Editor's Note -
I'm posting the following article from the health policy journal "Health Affairs" to follow up on the articles from Gilfillan and Berwick I posted last January, and are referenced in this Halvorson article. I think you'll find it interesting, given all the attention that has been given to the shortcomings of capitation payments in recent months in the OPS space.
- SPC
Medicare Advantage Delivers Better Care And Saves Money: A Response To Gilfillan And Berwick
A Health Affairs Forefront article by Richard Gilfillan and Donald Berwick, published in two parts on September 29 and 30, offered a severe critique of the Medicare Advantage (MA) program that is flawed in important ways that need to be addressed. Below, I point out some of those flaws and explain why MA, and the capitation system it employs, represent our best hope for health reform and high-quality, cost-effective care. I conclude by briefly suggesting a path forward.
MA has now enrolled slightly more than 40 percent of the people with Medicare coverage in our country. That number will continue to grow because the actual MA program is very different in key ways from the imagined program that Gilfillan and Berwick criticize and obviously dislike. The authors clearly do not understand the business model or the functionality of MA; they focus instead on cash flow and data flow issues, and they get some of these significantly wrong.
For example, Gilfillan and Berwick write: “Risk score gaming creates a major transfer of wealth from taxpayers and Medicare beneficiaries to MA plans, and it lies at the heart of the business model for most MA plans.” They also write: “CMS consistently overpays MA Plans with no demonstrable clinical benefit to patients.” These two statements are entirely incorrect.
Additionally, Gilfillan and Berwick focus on the payment process for MA plans. They write that the plans have a “perverse business model” and are so overpaid and incorrectly paid that the MA model is “distorting health care delivery, creating excessive costs for taxpayers and for Medicare beneficiaries, draining the Medicare Trust Fund, obstructing the badly needed value transformation of American health care, and diverting the money needed to fund other social services and goods.” They believe that the plans have intentionally and skillfully fed improper information into the risk computation process that creates the monthly capitation levels for the plans; they state that the results of that misinformation on payment levels is actually the source of the financial success of MA plans. According to Gilfillan and Berwick, this creates “extraordinary profits” that are so high that they put overall Medicare funding at risk.
That is a long string of inaccurate information, starting with the characterization of MA profits as “extraordinary.” The plans’ profits run slightly over 4 percent. There was a time, early in the development of the Medicare capitation programs, when some plans generated profits upwards of 20 percent, in part by enrolling the healthier seniors when they could achieve that goal. Some plans engaged in risk selection and even some level of risk skimming. However, that sort of gaming is now prevented by the Affordable Care Act’s (ACA’s) medical loss ratio (MLR) requirement, which caps the combined amount of administrative costs and profits at 15 percent of premium for plans in the large group and MA markets.
Administrative costs for most plans run about 10 percent. MA plan profits run about 4.5 percent. We can argue about whether 4.5 percent profit is a good number—but it’s clearly inaccurate to say that it is an “extraordinary number,” as Gilfillan and Berwick contend. Most businesses in most industries would see their stock prices dropping with only 4.5 percent profits. The hospice programs for Medicare that provide good care to some of our neediest patients have a 12 percent profit level built into their financial reality. Policy people very much want the hospice program to succeed and they believe that this profit level is useful in getting both for-profit and not-for-profit organizations to invest in building and running hospice programs in needed settings. The average profit levels for businesses of all types in America currently runs about 11.5 percent.
So, MA plans don’t make extraordinary profits. We know exactly what those profits are today. We also know that the health plans could use every technique and every approach known to the industry and described by Gilfillan and Berwick to inflate the risk scores for MA patients today and the full impact of that risk-pool enhancement, even risk pool-distortion if they could achieve it, would still be to end up with pretty much the same amount of profit that we have now—because the 10 percent administrative costs are real, and because the ACA is not going to allow any health plan to exceed that 15 percent limit on costs and profits.
