Hospital acquisitions of physician practices are primarily being fueled by burdensome administrative requirements, rising expenses and insufficient commercial and public reimbursement rates, the industry's most powerful hospital lobby wrote in a recent report that lands as policymakers are taking a magnifying lens to provider consolidation deals.
The American Hospital Association’s (AHA's) report, which leans heavily on a physician survey conducted by Morning Consult on behalf of the industry group, also points a finger at the "vastly different” scale of recent practice acquisition deals by UnitedHealth Group and CVS Health.
“While an inordinate amount of attention has been placed on hospitals’ acquisition of physician practices, little scrutiny has been given to commercial insurers, which have collectively invested billions in physician practice acquisitions,” the AHA wrote in the report.
Citing the resident survey, the AHA wrote that 94% of physicians believe it has become more financially and administratively difficult to run a practice. Eighty-four percent of employed physicians said administrative burden played a role in their career decision, 81% said commercial policies interfered with their ability to practice medicine and three quarters said that low public reimbursement rates affect their ability to practice medicine, per the report.
Alongside outside references detailing the administrative costs and workloads of running an independent practice, the AHA pointed to a 2021 survey of medical residents conducted by Merritt Hawkins in which 90% said they felt unprepared to handle these business-related aspects of their career. Respondents of that survey also most frequently ranked hospital employment as a career path they were open to pursuing.
“Despite efforts to paint hospitals and health systems as the sole cause of physician practice pattern changes, the truth is that commercial insurer policies, such as prior authorization, are creating unworkable environments forcing physicians to prioritize administrative duties over caring for patients,” the AHA wrote.
Health systems have been in the crosshairs of lawmakers for practice acquisitions and other merger deals that critics say are contributing to higher costs and reduced care quality across the country.
During a Ways and Means Subcommittee on Health hearing last month, for instance, expert witnesses told members that physician employment runs contrary to healthcare cost efficiency models, such as value-based care, due to resulting market control and hospitals’ incentives for reimbursement.
“Physicians … have been independent and we’ve relied heavily on that physician independence, and now very, very recently, three-quarters of physicians are now employed,” Barak Richman, Ph.D., a healthcare economics policy researcher and professor at Duke Law School, told lawmakers during last month’s hearing. “That’s something I think the healthcare sector hasn’t fully absorbed yet and it’s going to have some very significant long-term consequences."
While restrictions on hospitals’ physician practice purchases were the key policy intervention on the table, some lawmakers during that hearing also floated the idea of reviewing and removing Medicare and Medicaid policies for those that unintentionally “promote unhealthy consolidation.”
While this approach could potentially include public payer regulatory requirements highlighted as burdens contributing to consolidation in the AHA’s report, Rep. Kevin Hern, R-Oklahoma, suggested increasing competition by repealing the ban on new physician-owned hospitals, which is currently opposed by the AHA.
The hospital lobby, meanwhile, wrote in the new report that Congress’ scrutiny of health systems’ acquisitions is misguided in light of recent major deals being closed elsewhere in the industry.
UnitedHealth Group’s Optum is the largest employer of physicians nationwide with 70,000 doctors under its belt, the AHA wrote, while CVS has dropped nearly $20 billion to acquire Oak Street Health and Signify Health just within the last several months. Such deals are more appealing to commercial payers than hospitals as the former is “subject to far fewer regulatory requirements,” such as EMTALA, when providing care.
“Physicians are searching for alternative practice settings that reduce these burdens and provide adequate reimbursement while allowing them to focus on caring for patients. While hospitals and health systems are a natural fit for many physicians, commercial insurers are increasingly leveraging their considerable capital to lure physician practices," the AHA wrote.