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A new study gives ammunition to what health economists and health insurers have argued for years: When hospitals buy physician practices, the result is usually higher hospital prices and increased spending by privately insured patients.The study, published Monday in the journal Health Affairs, was based on an analysis of 2.1 million hospital claims from workers of self-insured employers between 2001 and 2007. The analysis by Stanford University researchers found prices were most likely to increase when hospitals bought physician practices, as opposed to hospitals forming looser contractual relationships with physicians.
Hospitals have increasingly bought physician practices over the past decade, arguing it helps them coordinate care and control costs. But insurers and many economists say hospitals’ main motivation is negotiating higher prices with insurers and building referrals to grow admissions.
The Affordable Care Act has accelerated the trend by encouraging the establishment of Medicare accountable care organizations that pay large groups of providers based on how well they control costs and improve quality.
The Federal Trade Commission has been watching the growing collaborations between hospitals and physicians, and until now has intervened to stop them only when one organizations controls so many physicians in one community that it is considered anti-competitive. Experts say the Stanford study could give the FTC ammunition to more closely examine and potentially block future hospital purchases.
“This study could be the evidence the FTC needs to challenge hospital physician practice acquisitions…that they believe have a strong prospect of leading to higher prices for consumers,” said Paul Ginsberg, a professor of health policy at University of Southern California.
The American Hospital Association, which defends hospital acquisitions as good for patients, called the study outdated and said it did not look at the impact on physician prices or spending, only those of hospitals.
Caroline Steinberg, the association’s vice president of trends analysis, said hospitals aren’t buying doctors to drive up prices. “Hospital are integrating with physicians because it is a necessary way to engage physicians in innovative payment methods such as bundling payments for one service such as hip replacements and ACOs,” she said.
Steinberg noted that such payment arrangements — which reward hospitals only if they contain costs — did not become common until after 2007. Linking payments to cost containment can serve as a counterbalance to make sure hospital-doctor arrangements don’t drive up spending, she said. Insurers’ greater use of so-called “narrow networks” of providers can also potentially thwart hospitals that try to increase prices by buying physician practices, she added.
Steinberg said many hospitals find it easier to buy doctors’ practices because it’s easier to stay within federal antitrust and anti-kickback laws.
The FTC won a victory in January when a federal judge blocked Idaho’s largest hospital system from buying the state’s largest physician practice, which would have given Boise-based St. Luke’s Health System control over 80 percent of the doctors in Nampa, Idaho. The FTC fought the merger, arguing it would drive up physician prices. The federal judge ruled the hospital could improve quality by working closer with physicians without buying their practices.
“The message from the study confirms that when doctors and hospitals merge it may not be in consumers’ best interest,” said Daniel Kessler, a study co-author and law and health policy professor at Stanford. “We are not saying ACOs and integration are necessarily a bad thing but there is a potential downside and people should be aware of it and here is more evidence of it.”
Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.
A new study gives ammunition to what health economists and health insurers have argued for years: When hospitals buy physician practices, the result is usually higher hospital prices and increased spending by privately insured patients.
The study, published Monday in the journal Health Affairs, was based on an analysis of 2.1 million hospital claims from workers of self-insured employers between 2001 and 2007. The analysis by Stanford University researchers found prices were most likely to increase when hospitals bought physician practices, as opposed to hospitals forming looser contractual relationships with physicians.
Read more here: http://www.washingtonpost.com/national/health-science/hospitals-purchase-of-doctors-leads-to-higher-prices-spending-study-finds/2014/05/05/67bc0e40-d497-11e3-8f7d-7786660fff7c_story.html
Where Are the Referrals Going?
If you are an independent, self-employed physician and your referrals are drying up, it could be part of the growing trend of hospitals hiring their own doctors. Hospital-employed physicians are often asked to refer patients to in-house physicians, disrupting referral patterns that independent physicians have counted on for years.
