Healthcare consolidation may bend the cost curve the wrong way

Last year, Ann Mathews wrote a brilliant piece in the Wall Street Journal about the future of medical care in the United States. It is an extremely informative study and provides the reader with a very fine 50,000-foot view of the current condition of its subject.

What she did not mention, or truly highlight, is the threatening trend that is taking place with ever increasing rapidity, of hospital conglomerates, both for profit and not for profit, purchasing medical practices and individual physician practices. It is currently estimated that 62% of not-for-profit and for-profit hospitals have either purchased or own physician practices.

With this in mind, government-controlled healthcare that includes the large healthcare combines of which Ms. Mathews wrote has far-reaching, devastating effects. It not only presents a fiscal vulnerability to the Medicare program but what she did not detail may be the most significant restriction imposed upon personal choice by this rampant purchasing of physician practices — pricing.

The de facto effect of this combination of hospital and physician, the delivery nexus, will be to command healthcare pricing, through control of large networks of physicians and hospitals putting significant medical services in a geographic area in the hands of one entity. This amalgamation will destroy the traditional checks and balances system of price control that currently exists between physician, hospital and insurance company by putting substantive price leverage in the hands of this nexus. The net effect will drive healthcare costs up, bending the curve in the wrong direction.

The most powerful weapon driving healthcare cost is the physician’s pen, which controls nearly $2.5 trillion. Should this weapon become co-opted by these large institutions, the resultant ownership of the place of production (the hospital), the workers (doctors) and thus almost all of the non-administrative revenue stream will be disproportionately placed in selective hands creating marketplace-pricing monopolies. The effect will be to further subordinate the individual in the value chain and hamper or remove the patient’s freedom to choose.

Most important of all, it will undermine the physician’s independence to make medical decisions free of financial considerations. What we have done is come full circle, but this time, the resultant HMO will be bigger, more powerful and ever more restrictive and time consuming.

Be careful for that which you ask. You may indeed get it, and get it good.

Mitchell Brooks is an orthopedic surgeon and the host of Health of the Nation on Talk Radio 570 KLIF in Dallas, Texas.  He blogs at Health of the Nation.

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  • Anonymous

    You make a good point, but how are large healthcare combines, both non-profit and for-profit, equivalent to “government controlled healthcare”?

    • http://onhealthtech.blogspot.com Margalit Gur-Arie

       Exactly my question.

      Another possibility is that those “combines” will include payers in their makeup and thus the price of health care may not go up, but the availability of choice will go down, i.e. less utilization of unneeded care but also of needed care, which will be relabeled “unnecessary” according to payers’ evidence based guidelines and consequently denied.
      Either way the “patient-centered” delusion will come to an abrupt end..

    • http://pulse.yahoo.com/_2LRZNHDZS6DU45WQ567LPQ7CMI ninguem

      I think I see the author’s point. The consolidations turn into what some call “silo’s”. One insurance, one hospital, one mega-medical group. The territory is divided like Mafia families. Government is Don Corleone.

      I suppose it’s not precisely “government”, though it might as well be. Individual providers of healthcare, be it physicians, pharmacies, labs, therapy, are all out of luck; in fact, the rules are deliberately set-up to the advantage of the silo’s and to the deliberate disadvantage of the individual practitioner (crony capitalism with the government).

      Healthcare is actually MORE expensive, no price competition, any insurances that left consumers with some price sensitivity (HSA’s) are driven out of business, as “Obamacare” tries to do with HSA’s right now.

      • Anonymous

        I’d call it unregulated capitalism rather than government control.

        Just as the Department of Justice has turned a blind eye towards monopolistic growth by the large insurers, to the harm of patients, physicians, and employers, the feds have announced that they have no intention of stopping similar actions by large healthcare combines.

        Back in the 50s, under a pinko Marxist like Eisenhower, this sort of behavior wouldn’t have been allowed!

        • http://pulse.yahoo.com/_2LRZNHDZS6DU45WQ567LPQ7CMI ninguem

          It makes me think of Tea Party versus Occupy.

          Government and Big Business are in bed together. Tea Party says government is bad, Occupy says business is bad. I say they’re both bad, at least when they’re in bed together.

          “Facility fees”. The hospital takes over practices, not because they are more efficient, they are in fact less efficient, but they can extract far higher payment for the same service. They do so because of government.

          So…..I don’t know, maybe this is just semantics. Government control, unregulated capitalism, I’ve liked the term “crony capitalism”.

          Control, maybe a better word is facilitating.

        • http://pulse.yahoo.com/_2LRZNHDZS6DU45WQ567LPQ7CMI ninguem

          Does government “turn a blind eye” to this monopolistic growth? I wonder if it’s more accurate that they are facilitating the growth. They like it that way.

          One doc says “Medicaid pay sucks”, another doc says “you’re right”, and the government jumps on them for antitrust collusion, I have to wonder if it’s a blind eye or if it’s deliberate.

      • http://twitter.com/JadeQueen Mary Saunders

        The silo’s will decide what overhead they want, and Don Corleone, getting dough from distant marks, will dole it out generously. 

        The states might have some ability to modify all this.

        But, if you ask questions of a federal presenter at a free presentation, as I did, the person can’t answer detailed questions because the paperwork is mountainous and new, as is the designated answerer.

        In Oregon, there will be client pressure to include acupuncture and other kinds of treatments that people choose here.  We can get acupuncture at small centers in our neighborhoods, and practitioners refer out to other treatment modalities when appropriate. 

