Why do hospitals buy primary care practices?

One reason is to apply an extra “facility fee” to patients’ bills.

Another reason is that primary care docs generate a ton of money for the hospital.  A new survey was sent to hospital chief financial officers across the nation and based on data submitted by 102 facilities, it found that PCPs generate more annual revenue than specialists do.

PCPs (defined in the survey as family physicians, general internists, and pediatricians) generated a combined average of $1.57 million for their affiliated hospitals last year, compared with a combined $1.43 million across 15 specialties.

Why does this happen?  Well, here is what this Medical Economics article said:

The company attributed the revenue shift toward primary care and away from specialists to the growing trend of hospital employment of physicians. As PCPs become hospital employees, they may be more likely to divert tests, therapies, and other services “in-house” to their hospital employer rather than to outside resources such as radiology groups or laboratories, according to the report.

Additionally, as new practice models such as accountable care organizations (ACOs) become more prevalent, revenue from primary care is likely to increase while it decreases from specialists. That’s because ACOs place a premium on lower-cost patient care, such as what typically is provided by PCPs, as opposed to more expensive, procedure-driven care from specialists.

Here are 2012 revenues generated for hospitals broken down by a few physician types:

  • family practice ($2.1 million)
  • internal medicine ($1.8 million)
  • pediatrics ($788,000)
  • orthopedic surgery ($2.7 million)
  • general surgery ($1.9 million)
  • invasive cardiology ($2.2 million)

So, now you know why hospitals buy out family doctors and their offices when they are in a competitive market.

The question is, will family doctors be paid more so as to incentivize medical students to go into that field?   The answer is no.   They may get a little bump here or there but nothing of any significance.   You see it doesn’t matter if there is much of a change by the insurers or the government in paying Medicare fees to PCPs.  The reason is that each hospital administration uses clauses in their physician contracts to find ways to keep that extra money.  I have seen that happen at two different systems before, multiple times.

Once you are owned by the hospital you are basically under their control and they will make up story after story of why meaningful use bonuses, RVU increases, etc. are needed by the hospital and not you.

And you have no way to fight it unless you sue or walk.

Doug Farrago is a family physician who blogs at Authentic Medicine.

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