Jewett Orthopaedic Clinic, with 25 physicians in 6 subspecialties, has thrived for 77 years in the Orlando area. But last year, "for the first time ever, we noticed a drop-off in business," said John W. McCutchen, MD, Jewett's former president and chairman of the board, who is now retired.
Read more here: Medscape Article - April 2013.pdf
FOR IMMEDIATE RELEASE
ASSOCIATION OF INDEPENDENT DOCTORS (AID) STATEMENT REGARDING MEDPAC RECOMMENDATIONS
Winter Park, FL and Washington, DC – January 27, 2014 – The Association of Independent Doctors (AID) issued a statement today, regarding MedPAC’s (Medicare Payment Advisory Commission) recommendations, to increase hospital inpatient and outpatient payments in 2015, and reduce differences between hospital outpatient departments and physician offices for selected procedures.
AID’s statement follows:
On January 16, 2014, MedPAC approved recommendations that Congress: (a) increase Medicare payment rates for hospital inpatient and outpatient prospective payment systems by 3.25% in 2015, and (b) reduce or eliminate payment differences between hospital outpatient departments and physician offices for selected procedures.
Particularly during times of strain on government budgets as well as on taxpayers, AID does not believe that increases in spending for hospital payments are warranted.
At the same time, AID commends MedPAC for its adoption of a “site neutral” payment policy, in which payments to hospitals would be reduced for some procedures, resulting in reimbursement parity between hospital outpatient departments and independent physician offices for the same procedures performed. A site neutral reimbursement policy would reduce cost to patients and to Medicare, and reduce market imbalances that increase consolidation in health care.
The American Hospital Association (AHA) expressed displeasure with the site neutral recommendation, noting “[W]e are troubled by the recommendation to reduce or eliminate payment differences between hospital outpatient departments and physician offices for 66 ambulatory payment classifications, which could threaten access to care for Medicare beneficiaries.”
However, this opposition, citing threats to patient access to care, stands in stark contrast to some press reports regarding the profitability, pricing practices, and executive compensation at some hospitals — in particular non-profits that are exempt from income, sales, real property, and tangible personal property taxes. 
Time Magazine reported that one non-profit hospital’s 2010 operating profit was $531 million, on revenues of $2.05 billion, with a profit margin of 26%; 2 and its President’s compensation that year was $1.85 million.  Another non-profit hospital’s 2010 operating profit was reported at $196.8 million, with $2.586 billion in revenue; and executive compensation of $4,065,000 for the CEO, $3,243,000 for the CFO, $2,220,000 for the EVP, and $1,798,000 for the head of the dental department.  Other press reports indicate that, according to audited financial statements, another hospital made $948 million in profits from 2011-2012. 
Press reported that the average operating profit margin “for all nonprofit hospitals, [is] 11.7%, even when those that lose money are included.” 
Last year, MedPAC noted the urgency of addressing disparate prices — and the relationship between high hospital prices, and a rapidly consolidating marketplace: “Payment variations across settings urgently need to be addressed because many ambulatory services have been migrating from physicians’ offices to the usually higher paid OPD setting, as hospital employment of physicians has increased.”  MedPAC further noted, “The growth of hospital employment of physicians is leading to higher spending by private plans outside of Medicare and higher cost sharing for their enrollees.”  MedPAC concluded, “If the same service can be safely provided in different settings, a prudent purchaser should not pay more for that service in one setting than in another.” 
High hospital charges have a profound adverse impact on U.S. Government spending, and on costs to patients; and have contributed to market consolidation and reduced competition. By pursuing MedPAC’s recommendations, and lowering high reimbursements to hospitals, Congress can promote at least three important objectives: (1) reduce U.S. Government spending; (2) lower cost of health care for patients when they seek health care services at hospitals; and (3) help level the playing field between hospitals and independent doctor practices, by alleviating marketplace distortions that contribute to hospital consolidation and excess market power.
 Time Magazine, 2/20/2013 cover story by Steven Brill, Bitter Pill: Why Medical Bills Are Killing Us, See http://content.time.com/time/magazine/article/0,9171,2136864,00.html at p. 2 (“Time Article”).
