In an era of continued healthcare cost reduction, independent medical providers have an edge: It’s called value.
As calls from government and private payers continue for hospitals to trim costs and become more transparent in their pricing, some experts believe the pendulum may swing to favor providers delivering quality care at the best price.
The notion flies contrary to the current trend of physicians selling their practices to hospitals, which is believed to increase an institution’s bargaining power and allow the health system to deliver outpatient services and be reimbursed at a higher, outpatient rate.
All of these factors have perpetuated “the great myth” that it takes a large organization with numerous physicians to operate in today’s healthcare environment. The myth is that you have to be huge to survive. In every other area we promote small business.
But, independent practices are well known for providing better care.
Why do hospitals and large health systems cost more than independents, even for the same procedures? One major factor is facility fees.
When a service is provided in an independent practitioner’s office, it brings one single payment. But when the same procedure is performed in a facility, either an outpatient department or an ambulatory surgical center, Medicare pays twice: To the facility and to the provider. These fees are meant to cover hospitals for overhead that a freestanding physician’s office does not carry.
Hospitals charge these fees because, like many providers, they aren’t paid for a large part of what they do. They get no money specifically for having an emergency room that can treat patients 24 hours a day.
There is a legitimate case to be made that they charge more than others. People will be unhappy when a hospital is closed at night, and they have a heart attack.
But hospitals are purchasing physician practices at a fast clip and, according to the Medicare Payment Advisory Commission (MEDPAC), these practices are increasingly being converted into outpatient departments, which allows the hospital to be paid more for various services than does a freestanding physician’s office.
These fees are costing the healthcare system billions, and contributing to an unlevel playing field between independent practices and hospitals. Insurance coverage of facility fees varies, and many patients become stuck with large, sometimes crippling, medical bills as a result.
According to a 2013 MEDPAC report, Medicare paid $188 to a freestanding physician for a level II EKG without contrast. At a hospital outpatient provider, the provider payment was $62 and the facility fee was $390.49, totaling $452.89.
Why have Medicare and other insurers allowed this payment disparity to continue?
Many believe Medicare hasn’t been responsive to the explosive trend of primary practice buyouts.
It is considered a flaw in the payment system that should be corrected. If it costs more to provide a service in a physician’s practice owned by a hospital, maybe it shouldn’t be provided in that kind of a setting.
The financial incentives of this payment system have led hospital systems to buy practices and migrate them from freestanding offices into outpatient departments, where they can charge more for the same service, according to MEDPAC. This must be addressed. Payment variations across settings need immediate attention because the billing of many ambulatory services has been migrating from freestanding offices to the usually higher-paid OPD (outpatient department) setting.
The tide may be turning, though, as more healthcare reformers look for ways to level the playing field.
MEDPAC recommends that Medicare equalize fees between hospitals, private practices and other settings such as ambulatory surgical centers, for services that can be provided safely in the lower cost setting.
Capitol Imaging Services is independent. We are an independent radiology practice that performs both the scan and the radiology report. When we perform a service, it is at one price for everything. Nothing is added on. Others similar to us, such as independent laboratories, therapy centers and physicians offer the same services at far lower costs — a huge advantage to people who bear the brunt of healthcare expenses before insurance benefits begin. By choosing independent, you save money without sacrificing quality.
Hospitals have their place. They offer valuable services for in-patient care and emergency situations. But, when not urgent or an emergency, you as consumers have better alternatives.
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