Category Archives: Health Economics

I Call BS -Consolidation in GI is Not a Good Trend

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D Marino et al. Clin Gastroenterol Hepatol 2024: 22: 1770-1773. Trends in Consolidation of Gastroenterology Practices

This article describes trends and rationale for consolidation of gastroenterology practices.

Trends:

  • “From 2012 to 2022, the share of physicians who work in private practices dropped 13 percentage points, from 60.1% to 46.7%.” (In the 1980s, 76% of physicians owned their practice)
  • “Ownership among physicians younger than 45 dropped more than 12 percentage points from 2012 to 2022, from 44.3% to 31.7%.”

My Views (in bold) on the Authors’ Rationales for Consolidation:

  • “The potential advantages of consolidation include achieving economies of scale, increasing choices for patients beyond large hospital-based systems of care, enhancing the infrastructure to support high-quality value-based independent practices…whereas drawbacks …diminished authority.” The driving force for consolidation is money not improvement in “high-quality value-based” care. PE investors are tapping into health care to extract profits from the healthcare sector.
  • “The long-term implications for individual practices, physicians and patient care remain uncertain.” Some of the implications are already evident –increased costs for patients and without improvement in quality. PE consolidation does allow improved negotiation with insurers and hospitals.
  • “Large PE-backed groups provide resources to help independent practices stay independent.” This is quite a paradox. PE acquisition is a not a way to maintain independence.

My take: While consolidation, driven by financial incentives, is affecting all areas of healthcare, it is NOT resulting in improvement in patient care or physician satisfaction. This is true whether consolidation is acquisition by private equity or by hospitals. This article’s attempt to provide a different narrative is BS.

As an aside, in some ways, acquisition by hospitals is harder to justify than acquisition by PE; hospitals state that their main goal is patient care. Yet, when hospitals consolidate physician practices, this often runs counter to that goal by increasing costs for patients without improvement in quality.

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AI Skirmish in Prior Authorizations

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Teddy Rosenbluth NYT 7/10/24: In Constant Battle With Insurers, Doctors Reach for a Cudgel: A.I.

An excerpt:

For a growing number of doctors, A.I. chatbots — which can draft letters to insurers in seconds — are opening up a new front in the battle to approve costly claims, accomplishing in minutes what years of advocacy and attempts at health care reform have not….

Doctors are turning to the technology even as some of the country’s largest insurance companies face class-action lawsuits alleging that they used their own technology to swiftly deny large batches of claims and cut off seriously ill patients from rehabilitation treatment.

Some experts fear that the prior-authorization process will soon devolve into an A.I. “arms race,” in which bots battle bots over insurance coverage. Among doctors, there are few things as universally hated…

Doctors and their staff spend an average of 12 hours a week submitting prior-authorization requests, a process widely considered burdensome and detrimental to patient health among physicians surveyed by the American Medical Association.

With the help of ChatGPT, Dr. Tward now types in a couple of sentences, describing the purpose of the letter and the types of scientific studies he wants referenced, and a draft is produced in seconds.

Then, he can tell the chatbot to make it four times longer. “If you’re going to put all kinds of barriers up for my patients, then when I fire back, I’m going to make it very time consuming,” he said…

Epic, one of the largest electronic health record companies in the country, has rolled out a prior-authorization tool that uses A.I. to a small group of physicians, said Derek De Young, a developer working on the product.

Several major health systems are piloting Doximity GPT, created to help with a number of administrative tasks including prior authorizations, a company spokeswoman said…

As doctors use A.I. to get faster at writing prior-authorization letters, Dr. Wachter said he had “tremendous confidence” that the insurance companies would use A.I. to get better at denying them.

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“Why It’s So Hard to Find a Pediatrician These Days”

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Aaron Carroll, NY Times (July 1, 2024): Why It’s So Hard to Find a Pediatrician These Days

The author notes that increasingly there are long waits to get appointments to see pediatricians. In addition, pediatricians rely on a referral network (e.g. pediatric subspecialists, psychologists, psychiatrists) and there are shortages and delays in getting seen in these fields as well.

An excerpt:

There aren’t enough pediatricians right now, and because of that, some kids are unable to get the care they need…

Approximately 30 percent of pediatric training programs failed to fill their available residency slots, leaving 252 positions vacant — a notable increase from just 88 vacant spots last year. This isn’t a minor hiccup; it’s a warning for the future of pediatric care in the United States…Last year, a National Academies of Sciences, Engineering and Medicine committee published a report on the future of the pediatric work force and the issue of shortages, especially in rural areas. It underscored the fragmentation in care coordination between pediatric primary care and specialty care exacerbated by geographic barriers and inadequate financial support.

The elephant in the exam room, though, is that pediatricians earn less than specialists in almost every other medical field in the United States. A key reason is that so many children live in poverty and therefore qualify for Medicaid, which pays far less for care than private insurance and even less than Medicare.