 Id at p. 8.
 CBSNews.com. Nonprofit hospitals make billions: Should it get a tax break? By Ben Eisler, Terrell Brown, 05/30/2013. See http://www.cbsnews.com/8301-505263_162-57586783/nonprofit-hospital-makesbillions- should-it-get-a-tax-break/.
 Time Article at p. 8.
 MedPAC Report on Medicare And The Health Care Delivery System released on June 14, 2013 (“Report”), at p. 33. See http://www.medpac.gov/documents/Jun13_EntireReport.pdf.
 Report at p. 36.
 Report at p. xii.
Hospitals, among the largest landowners in many communities, are often designated as nonprofits, allowing them to benefit from state and federal tax breaks for providing “charity care and community benefit.” The exemptions collectively amount to more than $12 billion annually, health economists say.
Now, provisions of the Affordable Care Act, along with Internal Revenue Service reporting requirements imposed in recent years, are revealing how much medical centers give back to their communities. And many health experts have found them wanting.
“You should get close to the value of tax exemption in community benefit,” said Paula Song, professor of health services organization at Ohio State University. “I think you’ll find most hospitals aren’t providing that.”
A study this year in The New England Journal of Medicine found that hospitals spent an average of 7.5 percent of their operating costs on charity care and community benefit, based on filings the I.R.S. has required only since 2009. Some spent under 1 percent and others about 20 percent.
What’s more, the I.R.S. allows hospitals to use broad definitions of community service, including the value of traditional charity — care dispensed free or at a discount to those who cannot pay — and the money hospitals calculate they lose because Medicaid reimburses them less than their costs. Hospitals can also take credit for hosting health fairs, operating some research labs and “donating” their executives’ time to serve on local community boards.
“Nonprofit hospitals may have been founded on the basis of community need but that doesn’t mean they’re not very profitable,” said Gary Young, an author of the New England Journal of Medicine article and a professor at Northeastern University. “Towns are hurting and they see this affluent institution in their midst on lots of land and say, ‘Hey, cough up some money. ”
Melinda Hatton, general counsel of the American Hospital Association, said that all hospitals have a financial-assistance program for the poor, and that they provide services like training new physicians and treating Medicaid patients who have no other doctors. “Tax-exempt hospitals devote the money they would pay in tax to the health of the community,” she said. “I hope cities don’t undervalue that.”
The federal government has not specified the amount of benefit a hospital should provide to be exempt from federal taxes, though their status will now be subject to review every three years under the new health care law. But states and cities are already poised to make demands, said John D. Colombo, a professor of tax law at the University of Illinois Urbana-Champaign.
In a case that is being closely watched, Pittsburgh this year filed suit challenging the University of Pittsburgh Medical Center’s tax-exempt status, saying that the medical center should pay some payroll taxes and more property taxes, estimated to total about $20 million annually.
“Its commitment to charity is dwarfed by its preoccupation with profits,” E. J. Strassburger, the city’s lead lawyer on the case, wrote in a letter to the city solicitor. He said that the hospital failed most, if not all, of Pennsylvania’s criteria for a tax-exempt charity, and that its annual report described it as a “$10 billion global health enterprise,” with excess operating revenue of nearly $1 billion and reserves of more than $3 billion. The institution paid 20 executives more than $1 million annually, he said. Despite a charity policy, the hospital made little effort to take care of poor people except in emergencies, he asserted, spending only about 2 percent of its net patient revenues on charity care.
The hospital does not dispute that figure but says it is being misconstrued. It acknowledges spending about $87 million — about 2 percent — in donated care for patients who qualify for financial assistance. But it says that it effectively donates about another $150 million when accounting for Medicaid shortfalls and patients who did not pay bills, and that it contributes to the city in other ways, like financing college scholarships for public school students. The medical center — which has countersued — says that the city is abusing tax laws in singling it out since it is following rules for nonprofits.
