As hospitals take over doctors’ practices, fees rise

By Marni Jameson, Orlando Sentinel
9:11 p.m. EST, September 15, 2012

Hospitals throughout Florida are taking over doctors’ practices at a rapid — and some say worrisome — rate.

The trend, happening across the country, allows hospitals to charge more and doctors to worry less about their financial futures.

Meanwhile, patients and others who foot the bill for health care lose, say some health-policy analysts.

The most recent local example of this is the potential sale of Physician Associates, one of the largest multispecialty practices in Central Florida, with 95 doctors. The physician group is entertaining bids from the area’s most eligible suitors, Florida Hospital and Orlando Health.

Today 40 percent of primary-care physicians nationwide are hospital employees, more than double the number employed by hospitals in 2000, according to Southwind, a Nashville, Tenn.-based consulting group that analyzes health-care trends. In 2000, only one in 20 specialists was a hospital employee; today nearly one in four is.

Buying physician practices is a boon to hospitals because it helps them secure more patients and profits. Once employed, physicians admit their patients to the hospital they work for and also funnel patients there for tests and procedures.

Physicians trade their independence for employment because they see the hospital as a buffer against the increasing challenges of private practice. Hospitals can cover the investment in technology to handle electronic medical records, and the rising cost of malpractice insurance. Some even cover costs for the doctor’s office overhead and staff.

Hospitals also have more clout, so they can negotiate higher payments from insurance companies than solo practices can.

“Doctors watch hospitals get higher payment rates, and they want in on that,” said Dr. Robert Berenson, an analyst at the Urban Institute’s Health Policy Center, a Washington think tank. “They find it attractive to work on high salary with productivity incentives, and get out from under the headaches of managing a practice.”

But all that bonding is driving health-care costs up, and access to care and choice down, say critics of the trend.

“As a result of their allegiance to one hospital, physicians may not give patients the range of referral choices they did before,” Berenson said.

Hospital executives say the acquisition of physician practices helps streamline care and creates an “integrated” health-care-delivery system.

“Acquiring physicians’ practices is not that profitable of an endeavor,” said Dr. Wayne Jenkins, who oversees Orlando Health Physician Group, hundreds of multispecialty physicians employed by Orlando Health. “It gets to where we’re going in the long run.”

That long run is a move from a fee-for-service payment model to value-based reimbursements, which reward good outcomes, fewer readmissions and nonduplication of tests, Jenkins said.

“Yes, some patients will see their bills go up. But consumers may not see the ways costs will come down. Over the years, we’re going to see costs come down more,” Jenkins said.

But others question the practice.

“It doesn’t matter what political party you belong to,” said Dawn Lipthrott, a Winter Park family therapist and patient advocate. “If we’re going to talk seriously about health-care reform, lowering health-care costs and Medicare viability, this is what we should be talking about.

“Unbeknownst to everybody, these consolidations are doubling the cost of health care.”

Lipthrott felt compelled to take action after a routine surgery in 2004 led her to question her medical bills and who got paid what. The next year she launched the Ethical Health Partnerships website to get the word out about the rising costs and compromised care she saw happening as a result of hospital-practice mergers.

“How do I make an informed choice when I don’t know who owns my doctors and whom they’re beholden to?” Lipthrott said. “How is this happening and why does no one know about it?”

No turning back

In Central Florida the movement is well under way.

In recent years, Orlando Health — a multihospital system in Central Florida that operates Orlando Regional Medical Center, Arnold Palmer Hospital for Children, Health Central Hospital and several others — has purchased two large cardiology groups: Orlando Mid-Florida Cardiology and Orlando Heart Center, which together have more than 40 heart specialists.

During the past 21/2 years, Orlando Health Physician Group has grown from 200 employed doctors to more than 400, Jenkins said.

Florida Hospital already has turned more than 200 community physicians into employees who practice in 90 local offices. Though to patients the doctors appear as private practitioners, they band together under the invisible hand of Florida Hospital Medical Group, a wholly owned subsidiary of Adventist Health, Florida Hospital’s parent company.

When asked about the trend, Florida Hospital spokeswoman Samantha O’Lenick said, “Our leadership believes it would be inappropriate for us to make any comment right now.”

Next, in what would be the region’s biggest shift yet, Physician Associates may be acquired. Industry insiders expect a decision next month.