Pediatricians attend the same medical schools as those who enter other specialties, and education is expensive. Almost half of those who graduated with over $150,000 in debt 20 years ago have still not paid it off completely. In 2020, the average debt of those completing pediatrics residencies was $264,000...

We need immediate action to address this crisis and find ways to attract more graduates to pediatrics. Our children are the future, but we sure don’t act like it when it comes to health care.

My take: Most pediatric physicians chose pediatrics to work with families and children. At this time, growing debt and pay inequity are factors causing many to choose other areas in medicine and needs to be addressed.

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Medical Billing Trap: Hospital Pricing for Urgent Care Visits and Outpatient Departments

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Danielle Ofri. NY Times (June 17, 2024): Even Doctors Like Me Are Falling Into This Medical Bill Trap

An excerpt:

I reflected on how urgent-care centers filled a perfect niche between the overkill of an emergency room and the near impossibility of snagging an immediate orthopedic appointment….Two weeks later a bill arrived: The radiology charge from NorthShore University HealthSystem for the ankle and wrist X-rays was $1,168, a price that seemed way out of range for something that usually costs around $100 for each X-ray. When I examined the bill more closely, I saw that the radiology portion came not from the urgent care center but from a hospital, so we were billed for hospital-based X-rays. When I inquired about the bill, I was told that the center was hospital-affiliated and as such, is allowed to charge hospital prices…

It turns out that I’d stumbled into a lucrative corner of the health care market called hospital outpatient departments, or HOPDs. They do some of the same outpatient care — colonoscopies, X-rays, medication injections — just as doctors’ offices and clinics do. But because they are considered part of a hospital, they get to charge hospital-level prices for these outpatient procedures, even though the patients aren’t as sick as inpatients. Since these facilities don’t necessarily look like hospitals, patients can be easily deceived and end up with hefty financial surprises…

As of 2022, federal law protects patients from surprise bills if they are unknowingly treated by out-of-network doctors. But there is no federal protection for patients who are unknowingly treated in higher-priced hospital affiliates that look like normal doctors’ offices or urgent care clinics...

HOPDs turn out to be an attractive business plan for hospitals that are aggressively acquiring doctors’ practices. ​​When these acquisitions occur, prices often rise as patients are now seen in “hospital facilities.”

It’s time for Congress to protect patients from both unfair pricing schemes and health care deception. MedPAC, the nonpartisan Medicare Payment Advisory Commission, recently recommended to Congress a basic set of site-neutral policies. It would apply site-neutral payments to a handful of low-risk procedures — some imaging, medication injections, simple office procedures — and this would apply to all HOPDs.

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Environmental Impact of Endoscopy

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M Desai et al. Gastroenterol 2024; 166: 496-502. The Environmental Impact of Gastrointestinal Procedures: A Prospective Study of Waste Generation, Energy Consumption, and Auditing in an Endoscopy Unit

This study prospectively collected data on total waste generation, energy consumption, and the role of intraprocedural inventory audit of a single tertiary care academic endoscopy unit over a 2-month period (May–June 2022, 450 procedures).

Key findings:

  • The total waste generated during the study period was 1398.6 kg (61.6% directly going to landfill, 33.3% biohazard waste, and 5.1% sharps), averaging 3.03 kg/procedure.
  • The average waste directly going to landfill was 219 kg per 100 procedures. The estimated total annual waste generation approximated the size of 2 football fields (1-foot-high layered waste). 
  • Endoscope reprocessing generated 194 gallons of liquid waste per day, averaging 13.85 gallons per procedure.
  • Thus, every 100 GI endoscopy procedures (esophagogastroduodenoscopy/colonoscopy) was associated with 303 kg of solid waste and 1385 gallons of liquid waste generation 
  • 20% of total waste consisted of potentially recyclable items (8.6 kg/d) that could be avoided by appropriate waste segregation of these items.

My take: The huge amount of trash (solid and liquid) generated by endoscopy is difficult to fathom. It is incumbent for gastroenterologists to consider this hidden extra cost. Recycling could help in a modest way. Trying to limit low-value procedures is another step. Long-term alternative diagnostic procedures will need to be developed/utilized which reduce the environmental impact.

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Cost Transparency Rules Not Implemented for GI Procedures

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GastroEndoNews 3/28/24: (Open Access!) Mandated Cost Transparency Requirement For GI Procedures Is Not Being Met

Excerpts:

Three years after the Hospital Price Transparency Rule was implemented by the Centers for Medicare & Medicaid Services, a large proportion of hospitals are not complying when it comes to gastrointestinal services, according to two studies presented at the 2023 annual meeting of the American College of Gastroenterology.

