The power of joining a hospital network: Physician clinics raise rates

Insurers could pay 100% more on a service at an outpatient center

Some physician practices have essentially doubled the prices of their services after being acquired by hospitals, the Wall Street Journal reports.

In part, the change reflects clinics' ability to bill Medicare for procedures not as freestanding practices (which receive about $70 for a 15-minute physician visit) but as hospital outpatient clinics (which receive about $124 for the same visit). Health insurers also reimburse more for lab tests, imaging scans, and outpatient surgeries when they are billed as outpatient services. A typical increase is about 50% to 100%, according to chief executive of Southwind John Deane.

Health experts say higher reimbursements are needed in some cases because it costs more to operate outpatient clinics, meet regulatory requirements, and treat uninsured patients, according to the Journal.

Meanwhile, CMS says many services are "paid the same regardless of location," unless a pay differential is tied to federal law. Pay differentials include services such as surgeries that can be performed at a hospital or an outpatient center.

The evolution of the hospital-owned physician practice

Between 2000 and 2012, the number of specialty physicians employed by hospitals jumped from 5% to 25% and the number of employed primary care physicians doubled to about 40%, according to Advisory Board Company research.

The shift in structure is driven in part by declining reimbursements for physicians and the pressure to make investments in new technologies such as EHRs, according to the Journal. Hospitals say they are driven to acquire physician practices by the Affordable Care Act's incentives to integrate services, reduce waste, and improve care.

"You put a hospital name on something, and the expectations change immediately," says chief executive of the American Hospital Association Richard Umbdenstock. But the elevated prices that come with different expectations may affect employers, the average consumer, and result in higher Medicare spending, some insurers say (Mathews, Journal, 8/26).

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