But many experts argue that most hospitals today do not deserve their tax-exempt status.
“The standard nonprofit hospital doesn’t act like a charity any more than Microsoft does — they also give some stuff away for free,” Professor Colombo said. “Hospitals’ primary purpose is to deliver high quality health care for a fee, and they’re good at that. But don’t try to tell me that’s charity. They price like a business. They make acquisitions like a business. They are businesses.”
The exact value of tax benefits is difficult to estimate for any particular hospital, but the benefits include exemptions from federal and state taxes, local property taxes and sales taxes, said Simone Singh, a professor of health management at the University of Michigan.
Many tax experts say that, at the very least, more stringent reporting standards are needed to ensure that tax-exempt hospitals fulfill their mandate.
Under current practices, they say, hospitals can overstate the value of the charity care they provide by subtracting the fees they collect from their estimated costs, which are highly subjective. If a hospital forgives a $3,000 bill for three stitches for a poor patient, how much of that should be counted as charity if the charges are greatly inflated?
Some patients who are hard pressed to pay today’s high charges found that hospitals can be aggressive in bill collection. When David DiCola, 61, went to Roger Williams Medical Center in Providence, R.I., for treatment of a finger infection, the bill was about $1,500. Uninsured, he offered the hospital $500; it refused his offer and sent it to a collection agency, he said.
After Oliver Nisch, 49, of San Francisco, was hit by a car that ran a red light last year, he spent about 12 hours in the emergency room at San Francisco General Hospital. When the driver’s insurance took a long time to pay, the hospital began billing him for $37,000, an amount he said he could not pay; his health insurance policy has a deductible of $10,000. The hospital, he said, sent him a reduced bill of $26,000 and “went after me like crazy.”
The New England Journal of Medicine study found that religious hospitals provided no more benefit to their communities than nonreligious ones, but that major teaching hospitals provided “somewhat more” — though that tended to come in the form of hard-to-quantify services, rather than direct patient care.
For example, on its 2011 tax form, Johns Hopkins Hospital said it spent about 11 percent of revenues on charity care and community benefit, but only about 2 percent was on free or discounted treatment. More than half was spent on educating health care professionals; it did not take any credit for treating Medicaid patients or research.
By contrast, the Cleveland Clinic said that nearly 14 percent of its revenue was spent on activities that would qualify. But two-thirds of that was for professional education and research, and it did claim credit for its so-called Medicaid shortfall.
“There are many gray areas,” Dr. Young said. “Is there manipulation? Absolutely.”
The Association of Independent Doctors (AID) issued a statement today, regarding the Physicians’ Workgroup Meeting that was held on Friday, November 15, 2013, in the U.S. Capitol in Washington, DC.
AID’s statement follows
AID PRESENTATION IN WASHINGTON, DC
On Friday, November 15, 2013, AID co-founder Thomas A. Thomas, C.P.A. spoke at the Physicians’ Workgroup meeting, an all-day event organized by Congressman Pete Sessions (32nd District, TX; and Chairman, Committee on Rules). The event was held in the U.S. Capitol in Washington, DC; and was a doctor-led meeting to discuss issues affecting health care, including electronic medical records, ICD-10, the Affordable Care Act, and the Medicare sustainable growth rate (SGR). Please view the video of Thomas’s presentation to the right.
A number of Members of Congress (including several of whom are doctors) either spoke at or attended portions of the event, including Reps. Sessions, Price, Roe, Fleming, Gingrey, Heck, Hartzler, Noem, Bucshon, Benishek, and Webster. In addition, several doctors from various specialties and geographic areas, presented at the meeting to discuss their perspectives on the state of health care.