When institutions do list their prices, they are often hard to find, and the wide variety of charges are frequently listed in a format that is “not patient-friendly,” according to investigator Kevin Brittan, MD, an internal medicine resident at the University of Nebraska Medical Center, in Omaha…

All hospitals are expected to be in compliance with the rule and report prices for these and other procedures as of Jan. 1, 2021. However, in one study, Dr. Brittan and his co-investigators found that only two of 25 [top-rated] hospitals surveyed (8%) reported costs for all eight procedures evaluated (abstract P4083). In the other study, from Howard University researchers, 14 of 30 hospitals (47%) provided some costs for four procedures, but only 10 (30%) provided cost information for all of them (abstract P4091)...

[They] also found “extreme variance” between institutions in the costs cited, raising the question of whether the reported data are even reliable. “There was a 51-fold difference found in the price for an upper endoscopy and a greater than 80-fold difference for a colonoscopy,” Dr. Bhayana reported. Self-pay colonoscopy prices, for example, ranged from $440 to more than $36,000...

Approximately 11 million colonoscopies and 6.1 million upper endoscopies performed each year in the United States, Dr. Brittan said. He calculated that the price differences would equate to billions of dollars if procedures were performed at top centers offering the lowest prices relative to top centers asking the highest prices.

My take: So far, the hospital price transparency has been ineffective. Patients should be able to find out more readily what the costs are prior to receiving a bill. Unfortunately, this appears to be years away. To implement price transparency will require either enforcement (penalties) and/or litigation.

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‘Physicians Are Not the Victims’ (Plus One)

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A recent blog post (Is Medicine a “Calling?”) reviewed a commentary about whether physicians have become ‘cogs of capitalism’ leading to dissatisfaction.

A recent response letter (RL Albin. N Engl J Med. 2024 Apr 18;390(15):1444. doi: 10.1056/NEJMc2403045) offered some useful insights:

  • Before WWII, physicians were paid directly by patients. Afterwards, “taxpayer-subsidized, employment-based health care and social insurance guaranteed healthy incomes. Generous subsidies for higher education lowered barriers to professional entry…”
  • Due to “clever political lobbying, physicians enjoyed these considerable subsidies without major sacrifices of sovereignty.2 This system was economically unsustainable…”
  • “Physician lobbying played a sizable role in defeating efforts toward rational public control, unwittingly advancing corporatization with its gross inefficiency, multiple inequities, and erosion of physician sovereignty. Physicians are “cogs of capitalism,” but we continue to be well-paid, respected professionals. The real victims are the many Americans who lack access to decent health care”

A related article: K Schulman, B Richman. NEJM 2024; 390: 1445-1447. Hospital Consolidation and Physician Unionization. This article describes the increase in physician unionization that is taking place and makes the following points:

  • “Since the 1990s, hospitals have been consolidating to form health systems that now exert monopolistic leverage in many health care markets in the United States”
  • “In 2012, only 5.6% of U.S. physicians were directly employed by a hospital,1 and another 23% were in a practice that was at least partially owned by a hospital…By January 2022, the proportion of hospital-employed physicians had risen to 52%, with another 22% of physicians being employed by other corporate entities”
  • [Unionization] “is a natural consequence of hospital consolidation and the corporatization of health care delivery… Executives may also consider physicians to be largely interchangeable…Amid shifts in practice structures, physicians may experience a deterioration in their working conditions, job satisfaction, and — most important — involvement in the governance of health care delivery”
  • [Unionization provides] “the opportunity to negotiate over wages with monopolists…Unions often express workers’ concerns about non–wage-related matters, including issues affecting job satisfaction, professional meaning, and workplace conditions”
  • “Physicians supporting these drives have emphasized concerns about staffing, burnout, and the quality of patient care as motivations for unionization. Collective bargaining has been a direct response to the most negative consequences of hospital consolidation”

My take: Doctoring can be sacred work. While physicians need to work to improve workplace environments and enhance personal interactions with patients, it is sobering to realize that many patients have been harmed much more than physicians with the changes in healthcare delivery and costs.

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NPR: Drugmakers Claim to Lose Money in US In Order to Avoid Taxes

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NPR 4/15/24: Drugmakers’ low U.S. taxes belie their high sales

Some excerpts:

Corporations are supposed to pay a nominal tax rate of 21%. But in recent years, the biggest pharmaceutical companies had an average effective tax rate of less than 12%, according to an analysis by the Senate Finance Committee….

An NPR examination of financial records for the top five drug companies in the U.S. showed that in 2023, all but Eli LIlly reported losing money in the US.

