Doctors bring in a lot of money for hospitals

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Doctors are generating a lot of revenue for hospitals — much more than those doctors receive in salary, according to a recent survey by physician staffing firm Merritt Hawkins.

Why it matters: It’s easy to see why hospitals view acquiring physician practices as a lucrative opportunity — which hospitals are doing at a rapid pace.

  • “This is [a] good reminder that doctors are the gateway to the rest of the health care system. It’s doctors that make the decisions about whether people get admitted to the hospital, or get a lab test, scan, or prescription,” the Kaiser Family Foundation’s Larry Levitt said.

Go deeper: A recent survey by the American Medical Association found that for the first time ever, the U.S. has more physicians who work as employees than those who run their own practice.

Click to access MerrittHawkins_RevenueSurvey_2019.pdf






When Hospitals Merge to Save Money, Patients Often Pay More

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With 8k more physicians than Kaiser, Optum is ‘scaring the crap out of hospitals’

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Since its acquisition of 250 Las Vegas-area physicians in 2008, UnitedHealth Group has steadily expanded its physician workforce to shield itself from competitors and hospitals, according to a Bloomberg report.

To date, the health insurance giant’s physician arm, OptumCare, employs or is affiliated with about 30,000 physicians. If OptumCare completes its acquisition of Davita Medical Group, the insurer will tack on another 17,000 physicians to its ranks — making it one of the largest physician employers in America.

Hospitals are gobbling up physicians, too. A recent Avalere Health study found that by mid-2016, hospitals employed 42 percent of U.S. physicians. Nashville, Tenn.-based HCA Healthcare has roughly 37,000 physicians, Bloomberg reports. Still, Optum outpaces Oakland, Calif.-based Kaiser Permanente’s roughly 22,000 physicians by 8,000.

“This is obviously scaring the crap out of hospitals in many markets,” Chas Roades, CEO at consulting firm Gist Healthcare, told the publication. By controlling a greater number of physicians, Optum is not only buffering itself from competitors, but attempting to steer patients toward lower-priced care outside of the hospital.

In some cases, Bloomberg notes, UnitedHealth is directing members toward its acquired physicians. For example, UnitedHealth lists New West Physicians, a Denver-area group of 120 physicians that the insurer purchased last year, as a favored narrow-network plan for commercial members. Some members can see the physicians for 20 percent to 30 percent less in out-of-pocket expenses compared to physicians outside the network.

Andrew Hayek, a leader in UnitedHealth’s care delivery operation, told Bloomberg the company has “been slowly, steadily, methodically aligning and partnering with phenomenal medical groups who choose to join us.” In the future, OptumCare hopes to expand its 30-market operation to 75 markets, including the nation’s most populous states: California, Texas, Florida and New York.

Whether it’s hospital- or insurer-employed physicians, Ken Marlow, an attorney with Waller Lansden Dortch & Davis, told the publication, “The smartest participants in the system are the ones who are going to be able to provide quality care at the lowest cost setting. Whoever gets there first, and whoever is able to do that, I think will be the winner.”


Hospitals acquired 5,000 physician practices in a single year

Since hospital-employed doctors tend to perform services in an outpatient setting, the trend increases costs for Medicare and patients.

Hospitals have been scooping up physician practices at a record clip. Research conducted by Avalere for the nonprofit Physician Advocacy Institute shows hospitals nabbed 5,000 physician practices and employed 14,000 physicians between July 2015 and July 2016, an 11 percent uptick.

Since 2012, that’s a 100 percent increase in hospital-owned physician practices, indicating those medical groups may be struggling to maintain independence in a healthcare landscape that is increasingly geared toward larger, integrated systems.

That scenario increases costs for both Medicare and patients themselves, since hospital-employed physicians tend to perform services in a hospital outpatient setting. The researchers revealed higher costs for services such as colonoscopy and cardiac imaging.

Increased physician employment by hospitals, in fact, caused Medicare costs for four healthcare services to rise $3.1 billion between 2012 and 2015, with beneficiaries facing $411 million more in financial responsibility for these services than they would have if they were performed in independent physicians’ offices, the research showed.

From mid-2012 to mid-2016, the percentage of hospital-employed physicians increased by more than 63 percent, with increases in nearly every six-month time period measured over these four years. All regions of the country saw an increase in hospital-owned practices at every measured time period, with a range of total increase from 83 percent to 205 percent.

This trend, the authors said, shows government- and insurer-mandated payment policies favor larger health systems, creating a competitive disadvantage for independent physicians, many of whom are already struggling financially due to administrative and regulatory burdens. Independent physicians often find it prohibitively difficult to cut costs while maintaining clinical quality, and failure to maintain quality can result in federal reimbursement penalties.

The acquisition trend held true in every region of the country, but was most prevalent in the Midwest; it was least prevalent in the South.

PAI is examining these trends as part of an ongoing effort to better understand how physician employment and health care consolidation affects the practice of medicine and impacts patients.

Georgia Supreme Court rules Northside Hospital can’t shield all financial records in fight over state open-records law

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The Georgia Supreme Court ruled Thursday that Atlanta-based Northside Hospital can’t bar public access to all financial records, overturning a lower court’s decision, according to The Atlanta Journal Constitution.

The lawsuit was brought by plaintiff E. Kendrick Smith, who sought records from Northside’s $100 million acquisition of four physician practices. When the hospital rejected his request, Mr. Smith sued.  

The case concerns whether the nonprofit hospital should be subject to Georgia’s open-records law, Northside has argued is it not bound to the law because it’s a private nonprofit organization, not a public entity. The lower court rulings agreed with Northside’s stance arguing its financial records were not subject to disclosure.

Georgia Supreme Court justices opposed Nothside’s postion regarding the open record laws, but the court also rejected the plaintiff’s argument that all of the hospital’s financial records should be public. Instead, they remanded the dispute back to the lower court for further proceedings to determine which specific financial documents should be public record.

Attorney Peter Canfield, who represented Mr. Smith, argued Northside Hospital is subject to the open record laws because it was created by a public hospital authority, which is a public entity and the system operates on the authority’s behalf.

“The corporation’s operation of the hospital and other leased facilities is a service it performs on behalf of the [county’s] agency, and so records related to that operation are public records,” Georgia Supreme Court Justice Nels Peterson wrote in the ruling, according to the Atlanta Journal Constitution.