Shrinking of private practice may drive up health care costs: study

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Over the last three years, more and more doctors have left private practice to work for hospitals. A new study has found that this trend might be contributing to the rising cost of health care, at least in the short term.

Hospital groups, which continue to be some of the biggest donors to members of Congress, wielded considerable influence during the debate over the Affordable Care Act, last year's health care reform law: during 2009 and 2010, hospital and nursing home groups spent over $216 million on lobbying, employing over 1,100 lobbyists in 2010 alone, according to the Center for Responsive Politics.

Hospitals are snatching up doctors in part in response to incentives mandated in the health care overhaul. One of its biggest selling points was the idea that we could lower costs and improve care by encouraging doctors to band together and coordinate a patient's treatment. Accountable Care Organizations (ACOs), as these groups of physicians are called, got a push forward in March when Medicare issued a proposed rule describing the incentives these organizations will receive if they lower costs while maintaining high quality care.

While ACOs can take many forms–not all of which involve doctors working together for a hospital–employing doctors is increasingly seen as a way to prepare for the change.

The study, released Aug. 18 by the Center for Studying Health System Change, found that costs can be higher because physicians are often pressured by hospital employers to increase the volume of procedures they perform. Hospitals that employ most of the physicians in town can also negotiate for higher prices from insurance companies, and often charge doctors facility fees that are then passed on to patients and insurers.

Dr. Melissa Walton-Shirley, a cardiologist in Glasgow, Ken., works in private practice, but many of her colleagues work for hospitals. She said doctors at some hospitals work on a point system: the more productive they are, the more points they accumulate, which translates to more dollars earned by the hospital.

"If you're not able to make [enough points], you may feel pressure to do more procedures, do more tests, and see more patients," said Walton-Shirley. She hastened to add that not all doctors who work for hospitals are in the same boat; salaried physicians, for example, may feel less pressure.

Dr. Ann O'Malley, one of the authors of the study, said the problem is that physicians in this country are currently paid by the procedure or visit. "Right now payment for services in this country has nothing at all to do with whether these services are effective," she said.

Accountable Care Organizations were conceived as a way to address this problem, by rewarding quality rather than quantity. O'Malley said they may do so, but the key is getting the doctors involved to truly work together–and making sure that they aren't being rewarded for the number of procedures they perform.

But changing the way we pay for our entire health care system is no easy task.

"How we move to a different payment method is not clear right now," said O'Malley. "We don't want to be disruptive to patients. It's got to be an incremental process."

Dr. David Goodman, one of the principal investigators at the Dartmouth Atlas, which was instrumental in developing and popularizing the accountable care concept, agrees that if change came too quickly it would be devastating to some institutions.

A lot of hospitals in New Jersey, Goodman said, spend a lot on health care and receive relatively poor marks on quality. At the other end of the spectrum are places like the Mayo Clinic, heralded for its excellent low-cost care.

"If a hospital in New Jersey were to suddenly start behaving like the Mayo Clinic, they would be bankrupt next year," said Goodman. "They've built their organization in response to where the institutional rewards are."

A hospital might need to hire a battery of nurse practitioners to call chronically ill patients and make sure they are taking their pills, for instance, and cut back on expensive spine surgeries that are of questionable use.

Accountable Care Organizations were envisioned as a way to soften the landing for hospitals looking to make these changes, which can be expensive in the short run. But to work well, doctors will have to work closely with hospitals–in many cases, as employees, according to Goodman.

"It's hard to imagine a well-functioning ACO without very strong formal ties between the medical staff and hospitals," Goodman said.

Whether employing doctors turns out to be an efficiency godsend or a cost headache may differ wildly depending on the environment and the motivations of the individual hospitals and physicians involved. These accountable care groups are still largely untested–only a few pilot projects and test cases already exist–but at the rate the health care landscape is changing, their mettle will likely be tested soon enough.