Is There Value in Hospital-Physician Integration?

Published Online: September 06, 2013
Katie Sullivan
Physician Carolyn Fields ran her independent practice in Greenville, South Carolina, for years before recently joining the Bon Secours St. Francis Health System. In Billings, Montana, oncologist Dr Patrick Cobb sold his 30-year group practice to the St. Vincent Healthcare hospital last December. Dr Dwayne Smith, a bariatric surgeon, shifted his practice to a hospital in Cincinnati, Ohio, almost 2 years ago.

These practitioners’ stories are not too uncommon. Hospitals and healthcare systems nationwide are increasingly buying more physician practices as health reform requires care delivery to move toward a more quality-based care model instead of a fee-for-service one. The reactions are mixed.

“I didn’t want to be bought. I wanted my independence,” Dr Fields said in a recent article. “But it’s becoming more and more difficult. And I got tired of all that.”

As reform initiatives drive up costs to operate private practices, many physicians are choosing to work for larger hospital care networks. The mandate to switch to electronic health records, for instance, could cost practitioners a 1% reduction in Medicare payments if they do not implement EHR use by 2015.

“This would have been a very difficult investment for us,” said Dr Smith about his private practice.

MedPAC, a federal advisory committee for Medicare issues, said the merging of physician practices to hospital networks could raise healthcare costs because physicians can bill for higher outpatient rates instead of traditional physician visit costs. In fact, MedPAC’s 2013 Report to Congress on Medicare Payment Policy found that Medicare payment rates for office visits were 80% higher when billed as outpatient services, even after adjusting for differences in packaging.

“The acquisition of physicians in principle would make it easier to integrate those physicians to coordinate care for the patients, and that should have positive impacts on quality. But there’s no guarantee that happens,” said Alwyn Cassil from the Center for Studying Health System Change. “The flip side is that it’s a consolidation of providers, and when you join hospitals and doctors together, you create even more negotiating levers to exert over payers and purchasers ... it gives you a lot of negotiation clout to get higher payment rates.”

Some say reform should look to capping rates for certain populations like Medicare beneficiaries in order to negate higher rates. Nonetheless, as hospitals hire more physicians and can offer a greater range of services, it will result in a more efficient and less costly care model.

Dr Angelo Sinopoli, vice president of clinical integration and chief medical officer at Greenville Health System, comments, “The continued rise in healthcare costs is a bigger and bigger line item for employers and government. Things are different now than in the past. The economic pressure to do this is greater than it’s ever been."

Around the Web

Cost Impact of Hospitals Buying Practices Yet to be Felt [Greenville Online]

Doctors Bail Out on Their Practices [CNN Money]

Hospitals Buying More Doctors' Practices [USA TODAY]