By Surabhi Dangi-Garimella, Ph.D.
The Federal Trade Commission (FTC) has announced that it has ordered 6 insurance companies to file a special report with the FTC by April 20, 2021, that will help the Commission analyze the impact of physician and healthcare facility consolidation—over a 6-year period, between 2015-2020—on market competition. These companies include Aetna, Anthem, Florida Blue, Cigna, Health Care Service Corporation, and United Healthcare
The insurance companies are expected to report claims data for inpatient, outpatient, and physician services for the stipulated period, namely:
- What were patients charged for health care services?
- What did insurance pay?
- What did insurers actually promise to pay
- What did hospitals bill patients?
- Were physician services included in the bill?
This announcement is a part of the FTC’s overall goal of evaluating antitrust questions in mergers and improving its enforcement efforts across various sectors. While the Merger Retrospective Program is not new, the recent initiative expands the program by addressing antitrust questions that have not been studied in detail, especially in certain sectors.
A study by Physicians Advocacy Institute and Avalere Health found that between July 2015 and July 2018, nearly 13,000 physician practices were acquired by hospitals—a 128% increase in hospital acquisition of physician practices over a 6-year period from 2012 to 2018. A top reason listed for these acquisitions was cost reduction: mergers help physician practices reduce operating costs. Other factors include improving care quality and efficiency and implementing value-based care.
The 2020 Community Oncology Practice Impact Report, commissioned by the Community Oncology Alliance (COA), revealed about a 10% increase in hospital acquisition of oncology practices between 2018 and 2020. The report states 2 primary reasons for this increase:
- Financial incentives in the 340B Drug Pricing Program
- Higher payments to hospital sites for cancer care services
COA’s Executive Director, Ted Okon, believes that the disparity in site-of-service reimbursement has a big role to play in these mergers/acquisitions.
These acquisitions could be a significant cost-burden on the overall health care system. For example, between 2012-2015, Medicare spending increased by $3.1B on common services (cardiology, orthopedic, and gastroenterology) as a direct result of an increase in hospital-employed physicians. Medicare reimbursement is higher for hospital inpatient and outpatient departments (facility rates) compared to physician offices (non-facility rates)—the site of service difference mentioned by Okon.
When the Health Care Cost Institute compared the increase in cost for various services between 2009 and 2017 at a physician office and a hospital-run outpatient facility, they found:
- Level 3 diagnostic and screening ultrasound: 4% rise in physician office, compared to a 14% increase in an outpatient facility
- Drug administration: 15% increase in office settings vs 57% in outpatient facilities
- Level 4 endoscopy upper airway: 14% rise in office vs 73% in outpatient
In an effort to reduce hospital outpatient spending, Medicare adopted a site-neutral payment method and has also been reimbursing hospital outpatient departments at a lower rate that is closer to what independent physician practices get reimbursed at. FTC Chairman Joseph Simons hopes that the new initiative will “encourage economists both inside and outside the agency to carry out more retrospective studies to test our analytical tools and strengthen our enforcement efforts.”
Surabhi Dangi-Garimella, Ph.D. is a biologist with academic research experience, who brought her skills and knowledge to the health care communications world. She provides writing and strategic support to non-profit groups via her consultancy, SDG AdvoHealth, LLC.