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]