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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