Hospital purchases of medical groups catch regulators' eyes

When hospitals purchase specialty physician practices they tend to raise the prices for care rendered--a move that has caught the eye of federal regulators, Bloomberg Businessweek reported.

In one instance, Pennsylvania-based health insurer Highmark saw its oncology costs for treating enrollees rise steadily. That was due in part to the 24 percent increase in hospital-owned oncology practices between 2011 and 2012. And more than 40 percent of oncologists practicing in the U.S. are in groups of seven or more physicians, compared to 29 percent just a couple of years ago.

The strategy of hospitals buying up medical practices has been in response to the Affordable Care Act, which has tried to steer patients to less costly forms of care. Hospitals charge 189 percent more on average for oncology services than other healthcare settings, FierceHealthFinance previously reported. Herceptin, a widely-used oncology drug, costs $2,740 when used in an independent clinic. But in a hospital outpatient setting, it costs $5,350, according to Businessweek.

Meanwhile, hospital purchases of physician practices also drive up the costs of other facets of care, such as echocardiograms, which cost more than double in a hospital-owned setting rather than an independent physician's office. The volume of procedures occuring at hospital-owned sites grew by a third between 2010 and 2012.

"By turning what used to be independent medical offices into so-called hospital outpatient centers, hospitals are creating networks that, critics say, give them the power to set prices and ultimately raise costs for private insurers and government programs such as Medicare," Businessweek reported.

Mark Miller, the executive director of the Medicare Payment Advisory Commission, testified before Congress in May that Medicare should ensure that payment rates are constricted in order "to limit the incentive to shift cases to higher cost settings," he said, according to the article. That has led Medicare to consider recording the volume of outpatient care that is occurring in hospital-owned settings.

To learn more:
- read the Bloomberg BusinessWeek article

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