The authors know this restriction to be true: They say at one point that MA plans often increase their benefits to members when they have a higher-than-expected surplus because they can’t retain that money as plan profits under the ACA’s MLR provision. Indeed, Gilfillan and Berwick complain that these enhanced benefits for MA members give MA plans what they perceive to be an unfair advantage over traditional fee-for-service (FFS) Medicare coverage, whose benefits are clearly flawed and limited at several levels.
Medicare Advantage Has An Extensive Quality Program
MA has an extensive, well-structured, and strongly administered five-star system that measures plan performance on more than 40 categories of quality and service and rates every plan based on their most recent performance levels. The program pays plans 5 percent more in most counties if they achieve at least four stars. Plans work hard to achieve those performance goals—and being a Five Star care site has become a mark of honor for many care systems and sites. The care improvement spillover from that process actually extends to millions of people—when you measure provider performance for multiple areas of care, then care gets better and more efficient for other, non-MA patients who are also seeing the same providers.
The five-star system works well. We know it works well because only a very few plans achieved four or five stars when the program began, while this year 80 percent of MA members were able to enroll in plans with four or more stars. That’s a highly functional proof of success because the expectations are high and the measurement process is well regulated and tightly administered.
Gilfillan and Berwick suggest that we should ignore MA’s progress on quality; they call the improvement in all those plans and care settings “The Lake Wobegon Effect.” They are clearly missing the point that one goal of an effective continuous improvement process in team or multi-group settings is to get everyone to do better. When the process is rigorous and aimed at improving performance year after year, then we should all should celebrate collective year-over-year success by care sites and plans, not disparage it.
MA team care has brought down the number of congestive heart failure events—an area traditional Medicare has struggled with—by significant levels for many sites because plans make that condition a priority for improving care. That’s part of an overall care delivery agenda. MA plans have diagnostic information on every patient. The plans can use that information to know who is likely to have a heart crisis, an asthma crisis, or the kind of diabetic damages that double the death rate for cardiac patients who are also diabetic. The exact diagnostic information that Gilfillan and Berwick say is being collected to inflate risk scores was being collected by MA plans for multiple purposes long before the risk scoring process existed, because the business model of health plans involves having complete medical records on people and using that information in a wide variety of ways—including targeted patient care plans—to improve care.
Gilfillan and Berwick actually say at one point that there are no clinical improvements associated with MA. That’s a very hard statement to understand and should be retracted at some point. Clinical improvements clearly happen across wide ranges of settings in MA plans, and plans transform care in a number of ways. Team care is created by plans at multiple levels because team care makes care better. When you are paid a capitation for each member rather than a fee for each piece of care, you can invest some of that available cash flow in ways to make care less costly and more effective, and you are incentivized to do so.
And, indeed, MA plans get better results. For example, compared to FFS Medicare, on a risk-adjusted basis, a 2018 study found that MA members have 33 percent fewer emergency department admissions and almost 23 percent fewer standard hospital admissions because of the better care that plans deliver in a wide range of areas.
But this entire process of care improvement is invisible to Gilfillan and Berwick. They state without seeming reservation that for MA plans, “It is far easier to game the codes than to improve care or change health care delivery.” They cite some examples of other care support vendors who they say worked with plans to maximize the number of diagnoses that the plans were able to use in their risk filings. Plans do sometimes send people into homes to welcome new members and do home safety and context gathering surveys for the members. Having a home survey can help the members bond with the plan and their care team and structure, and the survey process gives the plans important information to use to deliver care to those members. The nurses who do the visits are sometimes also asked to provide input into the diagnosis record-building process because the plans build records on each patient to help support their care and it’s an easy addition to ask those nurses to provide that information.
Gilfillan and Berwick cite one of those programs and criticize that plan directly because they sent the nurses back into homes as soon as COVID-19 receded enough to make visits safe. Their post says the nurses were sent into the home to harvest diagnoses to optimize the risk score for that plan. But, in fact, the plan had direct, in-home support in place and was using nurses and processes that were already set up to provide care. They did not send nurses into new homes; they sent them back into homes where they had already been to support patient care. This sort of team support does not exist at any level in FFS Medicare. (That particular care team was also the first major care team in the country to get functional COVID-19 tests into all of their owned care sites, very early in the process.)
