Mounir J. Haurani, MD

YES

The recent 2-year bipartisan budget deal signed by President Obama and sent up by Congress brought the hammer down on hospitals so quickly that they did not see it coming. It is highly unusual for Congress to keep anything secreted from the American Hospital Association (AHA) lobby. The AHA spent $4.6 million in the first quarter of 2015 for an annual estimated expenditure of about $18 million. This does not include dollars spent by local and state hospital associations. The SVS is clearly dwarfed by these powerful interests. Our society spent less than $100,000 in that same quarter on advocating for over 4,000 members, the majority of whom are United States residents and most of whom depend solely on the SVS to look out for them.

As a result of the budget deal, Medicare will not pay most hospital-owned physician practices higher rates than those of independently owned practices. The reimbursement changes will apply to those hospital-owned physician practices acquired or opened since the date the law was signed and also located farther than 250 yards from a hospital’s main campus. It does grandfather in facilities prior to the signing that were being reimbursed with hospital outpatient department (HOPD) rates. The savings will prevent an increase in premiums for about 15 million Medicare beneficiaries. The AHA expressed its outrage while the AARP celebrated. So did independent physicians who have been protesting all along that costs were rising because of excessive payments to hospitals for essentially the same services.

Margot Sanger-Katz, in a column for “The Upshot” in the New York Times, wrote that it had been estimated that correcting this payment differential would save Medicare $30 billion over 10 years, more than Medicare could save if it raised the Medicare eligibility age to 67!¹ She also pointed out that the Medicare Payment Advisory Committee (MedPAC), an independent group that advises Congress, thinks “that the pay differences should be narrowed, but only for a select set of medical services in which it’s really clear that there’s no difference between the care offered by a hospital and a physician office.”

The rush to buy physician practices is being done for many reasons but the disparate payment schedule favoring hospital-owned practices for many of the same services is one reason. The hospital brings in a lot more revenue through its hired physicians providing the same service in their offices that are now under the banner of the health system. The hospitals cite several justifications for the “surcharge” on care provided by employed physicians in hospital facilities, some of which may be valid. Regulatory requirements, sicker inpatients, increased cost due to training programs, and being required to support money-losing services such as burn care are some reasons. But, independent physicians say they provide the same or better quality care at a lower cost without resources such as legal, accounting, self-insurance against professional liability, and robust lobbying firms.

Hospitals have also contended that vertical integration by buying physician practices should lead to lower health care costs by squeezing efficiencies within the system. There have been conflicting reports on whether physician hospital integration leads to lower health care expenditures.² The public debate has caught the attention of government regulators. In the recent case of Saint Lukes-Saltzer, the question before the Federal Trade Commission (the agency responsible for federal antitrust action) was: Did total medical expenditures increase or decrease for patients cared for by physician practices acquired by St. Luke’s? Indeed, the conclusions were that not only did overall costs not go down but evidence showed that the merger may have resulted in increased costs.

On appeal, the Ninth Circuit Court ruled that any future efficiency must be “substantial, verifiable and specific” to the merger. Ciliberto and Dranove looked at hospital prices after physician hospital affiliations in California and found no evidence of increase in prices.³ Baker and coauthors analyzed privately insured patients between 2001 and 2007 and the effect of physician hospital integration on hospital prices, admission volumes, and spending.⁴ They reported higher hospital prices and spending in hospitals with the tightest vertically integrated relationship with physicians. In one of the few studies of the issue, Capps and colleagues reviewed 7 years of administrative data from multiple insurers across the United States to estimate postintegration costs. From 2007 to 2013, they found that there was a 57% increase in the share of spending by physicians whose practices are owned by hospitals. In addition, this led to an increase in physician prices of 14% post integration.⁵ The larger the market share of inpatients by a hospital the larger the price increase. The authors estimate that about 25% of the price increases are precisely due to “exploitation of reimbursement rules” by charging the facility fees for their employed physicians. If these “surcharges” led to decreased utilization as one measure of increased efficiency and therefore reduced overall health care costs, it would be acceptable. But, Capps et al. found no such evidence and speculate that this scenario could lead to higher expenditures.

In a recent study, total expenditures for over 4 million patients by private physician groups or integrated groups covered by health maintenance organizations (HMOs) in California between 2009 and 2012 were analyzed.⁶ Mean annual expenditures were highest for large multihospital systems followed by hospital-owned physician groups and, lastly, physician-owned groups. The expenditures for multihospital systems were 19.8% higher and for local hospital-employed physician groups 10% higher compared to physician-owned organizations.

