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CAPITOL PERSPECTIVES Healthcare Delivery Consolidation Spells Higher Costs And Less Competition T he consolidation of healthcare delivery over the past protests by the hospital industry. As a result, the ACO model several years has been substantial and is accelerating provides only an upside if costs come in below targets but with the implementation of Obamacare. But what are absolutely no downside if costs exceed expectations. Heads the implications for patients and those paying the bills I win, tails you lose. — employers and taxpayers? The ACO roll-out has expedited hospital acquisitions of A survey by the Medical Group Management Association shows physician practices, ASCs, and other free-standing centers, a nearly 75 percent increase in the number of active physicians in part because physician practices and other providers are employed by hospitals since 2000, while 74 percent of hospital being told they could be frozen out of the market and denied leaders planning to increase physician employment within the access to patients if they do not join up now as part of a next 12 to 36 months. hospital-based ACO. Medicare payment cuts on certain procedures in But does hospital acquisition actually reduce physician offices have resulted in increased hospital costs? And what are the impacts on patient care? acquisition of particular specialties, notably cardiolWHAT DOES MEDPAC HAVE TO SAY? ogy and oncology. For example, the percentage of In an interesting turn of events, the Medicare cardiology practices employed by hospitals more Payment Advisory Committee (MedPAC), which than tripled from 2007 to 2012, rising from 11 peradvises Congress on payment policy, has taken cent to almost 35 percent in that time. notice of this rapid consolidation and noted that Similarly, hospitals are acquiring ambulatory surhospitals are being paid substantially more for gery centers (ASCs), which provide outpatient John McManus, identical procedures that can be provided in the surgical care, at a rapid pace. Analysis by the The McManus Group Ambulatory Surgery Center Association found half jmcmanus@mcmanusgrp.com physician's office. In its June 2013 report, MedPAC stated, "If the of the 150 ASCs that closed since 2009 were pursame service can be safely provided in different setchased by a hospital and are now operating under hospital license and billing at the substantially higher Medicare tings, a prudent purchaser should not pay more for that service payment rate of hospital outpatient departments. Hospitals often in one setting than another. Payment variations across settings retain the center's physicians, nurses, and even the name on the may encourage arrangements among providers that result in building (e.g. The Louisville Endoscopy Center), but bill 78 per- care provided in higher-paid settings, thereby increasing total Medicare spending and beneficiary cost sharing." cent more for the identical procedures it delivered before. MedPAC goes on to recommend reducing hospital payment Proponents of this consolidation claim that it has the potential to improve care coordination and better lends itself to bundled rates to the physician office level for "Evaluation & Management payments and capitation, which can contain costs. They argue (E&M;)" procedures commonly performed in physician offices, salaried physicians who are no longer paid by the procedure will which would save Medicare more than $10 billion over the next be discouraged from ordering unnecessary tests and procedures. 10 years. A similar policy applied to hospital-based cardiac mediThe narrative for years in the health policy community has been cal imaging, where echocardiograms are as much as 141 percent that physician ownership and independent, uncoordinated phy- more expensive in the hospital than in physician offices, could result in more than $1.7 billion in savings per year. sician practices have incentives to overutilize care. The hospital lobby is aggressively pushing back on these Obamacare fully subscribes to this line of thinking through promotion of so-called "Accountable Care Organizations," where proposals, arguing that hospitals need this revenue to offset care would be delivered through consolidated health systems their uncompensated care and poor Medicaid payments, notthat would be responsible for the continuum of care provided to withstanding they get special payments exclusively available to patients. If treatment costs less than set targets and established hospitals and not physician practices (e.g. Medicare and Medicaid quality measures are met, the ACO health care providers would disproportionate share and bad debt). Last Congress, the Senate blocked a House-passed proposal to equalize E&M; payments for share in the savings. However, it is worth noting that the proposed ACO regula- hospitals and physician offices. While Medicare payments are set by statute and depend tion would have penalized ACO providers that exceeded the target. But that proposal was quickly scrapped after vocal heavily on the lobbying prowess of the competing industries 10 LifeScienceLeader.com August 2013