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So read the headline in Modern Healthcare on 14 November 2017. The article was based on several studies: a Northwestern University, Kellogg School of Business article entitled “Price Effects of Cross Market Hospital Mergers” (…/price-effects-of-cro…), a Rice University, Baker Institute for Public Policy study, “The Integration and De-integration of physicians and Hospitals Over Time” (…/CHB-pub-PHITrends-012417.p…) and an analysis from Avalere Health of a study from Physicians Advocacy Institute, “Implications of Hospital Employment of Physicians on Medicare & Beneficiaries” (…/PAI_Medicare%2…)

– Understanding the implications of recent physician employment trends provides a better understanding of today’s healthcare marketplace.
– Physician employment by hospitals grew by 49% between 2012 and 2015. More than 140,000 physicians were employed by hospitals in 2015. Less than half of practicing physicians in the U.S. owned their medical practice in 2016, according to Modern Healthcare, citing the AMA.
– Healthcare services provided in hospital outpatient department (HOPD) settings are reimbursed at higher rates than when provided in physician offices. The differences may be more than twice as much.
– Physicians employed by hospitals perform a higher volume of services in HOPD settings than in physician offices. For some procedures studied, employed physicians were 7 times more likely than independent physicians to perform services in an HOPD setting
– For certain cardiology, orthopedic, and gastroenterology services, hospital employment of physicians results in up to 27% higher costs for Medicare and 21% higher costs for patients.
– For the services studied, the increased costs from 2012 -2105 were $2.7 billion for Medicare and $411 million of increased financial responsibility for Medicare recipients.
– Additionally, hospital mergers cause price increases of 6% to 10%, when the hospitals are in the same state (sharing insurers) even when the hospitals are not adjacent.
– And many of the relationships–merger, hiring of physicians and degree of integration of medical staff from independent practice associations to full integration (hired and salaried)–are complex and of a relatively unknown outcome. The goals that allowed the legal formation of such combinations, namely higher quality and lower costs, have not been proven. Says the Rice study: “Some studies suggest that tighter levels of physician-hospital integration may be associated with higher expenditures. There is limited, mixed evidence of the effect of integration on admissions and utilization. Evidence on the association between integration and quality of care is similarly contradictory. While several studies show quality improvements when physicians and hospitals are integrated, others reveal lower quality or no association between integration and quality measures. Additionally, most previous research suggests that physician-hospital integration may increase the price of health care.”
– As Niche previously reported from Moody’s (…/…/05/18/moodys-report), hospital margins, in general, have been squeezed by increased physicians’ salaries.

NICHE believes that Fort Wayne will be an interesting laboratory in which to study these outcomes over time. The Rand Report in Indiana would suggest that prices are high, but no measures of quality suggested that patients had not received a good value. The growth in competition, as IU Health’s arrival and expansion suggest, will add data from yet another organizational model, academic medicine, as will the likely growth of concierge practice. And lastly, quality differences should become more clearly differentiated as public education on health matters increases. As Modern Healthcare suggests, the increases in cost may not be sustainable for hospitals, government or patients.