Why should prices increase after tighter physician hospital integration on a large scale? Market power. Once health systems have a large enough number of physicians in their panel, hospitals could charge insurers higher prices to access their specialists. Similarly, by employing a large number of physicians in a particular specialty, which then attracts a large pool of patients with a particular illness, they could dominate the other health systems in the region. One action specifically forbidden by anti-kickback laws is compensating physicians based on the number of referrals they make to the hospital. But, there are enough loopholes that allow hospitals to indirectly tie compensation to “productivity.” This may change with bundled payments or compensation tied to “value,” although there will always be incentives for work volume to some degree.

A further roadblock for basing merger decisions entirely on possible efficiencies is how the courts will see these activities in terms of antitrust actions. Most arguments using efficiency as the basis for merging physician groups with hospitals are vague and in general courts have not superseded antitrust actions with economic efficiency arguments.

What should be genuine reasons for hospitals employing and aligning with physicians? Addressing uneven quality of care, access and, of course, ever spiraling costs. If the object was to share responsibility for attacking these problems, health care systems and physicians would be cut a lot of slack. But, some health care systems want to not only survive the existing chaos but also dominate their local market.

I guess health care is really no different from Wall Street corporations in its focus on short-term gains versus long-term benefits. Until broader incentives change, health systems will continue to look to survive and gain market share and power. Competition, in isolation, drives tactics where the only objective may be to increase market share. However, it appears that the FTC will be busy wielding the Sherman Act of the antitrust law to keep a check on health systems to ensure consumers, payers, physicians, and the country at large are all on a fair playing field.⁷

Dr. Satiani is professor of clinical surgery, division of vascular diseases & surgery, department of surgery, associate director, FAME; director, Faculty Leadership Institute, and medical director, Vascular Labs, at Ohio State University College of Medicine, Columbus. He is also an associate medical editor for Vascular Specialist.

References

1.www.nytimes.com/2015/02/07/upshot/medicare-proposal-would-even-out-doctors-pay.html?_r=1&abt=0002&abg=1.

2. Journal of Health Economics 2006; 25: 1-28.

3. Journal of Health Economics 2006; 25: 29-38.

4. Health Affairs 2014; 33(5): 756-63.

5. www.ipr.northwestern.edu/publications/docs/workingpapers/2015/IPR-WP-15-02.pdf

6. JAMA. 2014; 312(16):1663-9.

7. Plastic & Reconstructive Surgery. 2006; 117(3): 1012-22.

NO

The days of hanging one’s shingle on a door and starting a self-employed practice are rapidly fading. While some fondly remember the practice of medicine as it was in Norman Rockwell’s classic “Before the Shot,” the realities of a current practice couldn’t be more different. Reusable syringes, analog weighing stations, an unaccompanied minor, and lack of regard for universal precautions are just a few examples from that painting that have long since disappeared. However, the humor in this painting comes from the young boy scrutinizing the doctor’s credentials, implying a sense of distrust and fear as he stands there with his buttocks partially exposed waiting for the vaccination.

This scrutiny of physician performance and results is more relevant today than ever before. Perhaps if we were to update the painting today, it would depict the boy furiously tapping away at his tablet searching through ProPublica to see what the doctor’s complication rate with the intended procedure truly is.

This is just one of the many pressures physicians are facing today. Navigating the publicly reported complication data is but one tiny portion of the regulatory red tape physicians face in taking care of their patients. If you add in the need to negotiate and contact with insurers, manage an office staff, acquire and maintain an electronic medical record (EMR) while ensuring that your EMR is properly secured against potential cyber threats and compliant with meaningful use regulations, audit your billing and coding, keep up to date with upcoming changes to bundled payments, mail out and track Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), as well as an endless list of other requirements, it is no wonder physicians are less willing to take these challenges on as solo practitioners. In fact, based on Medscape’s 2014 Employed Doctors Report, which compiled responses from over 4,600 physicians, the top three reasons for being an employed physician were not having to deal with the business of running an office (58%), not having to deal with insurers and billing (45%), and guaranteed income/even cash flow (42%).¹

Multiple sources continue to confirm the trend that more physicians are moving to an employed practice.^2-4 In the last decade, the rate of hospital employment has increased from 11% to 64%.¹ There are many factors that have pushed physicians away from self-employment. Some of these are related to physicians’ personal choices, and many are from external pressures. As various parts of the Affordable Care Act come into play, there will continue to be increasing regulatory demands. These have the potential of increasing overhead costs, and, coupled with decreasing reimbursement, will inevitably make staying profitable more challenging in a self-employed model.