Mr. Thomas’s presentation was entitled “Challenges Faced by Independent Physicians, and Impact on Patients & Health Care”– and focused on the following topics:
The results of the above are: Less choice for patients, diminished competition, a doctor shortage, and higher costs to Medicare and to patients. Mr. Thomas noted several proposed solutions to these systemic problems that play out to the detriment of all Americans. Among them:
 See http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Clinical- Transformation-New-Business-Models-for-a-New-Era-in-Healthcare.pdf
 For example, The Wall Street Journal reported that the number of specialty physicians who see patients at hospitals and who are employed by the hospitals, has risen by four times since the year 2000, and the equivalent share of hospital-employed primary-care physicians has doubled in the same time frame. See http://online.wsj.com/article/SB10000872396390443713704577601113671007448.html.
 See footnote 3. (Statistic for the period 2000-2013.)
For no compelling reason, a commanding tool for trying to contain health care costs is lying unused. That sidelined powerhouse is the Medicare claims database, which holds a record of all payments from taxpayers to physicians and other providers for seniors’ health care.
If bipartisan legislation now before the Senate becomes law, this information would be made available to all Americans through a free, searchable online database. It would instantly position Americans to secure more value for the $2.7 trillion being spent this year on health services. That’s because the publication of the Medicare data will become health care’s new financial baseline; the measure of what America’s largest and most powerful buyer of health care gets for nearly $600 billion a year.
Today, free access to the Medicare database is limited to a small number of bureaucrats and academics despite a federal judge’s recent ruling in favor of greater public access. If the public, press or watchdogs want this information, they must try to wade through the federal bureaucracy — a process that will never result in the free flow of information required for transparency.
Markets work best when information is transparent for buyers and suppliers. But in most instances today, patients lack any comparative information and usually don’t find out the cost of their care until after the fact — if at all.
With this information, the millions of Americans who are self-employed, hold Health Savings Accounts, get their health care through employers or are uninsured will be able to easily find out what Medicare pays for a procedure, and be able to compare prices between doctors’ offices, hospitals and other health care providers.
For example, patients could see how often a physician performed certain lab tests, X-rays, MRIs or other treatments, and at what cost. Similarly, patients could also see the wide price variations between nearby hospitals, clinics and doctors’ offices.
With access to this type of data, consumer groups and other advocates could begin assessing quality of care while researchers could examine regional health disparities and identify ways to address them.
By opening the database up to the public, Medicare would serve as the anchor for the health care system. If costs go out of control, Medicare would provide the power needed to reel them back in.
This fundamental change might be uncomfortable for some people. While patients’ privacy would be fully protected by eliminating all identifying information, there have been some concerns about shedding light on individual practice patterns of doctors, hospitals and providers. Balancing the interests of individuals with the responsibilities to society as a whole is important and achieved by weighing these concerns against the overwhelming benefits of transparency.
The Medicare guarantee is a godsend and lifeline for millions of older and disabled Americans. Transparency provides a huge opportunity to help preserve that guarantee by holding down costs while at the same time improving health outcomes. This should be a transformational moment in the debate over health care — a moment when the most useful information about costs finally becomes easily accessible to patients, providers and insurers.
Sens. Chuck Grassley of Iowa and Ron Wyden of Oregon are co-authors of the Medicare Data Access for Transparency and Accountability Act.
WASHINGTON — A federal advisory panel said Friday that Congress should move immediately to cut payments to hospitals for many services that can be provided at much lower cost in doctors’ offices.
The Medicare Payment Advisory Commission said the current payment disparities had created incentives for hospitals to buy physician practices, driving up costs for the Medicare program and for beneficiaries. Hospital buyouts of doctors, turning independent practitioners into hospital employees, have also led to higher spending by private insurers and higher co-payments for their policyholders, the commission said.
Congress often adopts ideas suggested by the commission, and hospital executives fear that could happen again as lawmakers search for ways to squeeze savings out of Medicare.
Medicare uses different fee schedules and formulas to pay for services provided in doctors’ offices and in hospital clinics.
“In many cases, a physician’s practice that is purchased by a hospital stays in the same location and treats the same patients,” but “Medicare and beneficiaries pay more for the same services,” the 17-member commission said in a report to Congress.
