Today’s Managing Health Care Cost Number is 67%
Hidden away in the budget bill passed and signed into law by President Obama last week is a provision eliminating the additional fees paid to hospitals which acquire private physician practices. The bill only eliminates this incremental payment prospectively, so hospitals that purchased physician practices in the past can continue to garner the higher fees. The example above is from a MedPAC analysis in 2014 – on the average, the conversion factor for the outpatient prospective payment fee schedule is 67% higher than the resource based value scale paid for ambulatory services delivered outside of hospitals.
Patients are often shocked by the costs of seeing physicians just after their offices have been acquired by hospitals. Here’s a report of a patient shocked by a $1525 facility fee charge associated with removal of a minor skin lesion what looked to him like a simple outpatient dermatology office. Elizabeth Rosenthal of the New York Times has written about surprise facility fees to see a psychologist. Of course this billing is mostly invisible to patients as it’s folded into what the insurance company pays, most often on behalf of employers.
There are certainly reasons why it’s more expensive to deliver care in a hospital – and even why it’s more expensive to deliver care inside a doctor’s office owned by a hospital. Hospitals tend to spend more money on their real estate, and they offer better compensation and benefits to their staff than private offices. But this is not a reason to pay hospitals more – it’s a reason to dissuade them from acquiring physician practices, or to encourage them to be thrifty in their operations.
Elimination of this incremental payment is good for at least four reasons.
· Medicare's costs will go down
· Patients will face fewer unexpected facility charges
· Physicians will have less reason to sell their practices to hospitals, since hospitals cannot offer as large a bounty for private practices if they can’t jack up the prices
· Commercial payers will likely follow Medicare's lead
The incremental ambulatory office visit fee offered to hospital-owned practices has been inflationary and has led to provider consolidation. I won’t mourn its passing.
h/t to Nathan Punwani for bringing this to my attention.
