Policy & Regulation News

Physician Groups Calling for Payment Reform

By Ryan Mcaskill

A new study found that the costs per patient for hospital-owned physician groups are higher than groups owned by physicians.

- There are many different factions of the healthcare industry that are pulling for payment reform. With the increased pressure to meet the demands of the Affordable Care Act and transition from  the fee-for-service payment model to a value-based one, older regulations need to be replaced in-order for new platforms to succeed.

One sector that is calling for payment reform is hospital-owned physician groups. According to a University of California-Berkeley study that was published in the Journal of the American Medical Association, the costs per patient for hospital-owned physician groups in California are higher than in groups owned by physicians themselves.

The groups owned by hospitals were 10.3 percent higher and those owned by multiple hospitals were 19.8 percent higher than groups owned by physicians. For the 118 physician-owned organizations, serving 3,065,551 patients, the mean expenditure was $3,066. For 19 organizations owned by local hospitals, serving 728,608 patients, the mean expenditure was $4,312. For organizations owned by multi-hospital systems, the mean expenditure was $4,776.

“These findings are in contrast to the hope and expectation that organizational consolidation of physicians with hospitals would result in greater coordination, and hence lower expenditures,” the report said.

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  • Last month, RevCycleIntelligence.com reported on the 2014 trend of hospital consolidation instead of the “mega-merger” that was prevelant in 2013. While this consolidation is making for better quality of care and reduce expenditures, the report found that it can also lead to higher expenditures through the greater use of hospital-based ambulatory services and through greater hospital pricing leverage against health insurers.

    The report obtained data on total expenditures for the care provided to 4.5 million patients treated by integrated medical groups and independent practice associations in California between 2009 and 2012. The patients were covered by commercial health maintenance organizations (HMO) insurances, but did not include patients covered by commercial preferred provider organization (PPO) insurance, Medicare or Medicaid.

    “Total expenditures per patient annually, measured in terms of what insurers paid to the physician organizations for professional services, to hospitals for inpatient and outpatient procedures, to clinical laboratories for diagnostic tests, and to pharmaceutical manufacturers for drugs and biologics,” the report reads.

    The report concludes that any reform should focus on payment methods that focuses on total expenditures that promote coordination but also creates incentives for efficiency and price reduction. From the perspective of the insurers and patients, between 2009 and 2012, hospital-owned physician organizations in California incurred higher expenditures for commercial HMO enrollees for professional, hospital, laboratory, pharmaceutical and ancillary services than physician-owned organizations.