There Is A Finite Number Of Diagnoses For Each Person
Gilfillan and Berwick inaccurately say that, the key strategy of MA plans is “to harvest a financial windfall just by finding more codes.” They say some plans even “look hard for diagnoses using various AI-enabled platforms.” If a plan does have an AI-enabled platform in place in some setting to support care, one of the least important and least useful things that platform would be doing would be to discern previously undiscovered diagnoses for the purpose of improving risk scores.
Each person has only a finite number of diagnosis. There are only a small number of diagnoses that we can possibly find for any individual even if we use artificial intelligence to look for them. The “game” that Gilfillan and Berwick write extensively about has only a very short burst of possible productivity, as all diagnoses for a patient tend to be found quickly, and then it’s done. Thus, plans can’t do what the authors say and “create a continuous money machine and harvest a financial windfall just by finding more codes.”
Finding more codes isn’t a business plan; it’s a care improvement plan. The truth is that we want every diagnosis code to be found. We very much want our care teams to know every diagnosis for every person because that information and knowledge is extremely useful, indeed necessary, for optimal care delivery.
Plans Have Both Quality Programs And Financial Rewards
It is important to understand how the payment model actually works for MA. This model is very different from the Medicare FFS program that has been our standard approach to Medicare since the program began.
MA plans are paid a flat capitation amount per month for every member and they use that money to deliver and improve care. The MA quality program changes the payment level a bit in a useful and important way. As mentioned, the MA star ratings program measures more than 40 areas of quality and service, rates the plans based on their performance in those areas, and then pays up to 5 percent more to plans each month if they achieve at least four stars. Thus, MA plans have a major and measurable overall quality improvement agenda; they also have an inherent focus on both quality and effectiveness of care because they are paid a capitation and they need to provide effective, efficient care to make the capitation model work and to continue to exist.
By contrast, standard FFS Medicare has no quality agenda at any level. The care teams that are created by MA plans using the revenue flow from capitation do not exist in FFS Medicare. The patient chart information is extremely incomplete in FFS settings; information is siloed and not shared between caregivers. These major shortcomings are not addressed by Gilfillan and Berwick, although they are not entirely silent on the overall quality issue—they misdescribe the MA reality by, as mentioned, falsely claiming that MA provides “no discernable clinical benefit to members.”
Low-Income People Are Twice as Likely to Join Medicare Advantage
Gilfillan and Berwick are also incorrect on another important issue when they write that, with MA, “Low-income beneficiaries remain underinsured.” Low-income people, defined as those making under $30,000 a year, are twice as likely to join MA as FFS Medicare. Rates of Hispanic and Black enrollment in MA are higher than before and growing. It’s not surprising that MA enrolls twice as many low-income people. Low-income people tend to both need and value team care. When we look at social determinants of health, we can see that people in far too many settings and in far too many areas of our country have inadequate care infrastructure and inadequate care availability.
COVID gave us a harsh awakening. The COVID death rates for our African American and Hispanic patients were more than double death rates for other patients in most settings. The science now tells us that disproportionate levels of chronic conditions drove those much higher death rates. Social determinants of health can play a direct role in the higher rates of chronic conditions for African American and Hispanic patients.
Forty-two percent of our total population has joined MA. We just reached the point where more than half of the African Americans on Medicare have joined the plan and about sixty percent of the Hispanic Medicare beneficiaries are in the plans. That number will probably continue to grow. All-told, minorities make up twice as large of a percentage of MA enrollment as traditional Medicare enrollment, 33.7 percent versus 16 percent.
Patients with low income and patients who have not had access to team care and coordinated care from the traditional, FFS Medicare doctors in their communities tend to find MA to be a good choice—and they tend to report high levels of satisfaction with their plans. Those members also appreciate how much money they save as MA members.
Medicare Advantage Members Save Over $1,600 On Care
One of the things Gilfillan and Berwick do not mention is that the fact that MA members actually spend much less money each year on care. The combination of better benefits and better care for MA members means that the average MA member saves more than $1,600 a year on personal health care costs, as compared to traditional Medicare enrollees. That’s is up from $1,400 in savings in health care costs per MA member last year.
