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Doctors selling to hospitals

Medicare rates for tests lower at private practices

Wisconsin heart doctor Thomas Lewandowski faced a dilemma after his Medicare payments were cut and his overhead costs soared: Fire half his staff to keep his practice open, or sell it to a local hospital.

He decided to sell, becoming one of more than 6,000 employees at Thedacare, which runs five hospitals and numerous clinics in northeast Wisconsin. It’s a decision being made increasingly in the United States, creating a new dynamic that threatens to raise the price of health care, even as the federal government and states strain to keep a lid on costs.

Under Medicare’s tangled payment system, hospitals get higher reimbursements than individual doctors for cardiology treatment, as they do for other specialty services, in some cases as much as three times more. At the same time, the added bargaining power gained by controlling more of the heart care in a geographic market has given large hospital systems added leverage in negotiating reimbursements from insurers, such as UnitedHealth Group and WellPoint.

“Clearly, in the short run, it raises costs,” said Paul Ginsburg, president of the Center for Studying Health System Change, a research nonprofit in Washington. “We have a case where a physician becomes employed by a hospital and now a payer, like Medicare, has to start paying more.”

In Wisconsin, the number of heart doctors in private practice has declined to 11 percent from 62 percent of cardiologists in 2007, according to the American College of Cardiology, whose main offices are in Washington. The trend is similar nationwide. The number of heart doctors working for hospitals has more than tripled, while the number in private practice has fallen, the ACC said.

The advantage of more doctors joining large health-care systems is the prospect of higher quality, more coordinated care for patients, especially in the better hospital systems. Meanwhile, the trend continues to push up costs.

Medicare, the U.S. government’s health program for the elderly and disabled, pays a hospital $400 for an echocardiogram, $180 for a cardiac stress test and more than $25 for an electrocardiogram, according to data from the American College of Cardiology. At a private physician’s office, Medicare pays $150 for an echocardiogram, about $60 for a cardiac stress test and $10 for an electrocardiogram.

Those payments to doctors in private practice have been slashed over the past five years, a main force pushing doctors to hospitals. Jay Alexander, a cardiologist who co-owned a practice in Illinois, said his Medicare revenue dropped 35 percent over two years, causing him to fire workers, cut salaries and borrow money to stay open. The revenue loss drove him to sell his practice to a local hospital in 2010.

“If this was government’s solution to reducing health-care costs, they should have their heads examined because it is probably increasing health care costs,” Alexander said. “This is an unfortunate consequence of bad planning.”

Longer term, the expectation is that those changes will help slow rising costs. The law encourages hospitals to move toward accepting lump-sum payments to treat a condition or manage a patients’ overall health, rather than charging separate fees for every test and procedure. The payment changes would reinforce preventive medicine and penalize duplicative services, a shift in priorities that forces hospitals to better coordinate care with doctors.

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