Patients like Gay Miller, a North Carolina resident who paid almost $900 more than her typical $60 co-pay for a routine 30-minute echocardiogram, are feeling the angst of increased out-of-pocket (OOP) costs solely attributable to a change in site of care. Gay received her echocardiogram at a hospital outpatient department (HOPD) as opposed to her cardiologist’s office.
Gay Miller’s experience is unfortunately not isolated. It is one example of a widespread and systematic national problem of price differences based on the site of care. Price differences by site of care refers to differential payments for the same service based on where the service was delivered, e.g. HOPD versus a physician office.
The Medicare Payment Advisory Commission (MedPAC) identified 66 outpatient services for which the payment rates can be either equalized between free-standing physician offices and hospital outpatient departments or the disparities in payments substantially reduced (such as for delivering a level II echocardiogram, for which hospital outpatient departments are currently paid 2.4 times more than physicians in independent practices). Enacting these payment changes can help save money for both Medicare and the program’s beneficiaries. For example, between 2009 and 2012, Medicare beneficiaries paid $4.05 million more in out-of-pocket coinsurance costs for chemotherapy services than they would have if these same services been rendered in a physician office.
Research shows that these site-of-care price differences also exist for health care provided to individuals with employer-sponsored insurance. Our recent study found that for seven common services, such as office visits, chest x-rays, and MRIs, prices for the same service were between 21 percent and 258 percent higher when delivered in a HOPD instead of a physician office. The study also found that these price differences have been increasing over time. For these seven services only, the price differences in 2013 accounted for $1.9 billion in additional health care spending among individuals who had employer-sponsored insurance.
Potential Causes of Price Differences by Site of Care
One potential driver of these price increases is what economists term “vertical integration”: hospitals acquiring physician practices. The number of vertically consolidated physicians nearly doubled between 2007 and 2013, and the proportion of routine office visits performed in HOPD was higher for Medicare beneficiaries in counties with higher levels of vertical consolidation — despite those beneficiaries not being appreciably sicker. Such acquisitions have shown to increase physician prices by as much as 14 percent.
The proponents of vertical integration stress its potential to improve care coordination and quality of care, however, research has not shown statistically significant improvements in quality of care in areas with a high share of hospital-owned physician practices. Moreover, many of the services that are paid at a higher rate in hospital outpatient departments are “commodities”: discrete, narrowly-defined medical services that are unaffected by the health status of patients or the ability of a hospital to distinguish itself on the quality of such services (such as the office visit for an established patient requiring medical decision of low complexity and typically lasting 15 minutes).
But hospitals are not only buying physician practices: they also have been acquiring other hospitals, a process called “horizontal integration.” As a result, a typical U.S. hospital market has changed from a market with on average five independent firms in the mid-1980s to a market with approximately three independent firms in 2010. While consolidated health systems may gain the ability to better coordinate care for the patients, they are certainly gaining greater market power. This makes it difficult for insurers to bargain successfully with one of only a few health systems to achieve lower prices for their enrollees.
Need for Policy and Market-based Solutions
Role of Policy
Policymakers are beginning to address price differences by site of care, although more needs to be done. Section 603 of the Bipartisan Budget Act signed into law by President Obama on November 2, 2015 changed Medicare fee-for-service (FFS) payment policy for new off-campus HOPDs. Beginning on January 1, 2017, non-emergency services provided at new off-campus HOPD locations will be reimbursed under the Ambulatory Surgery Center or Physician Fee Schedule rules.
However, this change does not apply to any off-campus HOPD locations that were already in existence when the law was signed, or to any new outpatient department facilities that will be located within 250 yards of the main buildings on the hospital campus. These HOPDs will continue to be reimbursed at the substantially higher rates compared to physician offices.
Congress can examine additional reforms that could help address this issue. For example, studies have shown that expanding Section 603 to existing off-campus HOPDs can result in substantial savings to the Medicare program and to beneficiaries. Estimates suggest that Medicare spending and beneficiary cost sharing could be reduced by $1.1. billion (including $180 million in out-of-pocket spending by Medicare beneficiaries)—in one year—if payments were equalized for many of the most common types of services.
Greater price transparency
There is also a need for a greater transparency from hospitals and physicians on the prices they charge for their services. Patients like Gay Miller should be able to easily compare prices and quality of care among several available providers and make their own informed decision on where they are going to obtain the needed medical care.
Approximately three-quarters of health insurers are sharing price and quality information with their members and working to implement new benefit designs such as reference pricing to generate savings for consumers. However, studies show that only 2 percent of health plan members use these resources. Plans must continue to make such tools more user-friendly and educate enrollees on how to use them. Evidence suggests that using price transparency tools results in savings. Health plan members who used a price transparency platform before receiving care paid 14 percent less for lab tests and 13 percent less for advanced imaging compared to people who did not use the price transparency tool provided by their insurer.
Continued antitrust scrutiny and enforcement
Finally, the federal government will need to continue scrutiny of the proposed hospital mergers and acquisitions, including hospital acquisition of physician practices, to maintain a healthy level of competition that will result in lower prices for medical services and better quality.
Further progress in reducing price differences by site of care can go a long way to helping patients like Gay Miller.
from Health Affairs BlogHealth Affairs Blog http://ift.tt/1XlDzoJ
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