Experts: Healthcare system weakened by red tape, hospital consolidation

A recent hearing in front of the House Subcommittee on Oversight, Investigations, and Regulations invited experts to describe how healthcare regulations are impacting providers.

The theme, central throughout the hearing, was that regulations are having an adverse effect on the long-term health of providers, especially smaller providers.

“There’s so much of it, it’s actually sort of hard to know where to start, to be completely honest,” said Brian Miller, M.D., a nonresident fellow at the American Enterprise Institute and practicing hospitalist at the John Hopkins School of Medicine. Miller has worked in various roles for the Federal Trade Commission, the CMS Innovation Center, the FDA and other agencies.

He said the decision to ban physicians from owning and operating hospitals has led to a concentrated and monopolized hospital market in major cities, an argument he explained in a white paper in February.

But for practices that remain, red tape is excessive, he argued. The Centers for Medicare & Medicaid Services (CMS) requires organizations to meet 2,466 quality metrics, while physicians are only able to spend approximately 15% of their day with patients, a JAMA Internal Medicine analysis found.

To Henry Punzi, M.D., medical director with the Punzi Medical Center, and other physicians, regulations that take time away from patients eliminate what makes working in the field of medicine desirable, and it’s more difficult to accurately diagnose a patient’s condition.

“Unfortunately, small providers bear a disproportionate amount of the regulatory burdens and administrative costs that are associated with health care compliance,” said Rep. Beth Van Duyne, R-Texas, during the hearing’s opening remarks.

Van Duyne pointed to a 2017 American Hospital Association report that said regulations cost providers $39 billion each year and a report five years later claiming that 89% of respondents believe regulations have become more burdensome.

“It leads to one thing and that’s consolidation,” she said. “Proponents of consolidation claim that healthcare mergers decreased cost and improve access to care, but the reality is quite different. Far too often consolidations decrease quality of care. It eliminates competition which increases costs, and it removes the possibility of physicians owning their own businesses.”

“We stand alone among our peers by not guaranteeing health care coverage as a right and while many factors underpin our country's high health care costs, none of them seem to carry such a healthy price tag as the administrative bloat permeating every interaction between a patient and their doctor,” said Representative Kweisi Mfume, D-Maryland, citing a Peter G. Peterson Foundation report that found the U.S. administrative costs per capita is $1,055 per year.

“What we are experiencing now with all these small practices leaving is we are seeing the cumulative effect of 30 years of administrative, state-drive interventions and healthcare policy,” said Miller. “And the problem is that when people design these solutions, they’re thinking about a static market. They’re not designing a solution that is dynamic over time.”

Experts urge reforms

Insurance-related administrative costs are about 13% of a practice’s revenue on average, said Matthew Fiedler, a senior fellow with the Schaefer Initiatives on Health Policy at the Brookings Institution. While administrative practices can be important, he believes it has extended its reach too far.

“In total, that amounts to hundreds of billions of dollars per year, costs that are ultimately borne by patients and taxpayers, he explained. “Due to economies of scale, these burdens probably hit smaller practices harder than larger ones.”

He suggested three reforms: eliminating Medicare’s merit-based incentive payment system, changing how provider insurance payment disputes are resolved under the No Surprises Act and improving the Medicare Advantage risk adjustment system.

Ponzi told the subcommittee that he believes prior authorizations need to be more streamlined to achieve a more efficient process.

“As a clinician when I order medication, I think that is best practice for that particular patient,” he said. "So, I think that there needs to be a little bit more leeway. I understand insurance companies have to make their profit, but I think we need to come to consensus and be able to diminish either the time or the investment in trying to get these things approved.”

Complications with prior authorizations result largely from private market plans and Medicare Advantage plans, said Fiedler, but there’s “no question” it creates very large administrative costs for providers and patients.

All reforms mentioned centered around the experts’ beliefs that the regulation they experience hasn’t improved patient outcomes.

“That's why one of the reasons why I'm a big fan that CMS needs to have a quality metric lifecycle,” said Miller. “If you have to comply with hundreds of quality metrics a year, you have to hire staff, you have to have IT infrastructure that can support that, that then changes how you practice, right, because you're practicing to document rather than practicing to treat the patient.”