Thursday, September 10, 2015

What to expect from trend in hospitals' purchasing physician practices

Kaiser Health News posted an article "When The Hospital Is Boss, That's Where Doctors' Patients Go" and poses the question with competing answers:

Why did hospitals binge-buy doctor practices in recent years?

To improve care coordination, lower costs and upgrade patient experiences, say hospitals.

To raise costs, gain pricing power and steer patient referrals, say skeptics.

Researchers at Stanford University looked into this, using 2009 CMS data.  This summary of findings by KHN caught our eye (emphasis added) -

Ownership by a hospital “dramatically increases” odds that a doctor will admit patients there instead of another, nearby hospital, they found. Worse, from the viewpoint of reformers, it boosts chances that patients will go to higher-cost, lower-quality hospitals.

The findings were published in August by the National Bureau of Economic Research.

In terms of the trend in hospitals purchasing physician practices, the article puts it this way -

Doctors are the hospital’s sales force, although they don’t like to think of it that way. Without doctors there are no admissions and no revenue to pay hospitals’ huge fixed expenses.

So hospitals have long been interested in owning physician practices, including a spurt of acquisitions in the 1990s in which many lost money and a renewed boom in the last decade as the Affordable Care Act promised to squeeze costs.

We thought the increased admissions was interesting from a patient access perspective.  From a public policy perspective, consider this -

“If these results are valid, then there are large implications,” said Martin Gaynor, a health economist at Carnegie Mellon University who was not involved in the study. “Hospital acquisitions of physician practices could disadvantage rival hospitals and harm competition.”

It is important to note that the data used in the Stanford study is pre-Affordable Care Act, so new data based on a new healthcare regime may yield different results different interpretations -

The health law encourages doctor-hospital collaboration in groups called accountable care organizations that put participants on the hook for financial and quality results.

ACOs are supposed to reduce incentives for hospitals to gobble market share, raise prices and slight quality — the kind highlighted by the Stanford paper.

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