continue to go up at insane rates.

      • dush says:

        No kidding. That’s why I said the subsidies OF medicare not subsidies TO medicare.
        It’s the flow of government monies and the price fixing that causes the inflated prices.

        The article shows this plainly: “A 15-minute doctor visit, for instance, cost the program about $70 last year at a free-standing practice, but the same visit ran about $124 if it was billed as hospital-outpatient, according to the Medicare Payment Advisory Commission.”

    • Evil_Otto would rather pay taxes than make someone else rich says:

      No, it’s the for-profit entities manipulating a loophole in the system to line their own pockets. You could substitute “Blue Cross / Blue Shield” for “Medicare” in this story, and it would still make sense. Private insurance companies do reimbursement nonsense like this all the time, it’s not unique to Medicare.

      So, first, close the loophole to fix the immediate problem, then, in the long-term, remove the profit motive from healthcare.

      • Kuri says:

        It will never be closed. They companies can pay anything they want to keep it open.

      • dush says:

        The loop hole is the price fixing via the medicare system. Hospitals aren’t competing based on market forces and customer retention. They get a set amount from the govt for certain procedures/practices and there is no incentive to lower the cost or do better.

  9. pgr says:

    Simple solution – don’t allow hospitals to own medical practices!

  10. Pre-Existing Condition says:

    It’s been my experience that lab work and diagnostics are also considerably more expensive when through a hospital. I have a $10,000-deductible HDHP/HSA, so it’s pretty much imperative that I call around and get quotes for absolutely everything.

    Even contract/negotiated rates can vary considerably between providers.

  11. TheMansfieldMauler says:

    For the doctors, it’s a good deal, as they generally make more being part of a hospital system than they do on their own.

    No no no. Doctors help people. They didn’t become doctors to make money.

  12. tinmanx says:

    If I ever get so ill that I need to stay at the hospital and for some reason my insurance doesn’t cover it, I’ll be refusing treatment and have someone wheel me home. I’ll be quitting my job, giving all my money to my wife, filing for divorce and applying for medicaid. And if I live long enough, get treatment under medicaid.

    I knew someone who stayed at the hospital for 6 days in the intensive care unit and it cost over $100k. If I’m going down, I’m not going to drag everyone down with me.

  13. Shadowman615 says:

    I dunno. After reading the story about how they went back and demanded a free drycleaning, it kinda sounds like the typo hit the nail right on the head.

    • Shadowman615 says:

      Woah, how did I end up on this page? I swore I was commenting on the drycleaning story.

      Sorry.

  14. Robert Nagel says:

    This is a consequence of the coming of ObamaCare. It is going to be necessary to be connected to a hospital to exist. My doctor’s group went with the local hospital and the costs immediately went up. It’s a public hospital owned by the local government. I get a kick out of the laudatory articles in the local paper each time the hospital records record profits. Apparently the locals do not know that their insurance is based on the insurance companies estimate of projected outlays. the rise in prices going into the hospital translate into several times as much in increased premiums. Then they complain about the high cost of insurance.

  15. surfpoet says:

    Imagine the memory buffers in all the hospital copiers, printers and fax machines were viewed via a legal judicial discovery request, imagine what they would show, eh?