COVID-related hospitalizations cost the Medicare program more than $10 billion last year; facility fees present the latest front in the effort to combat surprise medical billing; meanwhile, pandemic strain on smaller physician offices is paving the way for increased consolidation; and, hospital mergers are shown to significantly slow wage growth.
Week in Review
COVID Hospitalizations: According to new government figures released last week, the Medicare program spent more than $10 billion on COVID-related hospitalizations for approximately 447,000 beneficiaries in 2020. That averages nearly $23,000 per patient – and, experts caution that that estimate is likely on the low end, with more than 2.7 million Medicare beneficiaries having been diagnosed with the coronavirus last year. While no one questions the critical role that hospitals have been playing on the front lines of the ongoing public health crisis, a recent study has pointed to a significant gap between what Medicare pays for providers when it’s billed by hospitals as opposed to physician practices. In fact, according to the data, payments billed by hospitals averaged $114,000 higher per doctor per year.
Facility Fees: Something as seemingly innocuous as a simple location change has opened up a new battlefront in the efforts to address surprise medical bills. This was perhaps best illustrated by one patient’s experience, who wound up being charged ten times more for her routine arthritis injections simply because her doctor’s office had moved up one floor in the medical building where it was located. Despite being the exact same injection administered by the exact same doctor, her bill had gone up so significantly as a result of how the hospital system had changed how they classified the appointment for billing. What had been a routine visit to an office-based practice had now been switched to a service administered in a hospital-based setting, causing the approximately $30 in charges to the patient to balloon astronomically to nearly $1,400, including over $1,200 in a “facility fee” listed as “operating room services”. Experts point out that the practice – designed by hospitals, in particular, to extract more revenue from patients – is becoming increasingly popular, especially as more private practices are acquired by hospitals.
Increased Consolidation: With that in mind, there’s growing alarm over the severe economic strain that the coronavirus pandemic has placed on smaller physicians’ offices. As a result of last year’s lockdowns, patients were largely unable to visit their doctors for routine care and checkups. Despite the uptick in visits and resumption of healthcare spending prompted by the administration of vaccinations, many smaller offices have been forced to explore strategic transactions that will either see them partially integrate or be wholly-consumed by larger, well-capitalized health systems with more extensive infrastructure. Already in the first two months of this year, 71 deals were announced in which these practices were acquired. At that pace, well over 300 deals will be finalized by year’s end, well beyond the 208 deals in 2020. The pace of those deals is especially worrying to healthcare industry stakeholders, who point to the higher fees, increased healthcare costs, and diminished access that can result from consolidation.
Hospitals & Wages: A new analysis establishes a correlation between increased hospital concentration and depressed wages. The study draws attention to the impact that hospital mergers have on local labor markets and workers, an area of growing interest for regulators called upon to evaluate the repercussive effects of health system consolidation. By comparing markets in which hospital mergers took place between 2000 and 2010, researchers found that in those areas where mergers significantly reduced the number of hospitals in a local labor market, wage growth for nurses and other skilled workers was reduced. In fact, four years after hospitals increased their market concentration in a given geography, skilled workers’ wages in that area were 4 percent lower than they would have been absent the merger, while nurses’ and pharmacy workers’ wages were 6.8 percent lower.
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