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    Higher prices associated with hospital ownership of practices, study finds

    ACOs could offer care coordination in patients' best interest


    Hospitals across the country have been purchasing practices at a rapid pace, but a new study shows that increased hospital ownership may lead to higher prices for patients.

    The study, called “Vertical Integration: Hospital Ownership Of Physician Practices Is Associated With Higher Prices And Spending,” was published in the May issue of Health Affairs. Researchers from Stanford University analyzed about 2.1 million hospital claims from patients in private, fee-for-service health plans between 2001 and 2007.

    “Taken together, our results provide a mixed, although somewhat negative picture of vertical integration from the perspective of the privately insured,” the authors wrote. “Our most definitive finding is that hospital ownership of physician practices leads to higher prices and higher levels of hospital spending.”

    Provisions of the Affordable Care Act incentivize hospitals and practices to form Accountable Care Organizations (ACOs) by offering bonus Medicare payments, and the authors acknowledge that in some ways, vertical integration may be beneficial to patients. “There is almost universal agreement that greater coordination of care, especially between physicians and hospitals, would be in patients’ best interests,” the authors wrote.

    But the authors also raised another concern.

    “According to economic theory, vertical integration has the potential to increase the market power of providers, especially hospitals, and to encourage physicians to supply inappropriate treatments by facilitating hospitals’ payments of kickbacks that would be illegal if they were made formally,” the authors wrote.

    Caroline Steinberg, the American Hospital Association’s vice president of trends analysis, told Kaiser Health News that the goal is not to boost prices. “Hospital are integrating with physicians because it is a necessary way to engage physicians in innovative payment methods such as bundling payments for one service such as hip replacements and ACOs,” she said.

    The study did not examine impact of hospital consolidation on the quality of care or patient health outcomes, which the authors say is “an important topic for future research.”


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    • GizelleHemsworth
      Vertical integration can reduce health spending and increase the quality of care by improving communication across care settings, but it can also increase providers’ market power and facilitate the payment of what are effectively kickbacks for inappropriate referrals. The impact of vertical integration on hospital prices, volumes (admissions), and spending for privately insured patients were investigated. The increase in contractual integration reduced the frequency of hospital admissions, but this effect was relatively small. Taken together, our results provide a mixed, although somewhat negative, picture of vertical integration from the perspective of the privately insured. -Gizelle Hemsworth
    • Anonymous
      Hospitals currently have the upper hand, as usual. But in the next couple of years, employer based insurance will be phased out, and there will be a massive shift to high deductible policies for everyone. The patients cannot afford to go to hospital based physicians or use their services which are much more expensive, and usually less competent than an independent lab or professional. MC is considering changing hospital billing for the owned professionals to MC part B which will drastically cut hospital income. MC finally figured out they were paying a lot more for a lot less. Under current law, many "experts" project the 40% of US hospitals will close over the next decade.
    • Ms. CChapman
      I think this is something that physicians have known for a long long time - but hospitals have better lobbyist power and a closer relationship w/payers. These 2 groups (hospitals and insurers) have a very codependent relationship. They hate each other but definitely support each other when it comes to sticking it to physicians.
    • Anonymous
      Just read these. http://www.denverpost.com/ci_23236112/facility-fees-inflate-hospital-pri... http://www.publicintegrity.org/2012/12/20/11978/hospital-facility-fees-b... http://www.ctmirror.org/story/2013/09/19/jepsen-takes-aim-health-care-fa... You see as the hospital monopolizes primary care they control the referral base. The next step is to only refer patients to other hospital owned office care facilities, labs , radiology and any ancillary service. A facility fee is captured on each referral massively increasing health care costs. There is no way to justify this increase on cost. There are easier and better ways to coordinate care. Pay the office doctor a separate coordination of care fee! Make it $20 and every one would follow up and document . We do it now for nothing. It is 70% more for an office vist and 100's of percenoren for any procedure done at a hospital owned office. It truly is bringing ER prices to office care. Further if u are a specialist and u don't sell your practice to the hospital system you are toast. The hospital system buys your feeding primary care and chokes you to death. This is being done to cardiologists in the Bronx NYC . Montefiore Hospital system is the system doing it. When the hospitals but a primary care practice , they give a nice 5 year contract. after 5 years the selling doctor is released and a new graduate is brought in at 150k per year. So ask yourself. Premiums have been going up. Your insurance payments have been going down. Where is the $ going? Hospitals and insurance companies! Care has become more expensive not less. The bottom line is there is no transparency in this practice. If patients knew upfront that they were paying significantly more for the same care they would seek a none hospital owned practice where there was no Facility Fee for care .
    • Anonymous
      And exactly who is surprised by this ???? Independent physicians need to band together and utilize the power of patient steerage to create market competition by providers of high cost services if we are ever going to solve the cost problem in health care and preserve the independent medical practice
    • Dr. Venkat Mohan
    • Dr. Venkat Mohan
      Hospitals have bought over all primary physician practices , charged facility fees and control all referrals : To state that care has improved is a boatload of BS . Docs employed are making so much money than before that they are not complaining . The private self employed docs like me think that things will improve : but it wont. Employed physicians have hit the lottery and the free standers like me will beat the dust. No body cares: what a mistake I made in my life. Never will i recommend private practice anymore. Unfortunately hospitals do not want to hire people like me who are 57years . They want me to disappear by attrition by choking me off. CMS will never change. Please shed a tear for me. Sincerely yours A starving specialist !
    • Anonymous
      Hospital Ownership Of Physician Practices is leading to higher prices in more than one. The fee for service reimbursement is sufficiently higher than a private physician practice due to the facility charge. For instance a private physician office get $68.97 payment for office visit 99213, while the same office visit 99213 at a hospital owed practice gets $124.40. Hopefully CMS will put a stop to this and the hospital's incentives to buy private practices won't be so appealing anymore.

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