As health care companies expand, promised cost savings in doubt

A three-story building rises east of St. Anthony’s Hospital in St. Petersburg. Built by BayCare, the area’s biggest hospital group, the building will house the Suncoast Medical Clinic.
A three-story building rises east of St. Anthony’s Hospital in St. Petersburg. Built by BayCare, the area’s biggest hospital group, the building will house the Suncoast Medical Clinic.
Published Oct. 10, 2012

ST. PETERSBURG — On the edge of downtown, a three-story building is rising that symbolizes where health care is heading.

When the scaffolding comes down later this year, one of the area's biggest physician groups, Suncoast Medical Clinic, will move into a new home built by the area's biggest hospital group, BayCare.

The 50 or so doctors working at Suncoast are just a fraction of the 800-plus who have recently aligned with BayCare, which this year announced expansion plans with hospitals in Polk and Sarasota counties.

Bigger is thought to be better in these days of health care consolidations and partnerships. Size brings the bargaining power — and the range of patient services — needed to drive down costs and to better coordinate care, improving quality.

So goes the mantra uttered time and time again as hospitals and physician practices that once operated independently seek the protection of deep-pocketed partners.

But whether this trend will translate into lower costs — particularly for patients — is theoretical at best, experts say.

"Have you ever seen costs go down in health care? Anywhere? For anything?" said Glenn Melnick, a health economist at the nonpartisan RAND Corp.

The University of Southern California professor added, laughing, "Not that I'm cynical or anything."

• • •

The research is clear, experts say — hospital mergers and consolidations historically have led to higher prices, no matter the rosy promises to the contrary. There's little evidence that quality improves, either.

"It could be different this time," said Martin Gaynor, a professor of economics and health policy at Carnegie Mellon University. "But the past performance of the industry is not very reassuring."

Just because a hospital system drives down costs through size and scale — buying drugs in volume, for example, while spreading out administrative overhead — those savings may not be passed onto consumers, he said.

In reviewing research on the subject, Gaynor found that prices generally rise when hospitals consolidate. In markets left with little competition, the spike can be as high as 20 percent.

As they grow, hospital systems can increase their bargaining clout to command higher prices. And large systems can become "must-haves" for insurers, who need to include them in their networks to appeal to customers.

His report, published in June by the Robert Wood Johnson Foundation, flagged similar issues when physicians sell private practices to become employees of hospitals.

"What's good for a hospital," Gaynor noted, "is not necessarily what's good for a community."

Locally, insurance companies have seen examples of health care prices rising as physicians have merged practices, especially with the creation of large specialty groups, said Andy Marino, vice president of network management for insurer Florida Blue.

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The purchase of Tampa's University Community Hospital by the Florida Hospital/Adventist Health System also had an "adverse impact" on cost, he said.

"As a health care consumer, regardless of what I do for a living, it's frustrating," Marino said. "What do we get as consumers based on a big system getting bigger? Does my quality get better? Does my cost get lower? Do I get a better patient experience?"

"In the short run," he noted, "The answer to all of these is no."

Despite the lessons of history, Marino, and others in health care, remain hopeful that this time will be different. One reason: changes in how health care providers are paid.

This month, for example, the government began penalizing hospitals that readmitted too many Medicare patients for reasons that could have been prevented. This has been a wake-up call to an industry that has long profited from doing more treatments and procedures, regardless of how patients fared.

"We're desperate in health care to find some way to provide better value," said Paul Ginsburg, president of the nonpartisan Center for Studying Health System Change. He is optimistic that new payment models will lead to cost savings.

"(But) I'm skeptical about mergers as the way to prepare for that," he added. "I think that a lot of mergers are pursued to increase leverage with health plans — and no one is going to say that in public."

• • •

Another new factor is the Affordable Care Act, which encourages close relationships between doctors and hospitals to keep patients well, rather than waiting for them to get sick.

Republican presidential candidate Mitt Romney has vowed to repeal the act if he is elected. But no matter the outcome Nov. 6, change is considered inevitable in a health care system in danger of sinking under the weight of escalating costs.

That's the view at BayCare, which dominates more than one-third of the region's health care market. The not-for-profit owner of St. Joseph's Hospital in Tampa, St. Anthony's in St. Petersburg and the Morton Plant Mease system in north Pinellas County, is becoming bigger still.

In addition to its recent hospital expansion, BayCare is creating a network of doctors, now around 800 and growing, include the doctors of Suncoast moving to the new building next to St. Anthony's.

How could that mean better care? One example, BayCare officials say, is in diabetes care. Using electronic medical records, it's easier to help busy doctors figure out if a patient with high blood sugar levels has been missing appointments — before he ends up in a diabetic crisis and must be taken to the hospital.

"What we're essentially doing is moving our front door from the hospital to the physician's office," BayCare president and CEO Steve Mason said. The hope is that with early intervention, both patient health and the bottom line can be better served by avoiding costly, inefficient emergency room care.

BayCare is using data it is gathering to assess leading causes of avoidable emergency room visits. Headaches, back pain and urinary tract infections top its internal list of ailments landing patients in the ER. Doctors who have weekend hours are doing better at keeping their patients out of the ER for such ailments.

Insurers are watching BayCare with interest. "If they are buying up practices to protect turf, that's bad," Florida Blue's Marino said. "If they are doing it to become clinically integrated to drive out the inefficiencies, that's good.

"We believe BayCare is doing it for the right reasons," he added.

The next step, Mason said, is getting more doctors to add Saturday hours. What's the incentive? Under BayCare's plan, cost savings realized by avoiding unnecessary hospitalizations and other wasteful practices would be spread among participating physicians.

That could start happening as soon as next year, when BayCare expects to have contracts signed with major insurers to test out its new network of affiliated physicians.

Mason is not concerned about hurting BayCare's bottom line.

"As it evolves, I frankly think that our organization will be just as successful in the future as it is today," he said.

"But it's going to look a whole lot different."

Times researcher Carolyn Edds contributed to this report. Letitia Stein can be reached at or (727) 893-8330.