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Prices rise as hospitals buy medical practices

The Associated Press

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CHARLOTTE, N.C. (AP) — North Carolina patients are likely to pay more for services ranging from heart tests to routine office visits if their doctors are employed by a hospital, a newspaper investigation has found.

According to an investigation by the Charlotte Observer and the News & Observer of Raleigh, the higher charges are part of a national shift that experts say is raising costs for many patients.

The papers' investigation shows that hospitals are increasingly buying doctors' practices, then sending out bills for routine services that are significantly higher than those charged by the formerly independent doctors.

The percentage of U.S. doctors employed by hospitals has doubled over the past decade, the newspaper reported.

As a result, the same service performed in the same location by the same doctor can cost more than double what it did before the hospital acquired the practice, according to an analysis of Medicare data and insurance claims by the papers.

"Prices are increasing often for no other reason than the sign on the door changed," said Robert Zirkelbach, spokesman for America's Health Insurance Plans, a trade group representing the insurance industry.

The reason for the higher charges is that for many routine services, insurers pay hospitals more than independent doctors, the investigation found. Under Medicare rules, hospitals are allowed to collect more than doctors — and that means the out-of-pocket share for Medicare patients is also larger.

The shift has also affected those covered by private insurance. That's because hospitals wield far more market power than independent doctors, which allows them to negotiate higher payments from insurance companies.

Hospital officials told the papers they deserve to be paid more because they have expenses and obligations not shared by independent physicians. They must comply with more regulations, keep many departments staffed at all times and treat all patients, regardless of ability to pay, they said.

Experts say that hospitals should be reimbursed for the extra services they provide, but that there should be limits on how much.

Robert Berenson, an analyst at the Urban Institute's Health Policy Center, said hospitals get about 80 percent more Medicare revenue than independent doctors for many routine services. But the additional expenses for a hospital don't justify that kind of payment difference, he said.

As a result of this price disparity, some officials are questioning whether hospital systems have grown too big. Among them is N.C. Attorney General Roy Cooper, who the papers said is examining whether to use antitrust laws or push for new legislation to reduce health care costs.

In the meantime, experts say, it's likely that hospitals will continue to buy doctors' practices.

"It's only going to grow, and it's going to grow substantially," said Paul Ginsburg, president of the Center for Studying Health System Change. " . It raises the amount people pay. And I don't think there's a redeeming benefit to it."

For Gay Miller, the issue of higher hospital costs for similar services became apparent after she received a heart test earlier this year.

Following a heart valve replacement eight years ago, she has been getting periodic echocardiograms at her cardiologist's office in Shelby to ensure the valves still work properly. Under her insurance plan, the tests used to cost her a $60 co-pay.

This year, during Miller's annual checkup at the Sanger Heart & Vascular Institute in February, her doctor told her she would need to go to nearby Cleveland Regional Medical Center for her echocardiogram.

At the hospital, Miller received the usual 30-minute test. And the usual technician conducted it. Miller wound up owing $952.

"I was just shocked," Miller told the two papers. ". I feel like I got taken advantage of."

Across North Carolina and the U.S., hospitals are increasingly billing for heart tests like these. Experts say the higher bills for those tests illustrate the structural shift that is leaving patients with higher bills for identical procedures.

In 2005, doctors with Sanger - Charlotte's oldest and largest group of cardiologists and heart surgeons - became employees of Carolinas HealthCare System, the massive hospital system that runs Cleveland Regional.

Miller's insurance plan won't cover outpatient tests and procedures until she pays her $3,500 annual deductible.

"It's like we were hoodwinked and fell into their web," said Miller's husband, John, who owns a trucking company.

Officials for Carolinas HealthCare did not specifically address questions about the case for this story.

Until recently, the large majority of physicians worked in doctor-owned practices. But that's swiftly changing.

Last year, 47 percent of physicians in the U.S. were employed by hospitals - roughly twice the percentage in 2002, according to surveys by the Medical Group Management Association.

One health care recruiting company predicts that hospitals could employ as many as 75 percent of U.S. doctors within two years.

Some doctors say that federal efforts to reduce health care costs have helped drive the trend.

In 2010, Medicare sharply reduced payments to physicians for various cardiology tests while raising payments to hospitals. That prompted many independent doctors to sell to hospitals, which could collect significantly more for the same tests.

Many doctors have been unhappy about the trend. In a recent Physicians Foundation survey, 75 percent of N.C. doctors said they disagreed "somewhat" or "mostly" with the premise that hospital employment of physicians is a "positive trend likely to enhance quality of care and decrease cost."

While compensation helps explain why many doctors have opted to join hospitals, other factors also play a role. By joining hospital systems, many overworked physicians have been able to shorten their work weeks and share on-call duties. Hospitals also take over complicated back office functions such as billing, negotiating with insurance companies and managing the expensive transition to electronic medical records.

Hospitals have plenty to gain as well. Buying doctors' practices helps hospitals enlarge their referral networks and boost profitability.

"This is really a historic change in the practice of medicine in the U.S.," said Dr. William Zoghbi, president of the American College of Cardiology. " . It's more costly to the whole health care system, including patients."

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