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Physician Practice Acquisitions Driving The High Cost Of Care

November 12, 2015
By MIchael Jordan, President, Labor and Strategic Accounts Division,
 Special to LaborPress

Michael Jordan

New York, NY – Hospitals across the U.S. are merging and purchasing physician practices in efforts to reduce waste and reward value, rather than volume, and to prepare for accountability. It’s a potentially costly trend that savvy fund managers need to confront head-on.

Last year, hospitals announced 95 acquisition deals, down slightly from 98 in 2013, but up 44 percent from 66 transactions in 2010. Healthcare industry experts believe that hospital mergers and acquisitions will continue at a steady pace for years to come in response to healthcare reform’s collaboration mandate and added financial pressures. The trend has given hospital systems unprecedented leverage to inflate medical bills.

Catherine Marino, M.D., executive vice president and chief medical officer, MagnaCare, points to this example: A patient was being treated with chemotherapy for three months at her oncologist’s office. When the oncology practice was acquired by a New York Hospital, the fees for chemotherapy were drastically increased. For instance, the administration of sub-cutaneous Neulasta–pegfilgrastim, which had the wholesale acquisition cost of $4,914.80, was now being billed at $32,000, plus a facility fee. MagnaCare decided to shift this administration to a home infusion company to help its client save money. 

In 2013, the Denver Post reported on a patient who received the same cardiac stress test twice from the same cardiologist. When the physician was independent, the test cost about $2,100. Performed a year later after the practice was purchased by a local hospital, the test cost more than $8,000. 

Advocates of healthcare consolidation argue that economies of scale will, in time, reduce waste in the system and ultimately push prices down. Hospitals make acquisitions in part to ensure they have funds for capital improvements, such as the purchasing and installing of electronic medical record systems. But what can employers do to curb the total cost of care in the meantime?

Effective care management programs offer the best solution for funds seeking to rein in healthcare costs. Fund managers play an important role in providing options that include tailored solutions designed to positively impact the total cost of care, and programs and services that deliver high quality care at lower costs. 

For self-insured health plans, population health management [PHM] — the aggregation of patient data across multiple health information technology resources — has the power to transform healthcare by enabling providers to leverage robust data and use analytics to improve patient care in hospitals, communities, states and beyond. Because of this, PHM has become the key strategy for lowering the total cost of care. 

PHM works by providing a view of the entire continuum of care, defining the patient population, identifying gaps in care, stratifying risk and engaging the patient. Successful healthcare and long-term service delivery models must involve a team of providers to meet individual needs, improve healthcare access and outcomes, and synchronize the various services and supports. 

In the ideal PHM program, a care coordinator works closely with patients, primary care providers, and other healthcare professionals to aid communication, improve individual well-being and enhance outcomes.

PHM helps to identify high-risk patients and determine which ones require individualized attention. The most optimized programs encompass thoughtful, patient-centric, quality healthcare strategies that rely upon predictive modeling and individualized outreach programs. 

Predictive analytics turns data into a single, actionable patient record, enabling the care team to take actions that lead to improved clinical and financial outcomes. Individualized outreach programs evaluate the overall health of a plan population and identify participants who have, or are at risk for developing, common and costly chronic health conditions.

Additionally, funds must be able to choose from multiple plan options and offer plan members high performance networks, transparency shopping tools, and a menu of opportunities that can be tailored to meet their healthcare needs. 

PHM solutions enable members  to manage their own health, and align with the fund’s goals. They can use tele-health options to improve access to care and earn cash incentives for making smart healthcare decisions, such as choosing a less expensive MRI facility. 

Ultimately, this strategy helps to lower mortality rates, and leads to fewer hospital admissions and shorter hospital stays.

As hospital systems grow larger, gain more power, and potentially remove competition, funds must arm themselves with the latest tools to reduce costs, lower risk and remove administrative burdens related to healthcare. In this scenario, fund managers are well positioned to fill the void for employers who have already been struggling with a new regulatory environment, outrageous premium increases and exorbitant costs.

Click here to view MagnaCare President Michael Jordan’s video on understanding the impact of physician practice acquisitions.

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