There are two other very telling trends that foretell the inevitable decline of self-employed physicians. Fewer and fewer new graduates are reporting that they are self employed. In the most recent surveys, twice as many physicians under the age of 40 are employed than self-employed.¹ Furthermore, 92% of residents surveyed in their final year would prefer employment with a salary, and only 2% would consider solo practice.⁵ Of these graduating residents, 36% specifically were considering hospital employment, which is nearly a 10-fold increase from a decade ago. The second factor affecting new hires is their confidence that they have the necessary skills to manage a self-employed model. During the same decade, there was only a small increase in graduating residents who felt very prepared to deal with the business side of medicine (10% vs. 2%).⁵ This lack of knowledge will undoubtedly make it difficult for those who would consider self-employment to feel comfortable in that practice model. Some have speculated that there is soon to be a “push back” from the physicians and specifically from specialists who don’t have as much to gain in large group practices. With so few graduates considering solo and small group practice, and the overwhelming majority not feeling very prepared to manage the business of medicine, who can help lead this trend reversal?

Not only are fewer new graduates choosing self-employment, but fewer opportunities for self-employment are available as more physician groups are being bought by hospitals or other large group practices. Specifically with vascular surgery, there is a significant overhead cost requirement. Advantages to joining a large group practice include better ability to negotiate cost savings with the frequent capital requirements for new equipment, updates and maintenance of the electronic records, and professional liability. In fact, one study in California shows that as the proportion of physicians employed by the health system increased, supply chain expenses and inventory costs improved.⁶ Furthermore, hospitals have administrators who are hired to negotiate with insurers regarding reimbursement and respond to audits and other regulatory changes. As mentioned above, the top two reasons for avoiding self-employment are precisely these. This will no doubt draw even more physicians and specifically vascular surgeons into employed models.

Dr. Haurani is assistant professor of surgery in the division of vascular diseases and surgery, Ohio State University Medical Center, Columbus.

References

1. www.medscape.com/features/slideshow/public/employed-doctors#1

2. JAMA Surg. 2013;148:323-8.

3.Perspect Vasc Surg Endovasc Ther. 2013;25:46-52.

4 Tenn Med. 2012;105:38-39.

5.www.merritthawkins.com/uploadedFiles/MerrittHawkings/Surveys/2014_MerrittHawkins_FYMR_Survey.pdf.

6. Health Care Manage Rev. 2015 Jul 23. [Epub ahead of print] www.ncbi.nlm.nih.gov/pubmed/26207654

YES

The recent 2-year bipartisan budget deal signed by President Obama and sent up by Congress brought the hammer down on hospitals so quickly that they did not see it coming. It is highly unusual for Congress to keep anything secreted from the American Hospital Association (AHA) lobby. The AHA spent $4.6 million in the first quarter of 2015 for an annual estimated expenditure of about $18 million. This does not include dollars spent by local and state hospital associations. The SVS is clearly dwarfed by these powerful interests. Our society spent less than $100,000 in that same quarter on advocating for over 4,000 members, the majority of whom are United States residents and most of whom depend solely on the SVS to look out for them.

As a result of the budget deal, Medicare will not pay most hospital-owned physician practices higher rates than those of independently owned practices. The reimbursement changes will apply to those hospital-owned physician practices acquired or opened since the date the law was signed and also located farther than 250 yards from a hospital’s main campus. It does grandfather in facilities prior to the signing that were being reimbursed with hospital outpatient department (HOPD) rates. The savings will prevent an increase in premiums for about 15 million Medicare beneficiaries. The AHA expressed its outrage while the AARP celebrated. So did independent physicians who have been protesting all along that costs were rising because of excessive payments to hospitals for essentially the same services.