Those savings have very real, positive, direct impacts on the lives of real people. The importance of these savings are shown by both the high MA enrollment levels from our very lowest-income Medicare Members and the focus on care for our most medically complex seniors, those dually eligible for both Medicare and Medicaid. More than three million enrollees in D-SNPs, the Special Needs Plans for dual eligibles, make it very clear as a significant component of the patients for MA plans that skimming risk is not the reason for MA plans to exist. Enrollees in Special Needs Plans tend to be institutionalized, to have extremely low income, and to have disabling conditions. For many of those patients, the team care they get from their MA plan is the first team care of their life, as standard FFS Medicare refuses to pay for that care.
A Path Forward
As a nation, we should build on MA and the capitation method it employs. Health care in this century should be a process, not just as an avalanche of unrelated economic events and a cascade of unrelated piece-by-piece care purchases and encounters. We should want team care and continuously improving care for everyone getting care in America. The only way to achieve that is to put a cash flow in place to pay for our care that rewards and enables a cost-effective, quality-oriented process—in short, to adopt capitation for everyone.
That’s not to say that I find no common ground with Gilfillan and Berwick. I agree with their enthusiasm regarding accountable care organizations and support building on that model. ACOs fall short of full capitation and thus are not as good as MA in promoting high-value care, but they are certainly far better than traditional, FFS Medicare; ACOs should be encouraged for those who are not willing to join MA.
And Gilfillan and Berwick do make a legitimate point about our need to continuously improve the process that creates the precise amount of the capitated payment for MA plans. The original deal between CMS and health plans more than two decades ago was that the plans would provide more complete benefits than FFS Medicare and would be paid 95 percent of the costs of FFS Medicare in each market. CMS put together a number of ways of calculating the average area per capita cost for Medicare, and over the years they have enhanced the process to adjust the payment based on the actuarial risk levels of enrollees.
However, in contrast to MA data, FFS Medicare does not include anywhere near complete diagnostic information. This creates uncertainly in calculating relative risk profiles for MA and FFS Medicare, and we should be open to better ways to calculate those risk profiles and, by extension, relative payment levels. The key for future design is to look at exactly what future behaviors we want to incentivize in the delivery of care and the creation of health and to make sure the calculations are by groups such as independent actuaries, rather than politically involved stakeholders.
The presence of capitation is far more important than the precise amount of the capitated payment. Capitation is the most powerful tool we have to improve quality and to control costs. Thus, questions about the details of payment calculations should not cause us to back away from capitation; instead, we should expand its use. We actually could make the MA capitation system available to employers, and through them to working Americans, as part of an overall health improvement plan for the country.
By charging employees a flat 15 percent of their paycheck, we could create a capitation fund that the plans could use to provide the same system-based care offered through MA. If a large percentage of employers signed on, we could certainly make this work and put universal coverage in place. We would not need to invent anything new—we could retrofit pieces that we already have.
But for now, we need to get the numbers right for MA. We need to make sure we alleviate the key concerns about the accuracy of the data behind the payment amounts. However, we shouldn’t let the perfect be the enemy of the good. We don’t need perfect payment levels; we do need a perfect payment system, or as close to perfection as we know how to accomplish. We need capitation coupled with us functioning as a prudent and competent buyer—not just as an indiscriminate payer—for care.
MA is doing good things for a growing number of people. We need to support that, and we need to understand the advantages of MA and capitation far better than most people understand them now.
Dispute between MaineHealth and Anthem echoes conflicts in other states
Unless differences can be worked out, Anthem will no longer be in network at Maine Medical Center starting Jan. 1, 2023.
by Joe Lowlor - Portland Press Herald - May 8, 2022
In California, one hospital left the Anthem insurance network because of a dispute over reimbursements before reaching an agreement and rejoining less than a month later.
In Connecticut, a hospital group left the Anthem network over a contract disagreement in 2017, then rejoined after an agreement was reached several weeks later.
