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Outpatient Care Costly for Hospitals


NEW YORK - Outpatient care may cost more when hospitals own the medical practices or employ the physicians, a U.S. study suggests.

Hospital employment of doctors and ownership of physician practices has grown over the past decade as health care providers seek to curb expenses with economies of scale and deliver better-coordinated treatment to patients.

Research reported in an article online October 19 in JAMA Internal Medicine examined how the rise of tighter financial integration between doctors and hospitals affected costs for people enrolled in private health insurance plans from 2008 to 2012.

In communities with the sharpest increase in financial integration between doctors and hospitals over the study period, average annual outpatient costs for each person with private health insurance increased by $75, while the amount of outpatient services they used was little changed.

"We document an increase in spending driven by prices, without any change in utilization," lead author Hannah Neprash, a health policy researcher at Harvard University in Boston, said by email.

"Some price increases may be acceptable - particularly if they are accompanied with improved quality of care," Neprash added. This study, however, didn't look at changes in quality associated with physician-hospital integration, she said.

Using Medicare claims data for 240 metropolitan areas nationwide, the researchers identified physicians who were either directly employed by hospitals or who worked for practices owned by hospitals.

Overall, the proportion of physicians with close financial ties to hospitals rose from 18% in 2008 to 21.3% in 2012.

Next, the researchers analyzed spending and prices for nearly 7.4 million non-elderly adults in these regions with two common types of private health insurance coverage: preferred-provider organizations (PPO) or point-of-service (POS) plans. These types of insurance may tie patients' out-of-pocket fees to the prices doctors charge.

The cost increase seen with greater financial integration of doctors and hospitals was confined to outpatient spending, bringing the average outpatient cost per enrollee in the PPO and POS plans in 2012 to about $2,400.

The average cost of $872 for inpatient treatments, however, was unaffected by financial ties between doctors and hospitals, the study found.

One shortcoming of the study is that the researchers didn't assess quality of care, the authors acknowledge. Better quality outpatient care might justify higher prices, they note.

Newer payment arrangements, however, are starting to hold providers more accountable for both inpatient and outpatient spending and for outcomes, senior study author Dr. J. Michael McWilliams of Harvard Medical School and Brigham and Women's Hospital in Boston, said by email.

Over time, this means "physician-hospital integration could conceivably offer some distinct efficiencies in terms of higher quality of care at a lower cost," Dr. McWilliams said.

Still, price hikes for people with private insurance - often provided to U.S. workers by their employers - are probably going to lead to higher out-of-pocket costs for patients, noted Dr. James Reschovsky and Dr. Eugene Rich of Mathematica Policy Research in Washington, D.C., in an accompanying editorial.

"The higher prices in hospital outpatient departments are passed on to employers in the form of higher premiums, and ultimately to workers in the form of less generous health benefits, higher premium cost sharing, or lower wages," Dr. Reschovsky said by email. "Certainly patients with co-insurance would pay more out-of-pocket when the price of service is higher."

The Robert Wood Johnson Foundation supported this research. One coauthor reported being formerly employed by Truven Health Analytics.

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