Margot Sanger-Katz, in a column for “The Upshot” in the New York Times, wrote that it had been estimated that correcting this payment differential would save Medicare $30 billion over 10 years, more than Medicare could save if it raised the Medicare eligibility age to 67!¹ She also pointed out that the Medicare Payment Advisory Committee (MedPAC), an independent group that advises Congress, thinks “that the pay differences should be narrowed, but only for a select set of medical services in which it’s really clear that there’s no difference between the care offered by a hospital and a physician office.”

The rush to buy physician practices is being done for many reasons but the disparate payment schedule favoring hospital-owned practices for many of the same services is one reason. The hospital brings in a lot more revenue through its hired physicians providing the same service in their offices that are now under the banner of the health system. The hospitals cite several justifications for the “surcharge” on care provided by employed physicians in hospital facilities, some of which may be valid. Regulatory requirements, sicker inpatients, increased cost due to training programs, and being required to support money-losing services such as burn care are some reasons. But, independent physicians say they provide the same or better quality care at a lower cost without resources such as legal, accounting, self-insurance against professional liability, and robust lobbying firms.

Hospitals have also contended that vertical integration by buying physician practices should lead to lower health care costs by squeezing efficiencies within the system. There have been conflicting reports on whether physician hospital integration leads to lower health care expenditures.² The public debate has caught the attention of government regulators. In the recent case of Saint Lukes-Saltzer, the question before the Federal Trade Commission (the agency responsible for federal antitrust action) was: Did total medical expenditures increase or decrease for patients cared for by physician practices acquired by St. Luke’s? Indeed, the conclusions were that not only did overall costs not go down but evidence showed that the merger may have resulted in increased costs.

On appeal, the Ninth Circuit Court ruled that any future efficiency must be “substantial, verifiable and specific” to the merger. Ciliberto and Dranove looked at hospital prices after physician hospital affiliations in California and found no evidence of increase in prices.³ Baker and coauthors analyzed privately insured patients between 2001 and 2007 and the effect of physician hospital integration on hospital prices, admission volumes, and spending.⁴ They reported higher hospital prices and spending in hospitals with the tightest vertically integrated relationship with physicians. In one of the few studies of the issue, Capps and colleagues reviewed 7 years of administrative data from multiple insurers across the United States to estimate postintegration costs. From 2007 to 2013, they found that there was a 57% increase in the share of spending by physicians whose practices are owned by hospitals. In addition, this led to an increase in physician prices of 14% post integration.⁵ The larger the market share of inpatients by a hospital the larger the price increase. The authors estimate that about 25% of the price increases are precisely due to “exploitation of reimbursement rules” by charging the facility fees for their employed physicians. If these “surcharges” led to decreased utilization as one measure of increased efficiency and therefore reduced overall health care costs, it would be acceptable. But, Capps et al. found no such evidence and speculate that this scenario could lead to higher expenditures.

In a recent study, total expenditures for over 4 million patients by private physician groups or integrated groups covered by health maintenance organizations (HMOs) in California between 2009 and 2012 were analyzed.⁶ Mean annual expenditures were highest for large multihospital systems followed by hospital-owned physician groups and, lastly, physician-owned groups. The expenditures for multihospital systems were 19.8% higher and for local hospital-employed physician groups 10% higher compared to physician-owned organizations.

Why should prices increase after tighter physician hospital integration on a large scale? Market power. Once health systems have a large enough number of physicians in their panel, hospitals could charge insurers higher prices to access their specialists. Similarly, by employing a large number of physicians in a particular specialty, which then attracts a large pool of patients with a particular illness, they could dominate the other health systems in the region. One action specifically forbidden by anti-kickback laws is compensating physicians based on the number of referrals they make to the hospital. But, there are enough loopholes that allow hospitals to indirectly tie compensation to “productivity.” This may change with bundled payments or compensation tied to “value,” although there will always be incentives for work volume to some degree.

A further roadblock for basing merger decisions entirely on possible efficiencies is how the courts will see these activities in terms of antitrust actions. Most arguments using efficiency as the basis for merging physician groups with hospitals are vague and in general courts have not superseded antitrust actions with economic efficiency arguments.

What should be genuine reasons for hospitals employing and aligning with physicians? Addressing uneven quality of care, access and, of course, ever spiraling costs. If the object was to share responsibility for attacking these problems, health care systems and physicians would be cut a lot of slack. But, some health care systems want to not only survive the existing chaos but also dominate their local market.

