Medicare report a fresh threat to local hospital finances

June 17, 2013
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In these first few weeks of The Dose, I’ve been harping on hospital prices. Apparently, I’m not the only one.

The Medicare Payment Advisory Commission on Friday issued a report that recommends reducing payments to hospital-employed physicians and other clinicians who bill for their services as if they were working in a hospital outpatient department—even when they actually work in a doctor’s office nowhere near a hospital.

The commission, known as MedPAC, submits its reports to Congress, which usually adopts its recommendations. If that happens in this case, it would likely bring to an end one of the ways hospitals have maintained healthy revenue from their recent spree of physician acquisitions—and paid some of those doctors quite handsomely.

“In many cases, a physician’s practice that is purchased by a hospital stays in the same location and treats the same patients," states the MedPAC report, which you can read here. The result, however, is that "Medicare and beneficiaries pay more for the same services.

"The growth in hospital employment of physicians and the associated increase in payment rates also affect private plans and their enrollees," the report added.

I’ve written about this issue several times before: here, here and here.

My most recent story on the topic focused on a couple, Brian and Emily Kahn, who each received physical therapy for similar pain in their feet.

Emily Kahn received therapy at Methodist Sports Medicine, an independent physician pracirce that, in spite of its name, is not owned by Indiana University Health or its Methodist Hospital.

Brian Kahn went to a physical therapy practice owned by the St. Vincent Health hospital system, which was in a common medical office building several miles from the nearest St. Vincent hospital.

Brian Kahn ended up being billed twice as much per visit as his wife did—$182 vs. $91.

Hospitals are hardly forthcoming about this practice. The physical therapy practice Brian Kahn visited posted a sign that said it billed as a “hospital facility,” but offered no further explanation as to what that meant in practice.

MedPAC thinks the Medicare program should pay health care providers the same amount for the same or similar services, regardless of the setting. And the Obama administration agrees, according to the New York Times.

Hospitals, however, say such a policy would take away a financial support for the other important things they do, such as operate emergency rooms and keep medical staff available 24-7.

“Medicare already underpays hospitals for caring for patients in an outpatient setting, and the commission’s proposals would worsen that,” Joanna Kim, a vice president of the American Hospital Association, told the New York Times. “Hospitals might be forced to curtail services, threatening access for the poor and patients with multiple chronic conditions.”

If Medicare accepts the MedPAC recommendation, private health insurers such as Indianapolis-based WellPoint Inc. will likely follow suit.

What do you think? Do you think health plans should equalize payments regardless of who owns the facility where a patient is treated?

  • Gamers
    Non-profits that magically make many millions in profits have obviously figured this out. It's hard to buy the hard luck stories about not being able to provide "charity" services or other civic minded projects, when they have virtually bought up all the private physician groups and community hospitals in the state.Buying the Hospitals gives a dependable funnel of referrals to high margin specialists and procedures at the main hospitals, which have invested heavily in heart hospitals and cancer centers. Buying the doctors allows them to charge hospital prices (usually twice the rate) for office procedures, like imaging services. As we approach the implementation of the ACA and Medicare pricing as the baseline, the CEO's are finally committing to belt-tightening, which has been sapping the system for years. And lest we feel too sorry for the hospitals that provide the "charity", provisions of the ACA requiring insurance coverage will ensure all those procedures are paid.
  • Equalize
    Sure, if it is truly the same service, the fee should be the same. It shouldn't matter where the service is provided. As someone who just maxed out their deductable and out-of-pocket max for the year, it is ridiculous what some doctors and facilities charge and I am shocked that BC/BS pays it.
  • misguided
    While I understand that it seems wrong for hospitals to bill more than outpatient centers for the same service, please tell me then how hospitals will generate enough revenue to take care of the middle-of-the-night, uninsured person who needs urgent/emergent care. The patient will clearly not pay any of their bill hence the hospital/doctors/community at large will eat the cost. Not every hospital is a "fat cat" and rolling in the dough like some of you think. There are plenty of unassuming, smaller, community-hospitals that are barely holding their heads above water. Please tell me how they should survive and compete against the cherry-picking facilities that only care for insured patients Mon-Fri, 8A-5P?
    • doggy
      Many of the small community hospitals are now owned by the "cash-strapped" Indy biggies, with more coming. The doctor-practise buying has been done precisely to sidestep tiered payments for out-of-hospital procedures. These are no better done, or safer, because someone administers a pain shot or snaps an x-ray in a doctor's office. And the non-payment issue is resolved next year when we all have insurance, even though many still think paying private insurers an extra 10-20% is what makes our system "world-class".
    • windfall
      These higher rates Co. e about only because physicians are now hospital employees. otherwise physicians couldn't charge these rates and share the windfall with the hospital. Community/rural hospitals probably not buying physicians practices and thus weren't getting the windfall anyway.
    • Hospital Charge Mess
      A few years ago before St Vs bought the CV Center, the physician owned center was reportedly getting $500/Cath, and StVs in house was getting $3000/Cath across the parking lot. When StVs bought the center, caths were reportedly $3000 at both locations. The entire US hospital reimbursement needs redone. The soothing of costs together for charges would be fraudulent for most other provider suppliers. A true cost based system for goods/supplies + a treatment/facility fee, like all other providers is BADLY needed for hospitals. The current system is an affront to everyone paying for health services. The income-outgo lines will cross by 2014 at the latest for nearly every system in the US market. Panic is starting to set in. And at its root is the fact that hospitals have no idea what it costs them to do anything, much less know what works at the best cost. Topol is right- this system needs blown up.

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