Though the sale of Physician Associates could be a great opportunity for hospitals and physicians to improve communication, efficiency, quality and continuity of care, employers are concerned, said Karen van Caulil, president of the Florida Health Care Coalition, which works with local employers to reduce health-care costs.

“We are seeing significant increases in charges for care once practices have been purchased by hospital systems,” van Caulil said.

A spokeswoman for Physician Associates said the organization would not comment on the negotiation. Nor would representatives from either of the bidding hospital systems.

Payment loopholes

When hospitals employ doctors, they can layer in a “facility fee,” which adds cost to a patient’s visit without adding value, experts say.

It’s a practice few consumers are aware of.

“Patients don’t even know, quite honestly, and they aren’t going to notice,” said Cynthia Peterson, vice president of the Broward County Medical Association.

As for Medicare and insurance companies paying more, she said, “eventually they will figure it out.”

“Hospitals are taking advantage of anomalies in the payment system that allows them to charge a lot more for the same doctor visits in the same office,” Berenson said.

Because of how Medicare and private-insurance plans pay, hospitals can offer generous compensation to physician employees and still generate more profit, he said.

“In the short term, they are doing this for mercenary and financial reasons, not because it’s better for patients,” Berenson said.

In its March report to Congress, Medcap, a government agency that analyzes Medicare policy, found that the cost for a basic doctor visit nearly doubled once a practice was purchased.

Last year, a 15-minute visit to a doctor in private practice cost $69, including the $14 patient co-pay, the report said. That same visit to a hospital-employed physician cost $124. The patient portion rose to $25. At that rate, Medicare spending for doctors visits alone would increase by $2 billion a year, the Medcap report said.

Analysts at Florida Blue, the state’s largest provider of health insurance, looked at data from cardiologists who practiced in Orange, Osceola and Seminole counties. During the past two years, they found that overall costs from hospital-employed cardiologists were 20 percent higher than for cardiologists not employed by hospitals, said Andy Marino, a Florida Blue vice president.

“Though normally physicians want to be their own bosses, market uncertainty is making them run for cover,” Marino said. They are seeking employment partly because of pending mandates of the health-care overhaul, he added.

The good and bad

“I think it’s a bad direction,” said Dr. Harbinder Ghulldu, an Orlando internist in private practice. “Hospitals are one of the major culprits behind high health-care costs. They’re about billing, billing and billing, and how to get more money out of Medicare and insurance companies.”

The trend is bad for patients because they face higher co-pays to see their physicians once they become hospital employees, and that discourages access, Ghulldu said.

Florida Blue’s Marino gives the employee arrangement more credit.

“The goal of health-care reform — to encourage hospitals and physicians to get together to keep health-care costs more affordable and to offer better quality — is a good thing,” he said.

“But if doctors and hospitals are coming together to gain market power and negotiating leverage, that’s bad.”

Some analysts say the profits of consolidation won’t last long.

“Whatever windfall hospitals may be receiving won’t be sustained past the next few years,” said John Deane, chief executive for Southwind. “Regulators will cut reimbursements over time, and the old payment system will likely be replaced with value-based payment methods.”

Berenson doubts those days will come.

“My concern is that the short term will never lead to the long term, because hospitals and doctors like this arrangement too much,” Berenson said.

“The current system encourages doctors to generate volume. Both sides get more revenue. It’s basically fee for service on steroids,” he said.

“If the long-term plan is to change to a new payment plan that rewards providers for something besides productivity and maybe rewards them for not doing tests and procedures, I don’t see how hospitals can flip the switch,” Berenson said. “You don’t change culture overnight.”

mjameson@tribune.com or 407-420-5158

What’s a consumer to do?

Because so much of what is happening between doctors and hospitals is invisible to consumers, patients need to ask more questions and question more answers, experts say.

•”Consumers should ask their doctors upfront if they’re employed by a hospital and what that implies,” said Dr. Robert Berenson, with the Urban Institute’s Health Policy Center.

After an independent physician becomes a hospital employee, patients will see bills become higher and more confusing, he said.

•Ask providers about options for elective tests or treatments, said Andy Marino of Florida Blue. “Rather than just go where the doctor refers you for, say, a mammogram or physical therapy, ask about your choices. The difference in cost can be significant.”

Florida Blue offers its members a “Know Before You Go” resource on its website, which lets consumers shop for elective services and compare costs and quality ratings. Medicare has a similar resource on its website.

Marni Jameson