Hospitals Buy Physician Practices; Prices Rise 240%

There is an interesting article in the August 10th, 2014 issue of Medical Economics magazine entitled, “Lopsided Value: Why cost may ‘level the playing field’ for independent, office-based physicians.”

The article by Tammy Worth describes how when a hospital system buys a physician practice, the hospital can then consider the doctor’s office part of their ‘outpatient’ facility and therefore, charge a facility fee in addition to the doctor’s professional fee.  This holds true for when the hospital bills Medicare or private insurance carriers.

As an example, the article states how an EKG at a doctor’s office cost $188 before it was bought by a hospital.  However, if that same EKG is billed as an ‘outpatient’ hospital service, it costs $452.89—2 times more.  The EKG costs more in the second scenario because of that additional facility fee that is added.

In another example, an office visit for a complex new patient appointment costs $200 at an physician practice NOT owned by a hospital.  However, if the hospital buys the practice and charges the additional facility fee, the price goes up to $340—170% more.

Medicare and private insurance carriers have been slow to adjust their reimbursements, so as of now, they are just paying these higher fees.

What does this mean to employee benefits professionals and healthcare consumers?

  • If you do nothing to your plan, your costs will go up because the provider community is consolidating and using that consolidation to charge more.  Even if your population does not use more medical services, your costs will go up because the cost per service is going up.
  • If you are a healthcare consumer and are going to a doctor’s office that is owned by a hospital, expect an additional facility charge and find out how much it will be in advance.  It could double the price of your medical care and if you like, vote with your feet and go elsewhere.