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As hospitals buy physician practices, costs rise, Medicare report finds

The not-for-profit BayCare Health System, the area’s largest provider, dominates more than one-third of the Tampa Bay market and operates 10 hospitals, including St. Joseph’s. 

Melissa Lyttle | Times (2007)

The not-for-profit BayCare Health System, the area’s largest provider, dominates more than one-third of the Tampa Bay market and operates 10 hospitals, including St. Joseph’s. 

As they buy up physician practices, hospitals promise to streamline patient care and cut costs. But just the opposite is happening, warns a federal Medicare advisory panel.

The same services cost the government's Medicare program much more when performed on an outpatient basis at a hospital, rather than at a doctor's office.

A common type of echocardiogram can be done in a doctor's office for $188. But for the same procedure in a hospital setting, the total payment is $453, reported the Medicare Payment Advisory Commission.

A 15-minute evaluation visit nets $72.50 in a doctor's office — $58 paid by Medicare and a $14.50 patient co-pay. But as a hospital outpatient evaluation, that same visit is worth 70 percent more, or a total of $123.38.

Perhaps not surprisingly, the panel reported a 9 percent increase in the number of these evaluations performed through hospital visits between 2010 and 2011. And the rise in outpatient echocardiograms was even greater.

Leveling the playing field could save Medicare and patients $1.8 billion per year, according to the commission, a panel of independent experts that advises Congress on the government-run health care program for seniors and the disabled. Such differences "urgently need to be addressed," the group said.

In the Tampa Bay market and nationally, people with private insurance often end up paying more, too, for hospital-based care. Private insurers say they see examples of costs rising when hospitals buy out independent physicians or large doctors' groups consolidate.

"The theory was that if we all work together, and we put you under one roof, we will be able to do this more efficiently and pass the savings on to the consumer," said Travis Singleton, senior vice president at Merritt Hawkins, the nation's largest physician recruitment and consulting firm. "Unfortunately, we really haven't seen that."

Instead, the latest national survey by Merritt Hawkins found that primary care physicians, for the first time, are generating more revenue on average for hospitals than specialists are.

How much is the typical primary care doctor worth to a hospital? Considering lab orders, imaging tests and patient admissions, the average revenue generated last year by each doctor was a stunning $1.6 million.

Not only are tests and procedures more expensive, the report found, they are concentrated at the hospitals now paying the doctors. It's work that once was spread out among less expensive community centers.

"There is a massive financial incentive for hospitals to 'own' these physicians," Singleton said. "There always has been, but that's been a topic you're not supposed to talk about. You're supposed to talk about quality."

Quality has been the buzzword locally as BayCare Health System, the area's largest provider, has continued to grow. The not-for-profit system, dominating more than one-third of the Tampa Bay market, operates 10 hospitals, including the Morton Plant Mease facilities, St. Joseph's and St. Anthony's.

Two years ago, BayCare purchased Suncoast Medical Clinic, the largest multi-speciality doctors' group in south Pinellas County, building the group a $22 million home on the St. Anthony's Hospital campus in St. Petersburg.

Across the region, BayCare now employs about 350 doctors. It touts formal affiliations with an additional 800 who remain independently employed but have signed on to work with BayCare on creating new models of care.

It will take years to turn this growth into cost savings, acknowledged Glenn Waters, president of Morton Plant Mease Health Care. He is working on these issues across BayCare's properties.

In the meantime, he said, BayCare isn't taking advantage of the higher fee schedules available to hospitals. When it acquires a practice such as Suncoast Medical, it keeps in place the lower physician fees.

"We didn't think it was appropriate to take that same practice and, just because there was a change in ownership, have patients pay more out of their pockets," Waters said.

Last fall, however, BayCare was at the center of a rare public airing of health care costs when insurer UnitedHealthcare accused it of demanding excessive price hikes. Only after a highly public fight — and a nearly two-month contract break — did the two settle their differences.

Now, as the government is being urged to consider equalizing Medicare pay scales, private insurers also are trying to address the issue. Florida Blue, the state's largest insurer, uses contractual provisions to shield its 4.3 million health care members from the price hikes that can result from a change in ownership.

But it's not an easy fight.

"We get a lot of push-back," said Andy Marino, Florida Blue's vice president of network management. Popular care providers "have leverage. They have market power — and in the past, they have shown that they are willing to use it."

Prices tend to go up not only when hospitals buy physician practices, but also when competing doctors team up to form large practices, such as in cancer care, anesthesiology and emergency medicine.

Locally, Marino noted, the dominant obstetrics-gynecology practice, Women's Care Florida, commands prices for routine services that can be more than 10 percent higher than with independent providers. Leaders of that practice weren't available for comment.

Florida Blue sees some advantages to consolidation. Late last year, it purchased the Diagnostic Clinic, one of the largest physician practices in Pinellas. And the insurer points to BayCare as an example of a leader in creating financial incentives for practitioners to save money. That's the right approach, Marino said.

But he cautioned consumers not to be misled by the rosy promises of greater efficiencies heralded each time a hospital acquisition is announced.

There may be savings, but they generally aren't passed down to the consumer.

"I guess the hospitals are doing better," he said.

Letitia Stein can be reached at lstein@tampabay.com or (727) 893-8330.

As hospitals buy physician practices, costs rise, Medicare report finds 06/23/13 [Last modified: Monday, June 24, 2013 12:52am]

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