I guess health care is really no different from Wall Street corporations in its focus on short-term gains versus long-term benefits. Until broader incentives change, health systems will continue to look to survive and gain market share and power. Competition, in isolation, drives tactics where the only objective may be to increase market share. However, it appears that the FTC will be busy wielding the Sherman Act of the antitrust law to keep a check on health systems to ensure consumers, payers, physicians, and the country at large are all on a fair playing field.⁷

Dr. Satiani is professor of clinical surgery, division of vascular diseases & surgery, department of surgery, associate director, FAME; director, Faculty Leadership Institute, and medical director, Vascular Labs, at Ohio State University College of Medicine, Columbus. He is also an associate medical editor for Vascular Specialist.

References

1.www.nytimes.com/2015/02/07/upshot/medicare-proposal-would-even-out-doctors-pay.html?_r=1&abt=0002&abg=1.

2. Journal of Health Economics 2006; 25: 1-28.

3. Journal of Health Economics 2006; 25: 29-38.

4. Health Affairs 2014; 33(5): 756-63.

5. www.ipr.northwestern.edu/publications/docs/workingpapers/2015/IPR-WP-15-02.pdf

6. JAMA. 2014; 312(16):1663-9.

7. Plastic & Reconstructive Surgery. 2006; 117(3): 1012-22.

NO

The days of hanging one’s shingle on a door and starting a self-employed practice are rapidly fading. While some fondly remember the practice of medicine as it was in Norman Rockwell’s classic “Before the Shot,” the realities of a current practice couldn’t be more different. Reusable syringes, analog weighing stations, an unaccompanied minor, and lack of regard for universal precautions are just a few examples from that painting that have long since disappeared. However, the humor in this painting comes from the young boy scrutinizing the doctor’s credentials, implying a sense of distrust and fear as he stands there with his buttocks partially exposed waiting for the vaccination.

This scrutiny of physician performance and results is more relevant today than ever before. Perhaps if we were to update the painting today, it would depict the boy furiously tapping away at his tablet searching through ProPublica to see what the doctor’s complication rate with the intended procedure truly is.

This is just one of the many pressures physicians are facing today. Navigating the publicly reported complication data is but one tiny portion of the regulatory red tape physicians face in taking care of their patients. If you add in the need to negotiate and contact with insurers, manage an office staff, acquire and maintain an electronic medical record (EMR) while ensuring that your EMR is properly secured against potential cyber threats and compliant with meaningful use regulations, audit your billing and coding, keep up to date with upcoming changes to bundled payments, mail out and track Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), as well as an endless list of other requirements, it is no wonder physicians are less willing to take these challenges on as solo practitioners. In fact, based on Medscape’s 2014 Employed Doctors Report, which compiled responses from over 4,600 physicians, the top three reasons for being an employed physician were not having to deal with the business of running an office (58%), not having to deal with insurers and billing (45%), and guaranteed income/even cash flow (42%).¹

Multiple sources continue to confirm the trend that more physicians are moving to an employed practice.^2-4 In the last decade, the rate of hospital employment has increased from 11% to 64%.¹ There are many factors that have pushed physicians away from self-employment. Some of these are related to physicians’ personal choices, and many are from external pressures. As various parts of the Affordable Care Act come into play, there will continue to be increasing regulatory demands. These have the potential of increasing overhead costs, and, coupled with decreasing reimbursement, will inevitably make staying profitable more challenging in a self-employed model.

There are two other very telling trends that foretell the inevitable decline of self-employed physicians. Fewer and fewer new graduates are reporting that they are self employed. In the most recent surveys, twice as many physicians under the age of 40 are employed than self-employed.¹ Furthermore, 92% of residents surveyed in their final year would prefer employment with a salary, and only 2% would consider solo practice.⁵ Of these graduating residents, 36% specifically were considering hospital employment, which is nearly a 10-fold increase from a decade ago. The second factor affecting new hires is their confidence that they have the necessary skills to manage a self-employed model. During the same decade, there was only a small increase in graduating residents who felt very prepared to deal with the business side of medicine (10% vs. 2%).⁵ This lack of knowledge will undoubtedly make it difficult for those who would consider self-employment to feel comfortable in that practice model. Some have speculated that there is soon to be a “push back” from the physicians and specifically from specialists who don’t have as much to gain in large group practices. With so few graduates considering solo and small group practice, and the overwhelming majority not feeling very prepared to manage the business of medicine, who can help lead this trend reversal?

