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.

Digging Deeper

Research on Medical Practice Consolidation Outlines Challenges, Potential Solutions

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.

What We’re Reading

  • Li M, Goldman DP, Chen AJ. Spending On Targeted Therapies Reduced Mortality In Patients With Advanced-Stage Breast Cancer. May 2021, Health Affairs
    The study examined the impact of increased spending on targeted breast cancer therapies for Medicare patients. After assessing spending on targeted therapies, nontargeted treatments and other cancer care for various stages of breast cancer patients between 2000 – 2015, the authors found that targeted treatments made significant survival gains for patients with advanced-stage cancer. However, for patients using other interventions or with early-stage cancer, the spending was ineffective at increasing survival rates. The study highlights the importance of differentiating the types of spending and disease stage when maximizing the value of various treatments.
  • Phillips RL, McCauley LA, Koller CF. Implementing High-Quality Primary Care: A Report From the National Academies of Sciences, Engineering, and Medicine. May 4, 2021, JAMA
    According to the National Academies of Sciences, Engineering and Medicine, the United States “is increasingly falling behind peer nations in addressing health equity,” but doing more to offer high-quality primary care would help solve the problem.  The organization published five objectives to strengthen American primary care services, including shifting toward value-based payments, investing in quality primary care clinics to enable greater patient access and building up comprehensive data systems to enable providers to easily access patient data.

Dialogues in Health Spending

  • During an AcademyHealth webinar, in collaboration with the National Pharmaceutical Council, experts discussed how to evaluate social determinants of health programs and interventions from a cost perspective. Speakers emphasized the incomplete state of current knowledge and the need to improve studies and data infrastructure to determine their value. View the archived video and a summary of the conversation.
  • Going Below The Surface Forum partners are leading conversations about health care spending, with many webinars and events planned during the next few weeks. Check out the listings below for opportunities to take part in the dialogue.