Patients of private equity–affiliated physicians are the most likely to receive specialty procedures in lower-cost settings, while patients of hospital-affiliated physicians are the least likely.
This is according to a new paper from the Icahn School of Medicine at Mount Sinai that examined the relationship between physician affiliation, site of care and reimbursement for procedures in cardiology, gastroenterology, orthopedics and urology.
Using Medicare claims and commercial insurance data, researchers also found that facility fees are the main reason for cost differences between sites of care, and that these cost gaps are larger in commercial insurance than in Medicare.
And the cost differences were significant.
Across the 32 common procedures analyzed, hospital outpatient departments (HOPDs) were consistently the highest-cost outpatient setting. For Medicare, total reimbursement in the HOPD ranged from 24% to 861% higher than in the lowest-cost setting for that service.
For commercial payers, the gap was even wider, with some cases exceeding 1,300%.
Facility fees were the largest driver of the price disparity. While ambulatory surgery centers (ASCs) also receive a facility fee, it is much lower than in HOPDs, and physician offices do not bill one at all. For example, in Medicare, a colonoscopy with lesion removal costs 160% more in the HOPD than in an ASC, a difference of $513, researchers found.
And for commercial insurance, that same service cost 219% more in the HOPD, a difference of $2,348.
In weighted averages across the four specialties, 63% of patients attributed to private equity–affiliated doctors received procedures in lower-cost sites, compared to 60% for independent physicians, 55% for corporate-affiliated physicians and 37% for hospital-affiliated physicians.
These patterns hold even after adjusting for patient demographics, health status, income and market characteristics, meaning the differences are driven largely by practice affiliation, not patient complexity, researchers wrote.
Site-neutral payment policies could mitigate the cost impact of physician migration into hospital employment, researchers wrote.
“A more reasoned approach that would not constrain provider rights to choose their preferential practice SOC would be to acknowledge that physician affiliation trends are changing and to create a level playing field such that the choice of affiliation does not impact cost of care,” researchers wrote. “As Medicare SOC payment differentials are set by statute and regulations, policymaker interest in site-neutral payment policies continues to grow.”
Such policies, which would pay the same rate for the same procedure regardless of site, have been endorsed by MedPAC and the U.S. Government Accountability Office, and have been the subject of multiple congressional proposals.
“Physicians often get paid the exact same amount regardless of location, even though the effort required may vary greatly depending on the place of service,” Michael McClain, managing partner at LeftCoast Healthcare Advisors, told ASC News. “We also have to look at the ways we code and weight physician services. If there was a differential in payment, would that change behavior? Sure. Is there potential for abuse? Sure. But we’ve already opened that door with things like ASC and physician ownership.”
If site-neutral payments are enacted, Medicare would pay the same rates for ASCs and HOPDs, cutting excess costs and potentially reducing hospitals’ incentive to buy independent practices just to move procedures to higher-paying settings. However, such policies could also narrow the price advantage ASCs currently enjoy in Medicare.
Still, without action, costs associated with hospital employment will continue to rise, researchers wrote.
“Our findings suggest that the cost impact of migration in physician affiliation may be mitigated by payment strategies that reduce site-of-care payment differentials, and federal policymakers have the power to change the payment structure to better align Medicare payment rates with patient needs, access to care, and cost savings,” they wrote. “Hospitals, however, continue to make opposition to these efforts their key legislative priority.”