Not only are fewer new graduates choosing self-employment, but fewer opportunities for self-employment are available as more physician groups are being bought by hospitals or other large group practices. Specifically with vascular surgery, there is a significant overhead cost requirement. Advantages to joining a large group practice include better ability to negotiate cost savings with the frequent capital requirements for new equipment, updates and maintenance of the electronic records, and professional liability. In fact, one study in California shows that as the proportion of physicians employed by the health system increased, supply chain expenses and inventory costs improved.⁶ Furthermore, hospitals have administrators who are hired to negotiate with insurers regarding reimbursement and respond to audits and other regulatory changes. As mentioned above, the top two reasons for avoiding self-employment are precisely these. This will no doubt draw even more physicians and specifically vascular surgeons into employed models.

Dr. Haurani is assistant professor of surgery in the division of vascular diseases and surgery, Ohio State University Medical Center, Columbus.

References

1. www.medscape.com/features/slideshow/public/employed-doctors#1

2. JAMA Surg. 2013;148:323-8.

3.Perspect Vasc Surg Endovasc Ther. 2013;25:46-52.

4 Tenn Med. 2012;105:38-39.

5.www.merritthawkins.com/uploadedFiles/MerrittHawkings/Surveys/2014_MerrittHawkins_FYMR_Survey.pdf.

6. Health Care Manage Rev. 2015 Jul 23. [Epub ahead of print] www.ncbi.nlm.nih.gov/pubmed/26207654

YES

The recent 2-year bipartisan budget deal signed by President Obama and sent up by Congress brought the hammer down on hospitals so quickly that they did not see it coming. It is highly unusual for Congress to keep anything secreted from the American Hospital Association (AHA) lobby. The AHA spent $4.6 million in the first quarter of 2015 for an annual estimated expenditure of about $18 million. This does not include dollars spent by local and state hospital associations. The SVS is clearly dwarfed by these powerful interests. Our society spent less than $100,000 in that same quarter on advocating for over 4,000 members, the majority of whom are United States residents and most of whom depend solely on the SVS to look out for them.

As a result of the budget deal, Medicare will not pay most hospital-owned physician practices higher rates than those of independently owned practices. The reimbursement changes will apply to those hospital-owned physician practices acquired or opened since the date the law was signed and also located farther than 250 yards from a hospital’s main campus. It does grandfather in facilities prior to the signing that were being reimbursed with hospital outpatient department (HOPD) rates. The savings will prevent an increase in premiums for about 15 million Medicare beneficiaries. The AHA expressed its outrage while the AARP celebrated. So did independent physicians who have been protesting all along that costs were rising because of excessive payments to hospitals for essentially the same services.

Margot Sanger-Katz, in a column for “The Upshot” in the New York Times, wrote that it had been estimated that correcting this payment differential would save Medicare $30 billion over 10 years, more than Medicare could save if it raised the Medicare eligibility age to 67!¹ She also pointed out that the Medicare Payment Advisory Committee (MedPAC), an independent group that advises Congress, thinks “that the pay differences should be narrowed, but only for a select set of medical services in which it’s really clear that there’s no difference between the care offered by a hospital and a physician office.”

The rush to buy physician practices is being done for many reasons but the disparate payment schedule favoring hospital-owned practices for many of the same services is one reason. The hospital brings in a lot more revenue through its hired physicians providing the same service in their offices that are now under the banner of the health system. The hospitals cite several justifications for the “surcharge” on care provided by employed physicians in hospital facilities, some of which may be valid. Regulatory requirements, sicker inpatients, increased cost due to training programs, and being required to support money-losing services such as burn care are some reasons. But, independent physicians say they provide the same or better quality care at a lower cost without resources such as legal, accounting, self-insurance against professional liability, and robust lobbying firms.

Hospitals have also contended that vertical integration by buying physician practices should lead to lower health care costs by squeezing efficiencies within the system. There have been conflicting reports on whether physician hospital integration leads to lower health care expenditures.² The public debate has caught the attention of government regulators. In the recent case of Saint Lukes-Saltzer, the question before the Federal Trade Commission (the agency responsible for federal antitrust action) was: Did total medical expenditures increase or decrease for patients cared for by physician practices acquired by St. Luke’s? Indeed, the conclusions were that not only did overall costs not go down but evidence showed that the merger may have resulted in increased costs.