        Many clients avoid going to huge centers with all the parking garages unless carried in feet first. 

        When we don’t have insurance, but sometimes even if we do, it may be cheaper,  more convenient, and more pleasant to go to someone we know, in the neighborhood. 

        We are paying out of pocket for attention to some aches and pains.  Acupuncture, with tea, is not everyone’s cup of tea, but to serve everyone in some new paradigm, we may have to let people choose their gateway treatment mode. 

        Doing this is how client-centered care would work, in part.

        People who like the huge settings may not have to wait, and the affordability of neighborhood places may even out costs. 

        Throw in the differing cultures in different states, and it gets even more interesting.  My friend in public health thinks death with dignity saves lives.  Giving the dying person agency can contribute to better blood chemistry and pain response. 

        Her experience caring for a relative in IL was horrifying to her.  Not enough pain meds can be life-threatening, and it can be a consequence if docs are worrying about being second-guessed.

        I don’t use the word patient.  The USA today is not Einsenhower’s USA.

        Who knows what is next in this drama?

    • Anonymous

      They consolidate power out of the hands of the patient and the physician.

      A rose by any other name…….

      Mitchell Brooks, M.D.
      http://www.hotnationtalk.com

  • http://twitter.com/livewellthy Stewart Segal

    All good points!  If
    monopolies were good, wouldn’t they be legal? 
    The one point nobody is talking about is the consumer’s role in the
    healthcare crisis.  As long as the
    consumer of healthcare is not personally responsible for his/her health, the
    system will fail. 

    No system can expect to provide care for patients who do not
    care for themselves.  Shouldering the
    costs of treating COPD and lung cancer, while selling the patient cigarettes, is
    insanity.  Yet, that is what society
    does.  It’s time to take into account the
    patient’s role in the healthcare crisis we face.

    Until people take responsibility for their health, insurers
    and government will continually try to remake the system, ration care, and try
    to constrain cost, ultimately failing.

    • Anonymous

      Stewart:

      Bingo!!!! You win the prize!

      The real issue is that no one has skin in the game and that the expectation in this country is that healthcare is a right. I wrote about this and you can access it at the following site:

      http://hotnationtalk.com/?p=56

      The greatest cost containment vehicle for healthcare is an informed and engaged consumer and unless that consumer is spending his or her money for the healthcare they receive, there will be no market driven demand for improvement.

      Mitchell Brooks, M.D., FAAOS
      http://www.hotnationtalk.com
      http://www.mitchellbrooksmd.com 

  • Anonymous

    Great discussion.  As to Stewart’s point, monopolies are illegal in every case, but apparently health care gets an exception this time around… It is frightening and it is facilitated by the government.  However, I do not think we can equate the consolidation with government control.   In my view, the practice of medicine is increasingly more corporate to the demise of actual health care.  While some of the ideals espoused of better health care delivery and outcomes, decreased costs, and patient centeredness are all wonderful to hear – the way the new laws are set out will not allow these ideals to be a reality. 

    In my opinion, one of the problems is our focus on cost instead of care.  I do think that if we allowed the medical profession to focus on care and not tie the entire outcome to monetary incentives, we woul find the cost savings, improved outcomes, and patient involvement.  By tying outcomes to incentives, we not only set a low bar for care, but the end outcome isn’t about health at all – it’s about profits.  How to get around this, I have yet to figure out.  But while I applaud many aspects of the Affordable Care Act, I dread ACO’s and the decline of small practices.

  • Anonymous

     Do you think that the extraordinary increase in health care cost might be due to an unregulated patient’s freedom of power to choose?  Do you think the regulation such a freedom is synonymous with regulation or lack of the patient’s freedom to choose?  How do you explain the significant difference in medicare costs between the patients of the cities of McAfee and El Paso in Texas?

    • Anonymous

      I am not sure whether you are asking me a question or making a point that appears obscured by your passion. If you are suggesting tht there are no consequences to bad behavior, either personally or in McAfee and El Paso, I could not agree more.

      The issue involving freedom is ALWAYS that of choice; that is, upside and downside.Under the current insurance system, there is NO downside. No one has skin in the game. This issue is one of the basic, and in my mind, the major driver of higher healthcare costs.  

      If you have nothing to lose, if your healthcare is completely without restriction, the tendency is to overspend; why not, it’s not my money! On the other hand if there is a high deductible, then the initial costs are yours to bear and not the taxpayer, the latter under the new PPACA. You are going to think twice as to whether you really need that test or that MRI. Perhaps you will take better care of yourself so that if you could keep any of the deductible funds you did not spend and roll them over into the next year’s fund and create an annuity for yourself,you will be healthier and require fewer medical treatments. Nawwww!

      As to McAfee vs. McAllen, I have no data from which to draw to evaluate so that I may form a reasoned conclusion. That said, the issue in those areas vary with the patient population, the disease demographics, utilization, cost differentials and myriad other things that make up the convoluted Medicare regulations. Anecdotally, I think we both know the answer to your question.

      I appreciate the time you spent in reading the blog and most importantly, in taking the time to respond. Thank you. If you wish to read more about what I write, you can access my blogs at http://www.healthnationtalk.com

      Mitchell Brooks, M.D.
      http://www.hotnationtalk.com
      http://www.mitchellbrooksmd.com

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