Costs soar when doctors work for hospitals

April 22, 2013 

Dr. Kevin Kavanagh of Somerset is chairman of Health Watch USA.

  • At issue: March 22 Herald-Leader article, "Study: Hospital-owned physician groups losing money."

There is no doubt that drastic changes are needed in our health-care system. The United States has the most expensive health care in the world, spending over 50 percent more per capita than the next highest industrialized country.

The quality of our system is mediocre at best, with below average life expectancy and above average infant and maternal mortality, compared to Western Europe.

U.S. health-care costs are an unrelenting albatross, projected to account for 20 percent of gross domestic product by 2021, adversely affecting our nation's competitiveness.

The issue of facility fees involves cost shifting, increasing costs and the driver of physician hospital employment. Medicare pays facility fees to hospitals for outpatient services.

Doctors are flocking to hospital employment, and it's projected that within two years 75 percent of newly-hired doctors will be hospital employees. With a rural doctor's office classified as a satellite hospital facility, patients encounter two bills: one for the doctor visit, the other for using the hospital's facility.

According to a 2012 MedPAC Advisory Report, including hospital facility fees increases reimbursement for a 15-minute office visit by 80 percent. MedPAC has recommended equalizing payments for office visits in hospital outpatient departments and independent doctor offices.

The same is true for surgical services. Hospital employment of surgeons grew 32 percent from 2006 to 2011.

Hospital-employed surgeons are switching cases from independent surgery centers to their employer's outpatient surgery departments, where Medicare reimbursements almost double. This discrepancy continues to widen as hospital outpatient surgery departments received a 2013 pay increase of 1.9 percent, compared to 0.6 percent for free-standing surgery centers.

As more physicians become employees of hospitals, more hospital outpatient services will be provided, which produces an ever increasing cash trove for facilities, while increasing costs for patients and draining Medicare's financial reserves.

Even patients with private insurance are not immune.

For example, a member of Health Watch USA was charged, after insurance discounts, over $2,300 for a steroid injection of her hip under fluoroscopy.

The patient thought she was seen by an independent doctor, but was billed $1,382 for an operating room and $481 for X-Ray services. After the insurance paid, the patient still owed over $900. A similar procedure in a free-standing physician's office using ultrasound would cost under $400.

Ironically, one of the reasons given to justify physician employment and mergers is to create a more efficient system and save costs, but at the same time the health-care industry wants to keep the ever-growing facility fee financial windfall that this integration creates.

The unrelenting rising cost of health care is due to a multitude of factors, including overuse of tests, medications and procedures; billion-dollar expansions; and the increasing non-profit administrative salaries, now approaching seven figures.

In such an environment, it is not realistic to expect money saved or given will necessarily go toward improving health care quality.

In October 2011, a letter from Sen. Bernard Sanders, I-Vermont, to the American Hospital Association described AHA's plans at that time to promote increasing Medicare's eligibility age from 65 to 67, and the beneficiary's cost sharing requirements from 25 percent to 35 percent.

It is unconscionable that anyone would hold senior citizens and the disabled accountable for a system of runaway costs and below-average quality. Cutting facility fees should be a first step, and may send a message to the health-care industry that it needs to conduct business differently and realign its principles.


At issue: March 22 Herald-Leader article, "Study: Hospital-owned physician groups losing money."

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