On appeal, the Ninth Circuit Court ruled that any future efficiency must be “substantial, verifiable and specific” to the merger. Ciliberto and Dranove looked at hospital prices after physician hospital affiliations in California and found no evidence of increase in prices.³ Baker and coauthors analyzed privately insured patients between 2001 and 2007 and the effect of physician hospital integration on hospital prices, admission volumes, and spending.⁴ They reported higher hospital prices and spending in hospitals with the tightest vertically integrated relationship with physicians. In one of the few studies of the issue, Capps and colleagues reviewed 7 years of administrative data from multiple insurers across the United States to estimate postintegration costs. From 2007 to 2013, they found that there was a 57% increase in the share of spending by physicians whose practices are owned by hospitals. In addition, this led to an increase in physician prices of 14% post integration.⁵ The larger the market share of inpatients by a hospital the larger the price increase. The authors estimate that about 25% of the price increases are precisely due to “exploitation of reimbursement rules” by charging the facility fees for their employed physicians. If these “surcharges” led to decreased utilization as one measure of increased efficiency and therefore reduced overall health care costs, it would be acceptable. But, Capps et al. found no such evidence and speculate that this scenario could lead to higher expenditures.

In a recent study, total expenditures for over 4 million patients by private physician groups or integrated groups covered by health maintenance organizations (HMOs) in California between 2009 and 2012 were analyzed.⁶ Mean annual expenditures were highest for large multihospital systems followed by hospital-owned physician groups and, lastly, physician-owned groups. The expenditures for multihospital systems were 19.8% higher and for local hospital-employed physician groups 10% higher compared to physician-owned organizations.

Why should prices increase after tighter physician hospital integration on a large scale? Market power. Once health systems have a large enough number of physicians in their panel, hospitals could charge insurers higher prices to access their specialists. Similarly, by employing a large number of physicians in a particular specialty, which then attracts a large pool of patients with a particular illness, they could dominate the other health systems in the region. One action specifically forbidden by anti-kickback laws is compensating physicians based on the number of referrals they make to the hospital. But, there are enough loopholes that allow hospitals to indirectly tie compensation to “productivity.” This may change with bundled payments or compensation tied to “value,” although there will always be incentives for work volume to some degree.

A further roadblock for basing merger decisions entirely on possible efficiencies is how the courts will see these activities in terms of antitrust actions. Most arguments using efficiency as the basis for merging physician groups with hospitals are vague and in general courts have not superseded antitrust actions with economic efficiency arguments.

What should be genuine reasons for hospitals employing and aligning with physicians? Addressing uneven quality of care, access and, of course, ever spiraling costs. If the object was to share responsibility for attacking these problems, health care systems and physicians would be cut a lot of slack. But, some health care systems want to not only survive the existing chaos but also dominate their local market.

I guess health care is really no different from Wall Street corporations in its focus on short-term gains versus long-term benefits. Until broader incentives change, health systems will continue to look to survive and gain market share and power. Competition, in isolation, drives tactics where the only objective may be to increase market share. However, it appears that the FTC will be busy wielding the Sherman Act of the antitrust law to keep a check on health systems to ensure consumers, payers, physicians, and the country at large are all on a fair playing field.⁷

Dr. Satiani is professor of clinical surgery, division of vascular diseases & surgery, department of surgery, associate director, FAME; director, Faculty Leadership Institute, and medical director, Vascular Labs, at Ohio State University College of Medicine, Columbus. He is also an associate medical editor for Vascular Specialist.

References

1.www.nytimes.com/2015/02/07/upshot/medicare-proposal-would-even-out-doctors-pay.html?_r=1&abt=0002&abg=1.

2. Journal of Health Economics 2006; 25: 1-28.

3. Journal of Health Economics 2006; 25: 29-38.

4. Health Affairs 2014; 33(5): 756-63.

5. www.ipr.northwestern.edu/publications/docs/workingpapers/2015/IPR-WP-15-02.pdf

6. JAMA. 2014; 312(16):1663-9.

7. Plastic & Reconstructive Surgery. 2006; 117(3): 1012-22.

NO

The days of hanging one’s shingle on a door and starting a self-employed practice are rapidly fading. While some fondly remember the practice of medicine as it was in Norman Rockwell’s classic “Before the Shot,” the realities of a current practice couldn’t be more different. Reusable syringes, analog weighing stations, an unaccompanied minor, and lack of regard for universal precautions are just a few examples from that painting that have long since disappeared. However, the humor in this painting comes from the young boy scrutinizing the doctor’s credentials, implying a sense of distrust and fear as he stands there with his buttocks partially exposed waiting for the vaccination.