Contract disputes with Anthem and hospital networks in recent years have played out in Indiana, Georgia, California, Virginia, Colorado, New York, Nevada, Ohio and Connecticut, although most disputes don’t result in hospitals leaving insurance networks.
Now, MaineHealth and Anthem are locked in a tense contract dispute, with the hospital network saying Maine Medical Center in Portland will leave the Anthem network starting in January 2023. About 150,000 Maine Med patients have used Anthem insurance in recent years, so the move would potentially leave many patients with Anthem insurance paying high out-of-network fees or finding other medical providers.
Disputes between hospitals and insurers are fairly common. And when private negotiations go awry, the sides sometimes air grievances in public, much as Anthem and MaineHealth have in recent weeks. But it is rare for a major hospital to actually pull out of an insurer network and potentially cause thousands of patients to pay out-of-network fees for receiving their hospital care. And when breakups happen, they typically don’t last long.
In one example, Dignity Health in California pulled Sierra Nevada Memorial Hospital out of the Anthem network in July 2021. Anthem and Dignity Health traded accusations in the media, but ultimately settled a month later and covered all care at the hospital retroactively so that no patient was out-of-network.
When the similar dispute in Connecticut was resolved in 2017, coverage also was retroactive, so that no Anthem patients ended up being out-of-network.
Some health care industry observers in Maine are predicting a similar dynamic will occur between MaineHealth and Anthem, with a settlement to avoid 300,000 Anthem customers being out-of-network starting in January. That would avoid patients potentially being saddled with large out-of-network bills and employers having to switch insurance plans, among other disruptions.
But in the meantime, the two sides in Maine appear to be far apart. And in Maine, the disagreement pits the state’s largest health care provider in MaineHealth against the largest insurer in Anthem. At 300,000 members statewide, Anthem represents 54 percent of the insurance market in Maine.
Indianapolis-based Anthem is one of the nation’s largest health insurance companies and provides coverage to people in Maine and 13 other states.
MaineHealth – the parent organization of Maine Med in Portland, seven other Maine hospitals and one in New Hampshire – is accusing Anthem of shortchanging its health care providers by denying payments for services rendered. Anthem says MaineHealth routinely overcharges for medications. Both sides have provided examples, such as Maine Med charging $136 for a $2 bag of saline solution and Anthem only agreeing to pay for one of two heart stent procedures performed on the same patient in the same day.
Mitchell Stein, a Maine-based health policy consultant, said that while the fact that the MaineHealth-Anthem dispute became so rancorous and public is unusual, these types of disputes happen periodically.
“This happens with large, national for-profit insurance companies; they go through periods of more aggressiveness in their negotiations with health care providers,” Stein said. “It happened with United a few years ago, and also Cigna. If there’s a cycle of higher claims, that puts pressure on premiums, and they are trying to keep premiums down.”
Stein said another dynamic is that Medicare recently announced a lower-than-expected reimbursement rate increase for services, and that is also causing some hospitals to raise prices on private insurers.
“There’s a constant strive for balance, and when insurers are feeling out of balance, these contract disputes can happen,” said Stein, a volunteer board member for Lewiston-based Community Health Options, an insurance cooperative.
Stein said the way the United States funds its health care system is so convoluted that hospital prices, what insurers will pay and what patients may end up owing is often skewed in reality-bending ways, resulting in charges like $50 for a Tylenol. The hospitals and insurance companies have competing interests, which may or may not align with patients’ interests.
“Don’t blame the players, blame the game,” Stein said. “But the hospitals do do some things to bring this on themselves.”
Both MaineHealth and Anthem have been leveling accusations at each other during the current standoff.
John Porter, MaineHealth spokesman, said a similar dispute in Indianapolis resulted in a federal arbitrator ruling that Anthem had to pay back $4.5 million in claims.
“Anthem continues to deny claims and prior authorizations for coverage at an excessive rate, creating stress for MaineHealth’s patients and their caregivers. Across Maine it has failed to pay claims to hospitals and independent providers totaling more than $100 million. Similar to its behavior in Indiana, it continues to create new policies unilaterally so as to reduce payments to providers below contractually agreed upon rates,” Porter said in a statement.