For example, it said, Medicare pays $58 for a 15-minute visit to a doctor’s office and 70 percent more — $98.70 — for the same consultation in the outpatient department of a hospital. The patient also pays more: $24.68, rather than $14.50.
Likewise, the commission said, when a Medicare beneficiary receives a certain type of echocardiogram in a doctor’s office, the government and the patient together pay a total of $188. They pay more than twice as much — $452 — for the same test in the outpatient department of a hospital. (The test is used to evaluate the functioning of the heart.) The commission urged Congress to “equalize payment rates” or at least reduce the disparities, for doctor’s office visits and hospital clinic visits in which similar patients receive the same or similar services.
Variations in payment “urgently need to be addressed because many ambulatory services have been migrating from physicians’ offices to the usually higher-paid outpatient department setting, as hospital employment of physicians has increased,” the panel said.
Under the changes outlined by the commission, hospital clinics could lose 5 percent of their Medicare revenue. But the Medicare program and beneficiaries could save $1.8 billion a year, the panel said.
Hospitals strenuously oppose the cuts, saying they have many costs that doctors practicing on their own do not have.
“Medicare already underpays hospitals for caring for patients in an outpatient setting, and the commission’s proposals would worsen that,” said Joanna Kim, a vice president of the American Hospital Association. “Hospitals might be forced to curtail services, threatening access for the poor and patients with multiple chronic conditions.”
Full-service hospitals, unlike doctors’ offices, have emergency rooms and “standby capacity” to care for victims of accidents, natural disasters, epidemics and terrorist actions. And hospitals are subject to more stringent regulation.
Jonathan D. Blum, deputy administrator of the Centers for Medicare and Medicaid Services, said the Obama administration had “no official position” on the commission’s proposal. But at a Congressional hearing on Friday, Mr. Blum said he supported the general goal of “site-neutral payments,” meaning that Medicare would pay about the same amount for a service, regardless of where it was provided.
The new health care law encourages doctors and hospitals to join forces, coordinate care and hold down costs. But the Medicare commission cited another reason for collaboration, saying, “Hospitals often choose to employ physicians to ensure a stable stream of tests, admissions and referrals to specialists.”
From 2010 to 2011, the commission said, the number of echocardiograms provided to Medicare beneficiaries in doctors’ offices declined by 6 percent, but the number in hospital outpatient clinics increased by nearly 18 percent.
The shift reflects “financial incentives in Medicare’s payment systems” and coincides with “rapid growth in hospitals’ employment of cardiologists,” the panel said, noting that the share of cardiologists who are employed by hospitals tripled, to 35 percent in 2012, from 11 percent in 2007.
In a separate section of its report, the panel explored broader changes in Medicare, under which each beneficiary would receive a fixed amount of federal money to buy insurance from a private health plan or to help pay for coverage under the traditional Medicare program.
Republicans have championed such proposals as a way to increase choices for beneficiaries and save money for Medicare. President Obama and other Democrats have denounced the idea, saying it would turn Medicare into a voucher program and expose beneficiaries to higher costs.
The nonpartisan Medicare commission said the proposals were not necessarily good or bad but were “worth investigating.”
The effects on beneficiaries and the potential savings, it said, depend on the answers to crucial questions: whether all plans would offer the same benefits, how the federal contribution would be set, how it would increase over time and whether the traditional Medicare program would compete directly with plans offered by private insurers.
Since January, at least 114 local doctors have traded their independence for steady paychecks from hospitals. The move, part of a nationwide trend, has wide implications not only for doctors but also for patients' pocketbooks.
Often, patients don't realize their physician has become a hospital employee until they get their bill. These often will be higher because hospitals can negotiate higher reimbursement rates with insurers, according to comparisons on insurance Web sites.
Read more here: http://articles.orlandosentinel.com/2013-04-03/health/os-doctors-unite-20130403_1_orlando-health-physician-partners-independent-physicians-independent-doctors
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The Association of Independent Doctors (AID) is a 501(c)(6) non-profit organization.