In a beautiful community on the Olympic peninsula, just north of where I live and practice, it happened again; another private clinic sold to a large medical corporation.
Peninsula Children’s Clinic was a bustling pediatric office meeting the vital complex healthcare needs of children in Port Angeles, WA for the commercially insured as well as Medicaid patients. Why were they forced to close?
A phone call with their office manager six months ago foreshadowed the outcome, “we are losing a great deal of revenue seeing Medicaid patients making it difficult to survive.
Peninsula Children’s Clinic was unable to remain financially solvent, so they were purchased, like a horse on the auction block, by the Olympic Medical Center. Their website recently posted the following:
“Peninsula Children’s Clinic is now licensed as part of Olympic Medical Center. Patients seeking care at these hospital-based clinics may receive a separate billing for a facility-fee. This fee could result in higher out-of-pocket expenses for patients.
Patients should contact their insurance company to determine their coverage for hospital-based clinic facility charges.”
Hospital-based clinics tack on “facility fee” charges, which are separate from the bill for the doctors’ services, for the use of the room in which the patient was seen. One hospital administrator told me to think of it as “room rental.”
Facility fees bring in a considerable flow of cash and have the secondary benefit of incentivizing hospitals to buy independent practices because then the hospital can charge two to five times more. Buying independent practices, like Peninsula Children’s Clinic, expands the hospitals’ market share and allows greater leverage when negotiating reimbursements.
Payers must acquiesce and pay the facility fees. As the payers are forced to pay more to the hospitals and hospital-based clinics, guess where they make cuts? They cut their fees to the independent private practice physicians, already struggling to make ends meet. My practice was notified of the impending 50% cut in reimbursement from Kaiser Permanente for specific codes just last week for private providers. In the meantime, as the government incentivized hospitals, are costs getting lower? Are consumers spending less? Are outcomes improving at record speed? Nope, and they won’t be anytime soon.
Medicare pays twice as much for office visits at hospital-owned clinics as compared to private physician practices, according to 2012 and 2014 reports by the Medicare Payment Advisory Commission (MEDPAC), an agency that advises Congress on Medicare spending issues. For example, Medicare paid $453 for an echocardiogram at hospital-owned facilities, yet the same test performed at a privately owned offices cost $189, according to the 2014 report. In its 2012 report, MEDPAC found Medicare paid $124.40 for a 15-minute visit at a hospital-based practice compared to $68.97 at a private practice — an 80 percent difference.
Based on the prediction Medicare spending would increase $2 billion by 2020, MEDPAC lobbied Congress to equalize payments between hospital-based and private physician offices by eliminating the onerous facility fee. If the facility fee were eliminated and hospital reimbursement equivalent to that of independent physicians for 66 procedure groups, Medicare would save $900 million per year. However, eliminating the charges has proved daunting, for $3 trillion “reasons.”
Although MEDPAC has long argued for “site neutral payments,” the hospital lobby has deafened Congress to the recommendations of its own commission. The American Hospital Association opposes MEDPAC’s recommendations on several grounds, including facility fees are justified because they create the incentive hospitals “need” to shore up “loss leaders” like the ER, where they are obligated to treat everyone, regardless of ability to pay. Hospitals say the money helps make up for low government reimbursement rates and pay expenses outside of patient care, ranging from electric bills to hospital administrator salaries.
Consumer groups, however, say hospitals are charging patients, insurance companies and Medicare more without justification. It’s essentially double billing, and I have not seen any evidence of an increase in quality of service,” said Kevin Kavanagh, board chairman of Health Watch USA, which opposes the fees. Kavanagh believes the federal government has continued to allow the fees in an effort to encourage integration between hospitals and clinics. “It’s generated more profits, but not savings to the patients,” he said.
The facility fee adds billions of dollars to the nation’s health-care costs. Patients with private insurance are responsible for as much as a 15% portion of the facility fee. One family in Port Angeles accustomed to paying $125 in out-of-pocket costs for doctor visits saw their costs skyrocket to more than $500 overnight. The increase reflects the new “facility fee” charge. Now, this family drives 2 hours each way to see me, because after accounting for gas and time, it costs less to visit my office than to visit Olympic Medical Center.
The movie, “You’ve Got Mail,” succinctly illustrates the differences between small and large practices. Meg Ryan closes the doors to her specialty bookstore, Little Shop Around the Corner, for the last time and wanders over to the newly opened big-box Fox Books to browse the children’s section. In one memorable scene, a desperate mother runs in asking an employee where to find the “Shoe series” of books for her daughter. The hapless clerk blankly repeats “Shoe books?” Meg rolls her eyes and rattles off a list of multiple books in the series from memory, including her recommendation of which to read first, to which the mother was extremely grateful.
I am the Little Shop Around the Corner, as are many surviving, independent physicians across this great nation. We know our patients, their healthcare, and are effective, efficient, well-oiled machines. Facility fees must be made transparent for patients or abolished, like they did by law with Public Act No. 15-146 in Connecticut. Studies continually show small clinics provide better quality care for lower cost, have fewer hospital admissions, and keep patients healthier than the hospital-based clinics. We must eliminate the onerous facility fee to level the playing field, eliminate the incentive for hospitals to create monopolies, and save Americans 100s of billions of dollars per year.
Niran al-Agba is a pediatrician and THCB’s private practice editor.