However, drug companies make most of their sales in the U.S., thanks in large part to its unique health care system and the higher prices Americans pay for drugs. The top five American pharmaceutical companies all had more drug sales in the U.S. than they did in all the other countries in the world put together…

“How do they do it? You license your intellectual property to an offshore subsidiary,” Setser tells NPR. “You produce the high value-added active ingredients in a factory in Ireland or Singapore, and you pretend like the profit is accrued to these offshore subsidiaries, even though the sales are back to the United States…”

The drug industry isn’t the only one that moves its income around to pay lower taxes, but the U.S. market’s role in driving the drug industry’s overall revenue makes the tax strategy stand out, says Ameet Sarpatwari, assistant director of the Program on Regulation, Therapeutics and Law at Harvard Medical School.

“These findings are striking because they show that the companies want to benefit from the high prices and the high sales in the U.S. market, but are doing everything possible to not contribute to the taxes that make that system and market function” 

My take: Despite earning top dollar and receiving all sorts of research support, the pharmaceutical industry (like other industries) are taking advantage of US tax laws and not paying their fair share. Yet, I doubt there will be legislation passed in the near future to address this. “The pharmaceutical and health product industry spent $381 million lobbying Congress in 2023 – more than any other industry that year”.

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FTC Bans Worker Noncompetes

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NY Times 4/23/24: F.T.C. Issues Ban on Worker Noncompete Clauses

An excerpt:

“The Federal Trade Commission on Tuesday said employers could no longer, in most cases, stop their employees from going to work for rival companies.

The sweeping action could help create jobs, raise wages and increase competition among businesses, the agency said. But the action is all but certain to be challenged in court by businesses that say they need to protect trade secrets and confidential information…Noncompetes cover about 30 million U.S. workers..”

[It is estimated that] “the decision would lead to the creation of 8,500 start-ups in a year and up to $488 billion in increased wages for workers over the next decade.”

“The rule would become law 120 days after it is published in the Federal Register, which will probably happen in a few days. But legal challenges could delay or block the change…It orders employers to notify nonexecutive employees bound by an existing noncompete that it will no longer be enforceable.”

There is a carve out:   STAT (4/23, Bannow, Subscription Publication) reports: “Crucially for the health care industry, the noncompete ban does not apply to nonprofit companies, as the FTC determined it only has jurisdiction over for-profit companies.” This “means the ban likely won’t apply to most of the country’s hospitals, the majority of which are nonprofit, and some of the country’s biggest health insurers.”

My take: Noncompete agreements at the time of a job offer occur when prospective employees are vulnerable and have limited negotiating power. Established business with market dominance will need to use other ways besides coercion to keep talented employees when noncompete clauses go away.

Related blog post: What’s Wrong with Noncompete Clauses

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What Is Driving Hospitals’ Acqui$ition of Physician Practices?

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D Khullar et al. NEJM 2024; 390: 965-967. Vertical Integration and the Transformation of American Medicine

This article examines the growing trend of hospital acquisition of physician practices.

Some excerpts:

  • “From July 2012 through January 2018, the share of practices owned by a hospital increased from 14% to 31%, according to data from the Physicians Advocacy Institute; from January 2019 to January 2022, hospitals acquired 4800 additional practices, and about 58,000 more physicians became hospital employees.”
  • “In theory, vertical integration (the combining of organizations operating at different levels of production into a single entity) in health care can lead to improved patient outcomes — for example, by promoting care coordination, information exchange, and economies of scale. To date, however, the most consistent documented effect of such transactions has been an increase in prices.”
  • Increased prices are due to multiple factors including strengthened negotiating position, “facility fees” that are added to services delivered by hospital-owned practices.1, increased tests and procedures in hospital settings, higher payor rates, and in many cases discounted outpatient drug prices (for those qualified in 340B program)
  • “The limited research in this area suggests that vertical integration doesn’t tend to result in meaningful improvements in quality of care, with some studies finding that it may lead to poorer quality, if health systems take resources away from unprofitable services and redistribute them to more lucrative ones.2“
  • “Hospital acquisitions of physician practices have gone largely unreviewed by agencies such as the Federal Trade Commission (FTC) and the Department of Justice (DOJ)…In December 2023, the FTC and the DOJ issued new antitrust guidelines that could strengthen the agencies’ approach to vertical integration in health care “
  • “Many clinicians may be satisfied after their practice is acquired; they may, for example, have an improved work–life balance, receive greater administrative support, and be relieved of managing the business-related aspects of medicine. Alternatively, they may work longer hours, have less autonomy and constrained job mobility, and experience more burnout or moral injury.”
  • “The rapid acquisition of physician practices by hospitals highlights an important tension in health care — between the possibility that integration can promote efficiency and improved quality and the concern that it distorts markets and can worsen health and financial outcomes.”

My take: There are clear financial incentives for hospitals to acquire physician practices. This trend leaves patients facing higher costs and clinicians dealing with less autonomy. Regulatory efforts face a difficult task to limit this widespread anti-competitive practice which at this point is akin to extracting a large trichobezoar from the stomach.

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