The Indiana dispute did not result in hospitals leaving the Anthem network, but was based on claims stretching back to 2017. The Georgia Bureau of Insurance also recently fined Anthem $5 million for slow processing of payments and denied claims. The Maine Bureau of Insurance is currently conducting a monthslong “market examination of Anthem, which will include a review of provider payment issues.”
Stephanie DuBois, Anthem spokeswoman, said they are “committed to resolving this issue and hope MaineHealth will join us.”
“Anthem Blue Cross and Blue Shield in Maine is committed to providing access to quality, outcomes-driven healthcare, and we believe MaineHealth shares these goals. Where our two perspectives diverge is that our work at Anthem also centers on ensuring care is affordable. Across the industry it is not uncommon to have this divergence of viewpoints; in fact, it is part of the normal course of business for insurers and health systems to engage in negotiations regarding cost and quality. What we have not seen in Maine is a health system announcing its intention to drop a hospital from a care provider network in the middle of a contract,” DuBois said in a statement.
But Sean Barry, a spokesman with the American Hospital Association, said the group “continues to hear reports of significant issues with Anthem, including delays in paying claims and policies that restrict or delay access to care.”
“For some hospitals and health systems, the amount in unpaid or delayed payments represents substantial portions of the hospital or health system’s revenue, putting considerable financial strain on their ability to deliver care,” Barry said in a statement. “This is particularly challenging now in an environment of soaring input costs and growth in general inflation.”
Some independent health care providers – which lack the negotiating leverage of a large health care network like MaineHealth – are also having issues with Anthem.
Fore River Urology of South Portland on Monday announced that it was leaving the Anthem network, starting on Aug. 1 for commercial insurance and Sept. 1 for Medicare Advantage plans, because Anthem was reimbursing at rates far below what the service costs, according to Fore River Urology.
“This unfortunate outcome further erodes Anthem’s provider network adequacy in southern Maine,” said Ben Hinchey of Schooner Healthcare Resources, which is representing Fore River Urology. Notices went out to about 10,000 Anthem patients on Monday. Anthem officials countered by saying that Fore River wanted to increase reimbursement rates by 50 percent, and turned down more “reasonable” increases.
https://www.blogger.com/blog/post/edit/3936036848977011940/7871200150999485560
Our View: Anthem not telling the whole story in Maine price dispute
A $136 bag of saline is a sign of a bad system, not price gouging by MaineHealth.
by The Editorial Board - Portland Press Herald - April 22, 2022
In 2013, The New York Times looked at the hospital bills of 100 patients struck by an outbreak of food poisoning. The newspaper found that when the patients were hydrated with saline – sterile salt water – they were charged from 100 to 1,000 times the manufacturer’s price for the solution.
It’s good to remember that story when viewing the dispute between two health care giants: Anthem, the state’s top health insurance company, and MaineHealth, the state’s biggest health care provider. Last month, MaineHealth announced that Anthem had shortchanged Maine Medical Center, the network’s flagship hospital, by a rate of $1 million a month, and Maine Med will end its network agreement with the insurer at the end of the year.
In response the Indianapolis-based Anthem has accused MaineHealth of overcharging patients, citing bills that include charges of $136 for a bag of saline solution that cost the hospital about $2.
That’s an eye-popping markup, but as anyone who has tried to make sense of a hospital bill knows, it’s neither unusual nor limited to MaineHealth. What’s going on is the way that a provider’s overhead costs are allocated in our fee-for-service health care system.
There is no line item on your bill for the people who make sure the hospital has enough bags of saline, that they are stored properly or that they are put into your body by someone who knows what they are doing. There’s also no line item for the portion of your bill that covers the uncompensated care the hospital is required to provide to people who don’t have health insurance and the difference between the actual cost of a service and what the federal government pays through Medicare and Medicaid.
Anthem, of course, knows all of this. But instead of negotiating a price for things like a bag of saline or the installation of a stent in a patient’s heart, the company is refusing to pay its bills – and this does not appear to be a strategy that’s limited to its operation in Maine. According to news reports:
• The state insurance commissioner in Georgia fined Anthem $5 million in March for failing to pay providers in a timely manner.