This scrutiny of physician performance and results is more relevant today than ever before. Perhaps if we were to update the painting today, it would depict the boy furiously tapping away at his tablet searching through ProPublica to see what the doctor’s complication rate with the intended procedure truly is.

This is just one of the many pressures physicians are facing today. Navigating the publicly reported complication data is but one tiny portion of the regulatory red tape physicians face in taking care of their patients. If you add in the need to negotiate and contact with insurers, manage an office staff, acquire and maintain an electronic medical record (EMR) while ensuring that your EMR is properly secured against potential cyber threats and compliant with meaningful use regulations, audit your billing and coding, keep up to date with upcoming changes to bundled payments, mail out and track Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), as well as an endless list of other requirements, it is no wonder physicians are less willing to take these challenges on as solo practitioners. In fact, based on Medscape’s 2014 Employed Doctors Report, which compiled responses from over 4,600 physicians, the top three reasons for being an employed physician were not having to deal with the business of running an office (58%), not having to deal with insurers and billing (45%), and guaranteed income/even cash flow (42%).¹

Multiple sources continue to confirm the trend that more physicians are moving to an employed practice.^2-4 In the last decade, the rate of hospital employment has increased from 11% to 64%.¹ There are many factors that have pushed physicians away from self-employment. Some of these are related to physicians’ personal choices, and many are from external pressures. As various parts of the Affordable Care Act come into play, there will continue to be increasing regulatory demands. These have the potential of increasing overhead costs, and, coupled with decreasing reimbursement, will inevitably make staying profitable more challenging in a self-employed model.

There are two other very telling trends that foretell the inevitable decline of self-employed physicians. Fewer and fewer new graduates are reporting that they are self employed. In the most recent surveys, twice as many physicians under the age of 40 are employed than self-employed.¹ Furthermore, 92% of residents surveyed in their final year would prefer employment with a salary, and only 2% would consider solo practice.⁵ Of these graduating residents, 36% specifically were considering hospital employment, which is nearly a 10-fold increase from a decade ago. The second factor affecting new hires is their confidence that they have the necessary skills to manage a self-employed model. During the same decade, there was only a small increase in graduating residents who felt very prepared to deal with the business side of medicine (10% vs. 2%).⁵ This lack of knowledge will undoubtedly make it difficult for those who would consider self-employment to feel comfortable in that practice model. Some have speculated that there is soon to be a “push back” from the physicians and specifically from specialists who don’t have as much to gain in large group practices. With so few graduates considering solo and small group practice, and the overwhelming majority not feeling very prepared to manage the business of medicine, who can help lead this trend reversal?

Not only are fewer new graduates choosing self-employment, but fewer opportunities for self-employment are available as more physician groups are being bought by hospitals or other large group practices. Specifically with vascular surgery, there is a significant overhead cost requirement. Advantages to joining a large group practice include better ability to negotiate cost savings with the frequent capital requirements for new equipment, updates and maintenance of the electronic records, and professional liability. In fact, one study in California shows that as the proportion of physicians employed by the health system increased, supply chain expenses and inventory costs improved.⁶ Furthermore, hospitals have administrators who are hired to negotiate with insurers regarding reimbursement and respond to audits and other regulatory changes. As mentioned above, the top two reasons for avoiding self-employment are precisely these. This will no doubt draw even more physicians and specifically vascular surgeons into employed models.

Dr. Haurani is assistant professor of surgery in the division of vascular diseases and surgery, Ohio State University Medical Center, Columbus.

References

1. www.medscape.com/features/slideshow/public/employed-doctors#1

2. JAMA Surg. 2013;148:323-8.

3.Perspect Vasc Surg Endovasc Ther. 2013;25:46-52.

4 Tenn Med. 2012;105:38-39.

5.www.merritthawkins.com/uploadedFiles/MerrittHawkings/Surveys/2014_MerrittHawkins_FYMR_Survey.pdf.

6. Health Care Manage Rev. 2015 Jul 23. [Epub ahead of print] www.ncbi.nlm.nih.gov/pubmed/26207654