BROWN: The real reason hospitals are buying doctor offices

mike brownThrough my 30 years in health care as a consultant and economist, I have never witnessed such an exodus of physicians from health care. Every hospital is in doctor buyout mode. Are hospitals buying up practices in a divide-and-conquer strategy of segmenting the market or reducing the quality of doctors in the market, therefore reducing competition? Or are they simply buying up practices to secure the market?

I offer that they are segmenting the market, therefore reducing the number of physicians. Hospitals will control the market with fewer physicians and less competition.

They are clearly affecting the strategy from three critical perspectives:

• Fewer physicians. Have you not seen more physicians retiring and fewer replacement physicians coming into the market? Have you tried to call your primary care physician lately and found his or her practice is now owned by the hospital? That the doctor is not taking new patients and operating hours have been shortened and their fees increased? I have.

Look at the medical-school graduation rate. Call the medical societies and ask about new doctors. Go into a medical building and look at the vacancies.

• Less competition. By having fewer physicians, the doctors gain control. They can do what they want when they want—shorter hours, be on staff at fewer hospitals, and offer fewer services. They control with less competition and fewer physicians.

• Higher pricing. Pricing is going up. And it always seems like it’s more tests, and more quantity and less quality.

We consumers are paying higher deductibles, higher co-shares per procedure and generally higher (7 percent to 10 percent) prices on elective procedures. Doctors are trying to make up the loss in Medicare reimbursement by charging more to all other lines of insurance. You will pay more.

This movement of hospitals buying out physician practices has been the most newsworthy topic of 2011. We have always assumed it was a buyout by the hospital to offer more services, more options, therefore less price. That assumption is wrong.

Is this all problematic? Of course not. In some regards, it could actually be controlling health care costs and competition.

But I want to see not only a control of the selectivity of our physicians, but also a lowering of cost through negotiations and competition.

The key to offset this movement has been to control our destiny in terms of health care cost. Good businesspeople will:

• Find and keep a primary care physician. Call the medical society for a referral, look for offices that are opening a new practice, or ask your neighbor, partner or business colleague for a referral.

• Ask about competition when you’re with your primary care doctor. Who are the well-known, respected primary care physicians and specialists in the market? Who are the doctors who accept insurance, get results and compete with fees? If you are uncomfortable asking the doctor, ask his or her staff. The nurse always knows everything.

• Negotiate your fees, ask about any extra tests, and focus on your existing problems and not on multiple situations, which stimulate multiple bills. Take control of your own health care process and cost.

Why do businesspeople all assume that every year the commodity called health care goes up in price? You negotiate all other lines of business—why not your health care?•


Brown is president of Health Care Economics, a consulting firm advising physician practices on financial issues. Views expressed here are the writer’s.

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