Medicare report a fresh threat to local hospital finances

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?