• VCU Health in Richmond, Virginia, claims that Anthem owed them $385 million, equal to 40 percent of its claims.
• A federal mediator recently awarded 11 Indiana hospitals $4.5 million after agreeing that Anthem violated its contract by delaying payment for thousands of claims for emergency care.
These cases suggest something is going on here beyond the insurance company’s concern for the health care consumer in Maine.
Other countries regulate health care costs, but that’s not how our system works. About half of the population gets private insurance through work. Negotiations between providers and insurance companies are supposed to put downward pressure on prices. Anthem can complain about the price of a bag of saline after the negotiations are done, but refusing to pay claims won’t lower costs – it can only shift them onto someone else.
We ought to have a more rational system – one where health care keeps us healthy and insurance coverage gives us peace of mind. Instead, high costs drive people away from their doctors, and insurance won’t protect them from ruinous medical bills.
MaineHealth and Anthem should work out their differences – a state as small as Maine can’t have its biggest insurer locked out of its biggest hospital.
But as this case shows, we can’t rely on market forces to control health care costs.
https://www.pressherald.com/2022/04/22/our-view-anthem-not-telling-whole-story-in-price-dispute/
Is The End Of Private Practice Nigh?
Nearly three in four doctors now work for a hospital, health system, or corporate entity, according to new data from Avalere. That's a 7% increase from a year ago—and an almost 20% jump since 2019.
In other words, the independent physician is becoming an endangered species. The corporatization of medicine is sapping competition in the healthcare marketplace. And that's leading to higher prices for patients—and lower pay for providers.
The pandemic accelerated the longstanding trend of greater consolidation in medicine. Large health systems acquired more than 36,000 physician practices between January 1, 2019—the year before the pandemic began—and January 1, 2022. That represents a 38% increase in the share of practices that are corporate-owned.
Facing financial strain and burnout because of the pandemic, some independent physicians felt they had no choice but to close their practices and go to work for larger healthcare corporations. Roughly 83,000 physicians have become employees of hospitals or other corporate entities since the start of the pandemic, according to Avalere.
Pandemic-related factors aside, it's not hard to see why corporate medicine might be enticing to a private physician.
As an employee of a larger system, doctors don't have to deal with the administrative headaches of billing and paperwork that accompany private practice. They're also guaranteed a set salary and working hours—unlike an independent physician, whose income and hours often depend on the volume of care he or she delivers and the overhead expenses the practice accrues.
But as large health systems seize an ever-growing share of the market, they accumulate more leverage to demand higher prices from patients and insurers. And they're not shy about using it. When a hospital acquires a physician practice, prices for healthcare services increase by more than 14%, according to research published in the Journal of Health Economics.
Those higher costs don't translate to higher salaries for doctors. A recent Health Affairs study found that a physician's salary actually decreases after his or her practice is acquired by a hospital. Doctors in some specialties experience average salary cuts of nearly $10,000 after a hospital takes over their practice.
There's no evidence that higher prices lead to better care for patients. In fact, practices owned by a hospital report higher preventable hospital admission and readmission rates among their patients than small, independent practices, according to a report published by the Annals of Family Medicine.
That's because consolidation in the healthcare market limits competition and choice. The consequences, per a National Bureau of Economic Research working paper? "Patients are more likely to choose a high-cost, low-quality hospital when their admitting physician's practice is owned by that hospital."
That's sometimes because doctors employed by large conglomerates are often prohibited from referring patients to providers outside their health system. So a patient might not be able to see a specialist with expertise on a particular health condition if that specialist isn't part of the referring provider's network.
It's no wonder patients report lower satisfaction rates when they receive hospital care in markets with higher levels of concentration.
Health systems are keeping much of those higher prices from consolidation for themselves. Studies indicate that a hospitals' revenue jumps nearly 20% after it acquires a physician practice.
Patients and providers should lament the increasing corporatization of medicine. All too often, it's a recipe for lower-quality, higher-priced health care.
https://www.blogger.com/blog/post/edit/3936036848977011940/7871200150999485560
