Going Below The Surface E-newsletter: May 2021
May 24, 2021
As we were looking over journal and news articles this month, one topic kept popping up: hospitals and large physician practices, and how effective they are at driving high-value care and reducing wasteful spending. Hospitals play a vital role in health outcomes in communities across the nation, and they also account for one-third of all U.S. health care spending, totaling $1.2 trillion in 2018. Digging deeper, recent research suggests there is still room for improvement when it comes to eliminating low-value care.
Consolidation and mergers among hospitals and other large clinical settings has become common in the United States, but it has often led to reduced competition, increased prices, more unnecessary services and additional barriers to patient care. A study in Health Affairs examined claims data from 2009-2016 and found that patients who received an inappropriate MRI referral rose by more than 20% after a doctor joined a larger hospital system. A separate study dug into Medicare fee-for-service claims between 2013-2016, finding that the monthly number of diagnostic imaging tests jumped after a larger hospital acquired individual doctors’ practices.
Recent years have also seen a rise in the number of physician-owned hospitals, as providers sought to gain more control and ownership over their practices. However, these entities can lead to additional challenges, according to the authors of a Health Affairs blog post, which highlighted rates of increased self-referrals from doctors in physician-owned hospitals, thus leading to wasteful spending and low-value care. The authors included physicians from the American Medical Association, the American Academy of Orthopedic Surgeons, the American College of Cardiology and a policy analyst from the Heritage Foundation.
A recent RAND publication suggested three solutions to curb hospital spending, including regulating prices, improving price transparency and enhancing hospital competition by discouraging mergers. Of the suggested options, regulating prices saved the most money, with estimates of between $62 billion and $237 billion in reduced spending if rates were set at 100%-150% of Medicare rates. However, the authors were quick to note the savings could reduce the quality of care and decrease patient access. Even if policymakers accepted the tradeoffs, price controls like those the RAND paper suggest would face significant opposition from hospitals and other providers.
Why it Matters:
Consolidation and mergers are likely to continue, especially with the budget pressures brought on by COVID-19. Because of this, prices may continue to rise and rural communities may be left with reduced access to care. It is important to note that these are tough challenges to tackle, and there are disputes about some of the research. The American Hospital Association, for example, has pushed back on studies about hospital spending that rely only on Medicare claims, noting that billing data alone cannot determine whether a procedure or treatment is “clinically necessary.”
The answers to tackling these problems are complicated and require us to confront the reality that in order to reduce costs, something has to be let go. A better solution may be to work harder to eliminate the low-value care that drains resources without improving patient outcomes. Reducing and eliminating low-value care is a common sense, nonpartisan goal which can address health spending while also improving care quality.