Say it together one more time–provider consolidation is really bad for the health system!! A new presentation at the latest meeting of the Medicare Payment Advisory Commission gives more data on the effect of such consolidation on Medicare and on Medicare beneficiaries. (MedPAC Presentation) The data presented on consolidation is pretty well known, 57% of hospital markets are super-concentrated in 2017 as opposed to 47% in 2003 and there is almost no entry by new competitors into these markets. From a Medicare perspective, because CMS basically sets inpatient rates, there is not an effect of lack of competition on those rates, although there may be more political pressure from larger hospital systems. Commercial health plans, on the other hand, have definitely seen much higher prices due to hospital consolidation. And while larger organizations theoretically could lower their own costs of providing a service, it does not appear that greater scale has in fact led to lower inpatient costs for the super-concentrated systems. In fact the super-concentrated systems reported costs per discharge of $12,457 in 2017 versus $12,058 for less concentrated markets. So much for scale creating cost-efficiency. But on the outpatient side, right now CMS does pay more for physician services in an outpatient department versus an independent office. So as consolidation has become vertical as well as horizontal, more services are being billed as higher-cost hospital outpatient ones. The percentage of physicians employed by hospitals has increased from 26% in 2012 to 44% in 2018. As with inpatient services this causes higher prices for commercial health plans but the main impact for Medicare is the site of service payment differentials. For chemotherapy administration for example, service volume declined 16.6% in physician offices but increased 52.9% in hospital outpatient departments. Even for office visits, there was a 2% decline in physician offices but a 37% rise in the hospital setting. Physicians employed or owned by hospitals also have higher rates of referrals to other hospital-owned facilities and services, like home health. This can inconvenience patients. And as the MedPAC presentation notes, there is no evidence for better quality at hospital-owned physician practices. Finally, the higher prices for services in hospital outpatient departments results in higher cost-sharing for beneficiaries. The presentation makes a further case for site neutrality in payment policies and for reversing consolidation.
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About this Blog
The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at [email protected].
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