Hospital-employed physicians increased Medicare costs for four services by $3.1 billion between 2012 and 2015, according to a new study from the Physicians Advocacy Institute (PAI) and conducted by Avalere Health.
Avalere Health researchers said Medicare paid $2.7 billion more for four specific cardiology, orthopedic and gastroenterology services in hospital outpatient settings rather than in independent physicians’ offices.
Medicare beneficiaries also paid $411 million more in out-of-pocket costs for those services than they would have spent in independent physicians’ offices.
The report is the latest analysis on how settings influence costs.
Hospitals are increasingly buying medical practices. An American Medical Association report said that nearly 33% of physicians work in a practice with at least some hospital ownership in 2016. PAI said there was a 49% increase in hospital-employed physicians between 2012 and 2015.
PAI is reviewing that trend to “better understand how physician employment affects the practice of medicine and impacts patients.” The PAI report said Medicare beneficiaries paid more because patients were seen in “higher cost settings of care.”
PAI President Robert Seligson said hospital consolidation, including hospitals buying medical practices, is increasing healthcare costs. Hospital-owned outpatient practices create “a greater financial burden on Medicare beneficiaries and on taxpayers,” he said.
Researchers found that hospital-employed physicians caused 27% higher costs for the Medicare program and 21% higher costs for patients. The study reported that hospital-employed physicians “deliver a higher volume of services in the more costly hospital outpatient setting than independent physicians.”
Payers are already pushing services to outpatient services outside of hospitals, as a way to cut costs. Most notably, Anthem’s policies to stop paying for unnecessary emergency room visits and not paying for MRIs and CT scans at hospitals unless medically necessary.
If payers find that they can cut costs associated with hospital-employed physicians who provide services in outpatient settings, you can expect they’ll look for ways to drive additional traffic away from those settings.