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Since aspects of the HITECH act started in 2009, the US Healthcare system experienced significant consolidation of independent medical practices into the Hospital Systems and/or Integrated Delivery Networks (IDNs). The incentives for our Healthcare system promote large IDNs. Once a practice system obtains a certain size, the system leverages their negotiation power to obtain higher reimbursements from commercial and managed Medicaid Insurances. For government insurances like Medicare and Medicaid, Hospital systems optimize revenue by billing some services through a different channel than independent provider office.
IDNs as well as physician-owned groups made significant investments in infrastructure, people and processes. Many large practices also invested significantly in their practices to ‘keep up with jones’. The 2016 MGMA Cost and Revenue Report quotes that the average practice increased revenue by 10% but expenses increased by 15%. Additionally, the MGMA report quotes that the average cost for Health IT costs in 2015 was $32,500 per provider. The report states this cost is related to IT equipment, Staff, maintenance & other items. Many IDN systems as well as physician owned practices are focusing resources on much of the items to meet the federal requirements. MGMA President Halee Fisher-Wright provides some comments including:
“We remain concerned that far too much of a practice’s IT investment is tied directly to complying with the ever-increasing number of federal requirements, rather than to providing better patient care”
“While technology plays a crucial role in helping healthcare organizations evolve to provide higher-quality, value-based care, this transition is becoming increasingly expensive,”
Are Integrated Delivery Networks and Hospitals Driving Up Healthcare Costs?
There is concern with commercial and government payers about increased Healthcare costs due to Hospitals absorbing independent provider groups. Medicare took a first step to reduce costs of care related to paying Hospital-owned IDNs via section 603 of the Bipartisan Budget Act of 2015. The hope for this section of the act is to reimburse hospital clinics at the same rate as providers versus a higher hospital rate. This should save money for the payer and patient. This revised reimbursement model could significantly slow-down the acquisition of physician offices by Hospital systems.
Do independent physician practices provide enhanced value to the Healthcare system?
An independent-owned physician practice provides value since the owners of the practice are aligned with optimizing the amount of staff and administrative work. Usually, most independent – owned physician practices the physicians see patients and have a strong understanding of the practice costs and needs to optimize patient care. Since, in many cases, Independent Practice physician owners are ‘hands on’ managers of their practices, they are able to hear direct comments from patients and parents related to the practice and their care. Although IDNs have invested significant capital to purchase independent provider groups, invested in extra people and processes and bill at a higher rate, there are not well-documented reports in that these large IDNs improved outcomes and provide more cost effective care. There is alignment of incentives and processes for the independent provider group to provide more cost-effective care to patients.
