I visited a friend in the hospital yesterday. Having not visited this particular hospital in several years, the transformation was startling. Despite the anemic growth of our economy in the last six years, it seems that the hospital business is booming.
Florida Hospital Orlando will soon complete yet another hospital expansion project that will make it the largest private hospital in the country. Across town, Orlando Health, its largest competitor, has also just completed a huge building project, too. While other industries are holding back with expansion plans, it’s full speed ahead for hospitals.
What is driving this movement? It certainly isn’t a robust economy. The government just released the first quarter statistics for 2015 and the economy grew a paltry 0.2 percent! That’s practically another recession. In the six years since the end of the last recession in June, 2009, the economy has averaged a mere 2.4 percent growth. While other industries are holding onto their money waiting for better economic times, hospitals are building huge additions. Clearly, they aren’t worried about the economy.
The answer is ObamaCare. It has encouraged a record number of hospital mergers and acquisitions – 95 last year – some creating regional monopolies that will likely result in higher prices from decreased competition. That is the assessment of Marty Makary, surgeon at the Johns Hopkins Hospital and professor of health policy at the Johns Hopkins Bloomberg School of Public Health.
Writing in The Wall Street Journal, Dr. Makary says the Affordable Care Act (ObamaCare) created incentives for physicians and hospitals to work together in “accountable care organizations”, so-called ACOs. But an important and often forgotten prerequisite for this model is hospital competition.
Makary explains: “Today’s frenzy of hospital mergers and physician practice acquisitions is giving hospital systems even greater leverage to inflate opaque “chargemaster” medical bills that even hospitals are sometimes unable to itemize sensibly. With no mechanism to allow free-market forces to keep prices in check, this translates into higher health-insurance deductibles and copays for insured Americans, and in the case of Medicare and Medicaid, higher taxes.”
When I began my own practice in 1984, the only doctors who worked for the hospital were hospital-based specialties such as radiology, pathology, and anesthesiology. But today nearly every specialty has been hired by hospitals from the ranks of the formerly private practices. Since hospitals are allowed to charge more than private practices for providing the same services, this means more money for hospitals.
A study of more than 150 hospital-owned and physician-owned organizations published last October in the Journal of the American Medical Association (JAMA) found that patient costs are 19.8% higher for physician groups in multi-hospital systems compared with physician-owned organizations.
Hospitals like this because it improves their bottom line. The Obama administration likes this because it brings control of more doctors under the roof of hospitals – which brings control of more doctors under the roof of the government. Since the government controls the funding of hospitals, it will have more control over the whole system.
It’s no secret here in Florida that the pressure to expand Medicaid under the rules of ObamaCare is coming from hospitals and related businesses. They’re looking out for their bottom lines to pay for those new buildings. They aren’t looking out for the quality of medicine that those newly enrolled in Medicaid will receive.
Drug Companies Buy Physicians
Drug companies are seeing the benefits of buying physicians, too. U.S. Oncology, for example, boasts more than 1,000 oncologists in its network and serves nearly 20% of all U.S. cancer patients. In 2010 it was acquired by McKesson Corporation, one of the largest U.S. drug distributors, in what some called a savvy move to get cancer doctors and the drugs they prescribe under the same roof
Advocates of this approach tout improved standards of care and clinical trials, but opponents point out patients lose options by this homogenization of treatment. Furthermore, management may make decisions that doctors can only use one particular treatment protocol based on economics rather than clinically demonstrated proficiency. Doctors beholden to their employers may have no other choice than to comply.
Where does all this leave the patients? With fewer choices. There are fewer physicians in private practice today which means patients have fewer options when it comes to choosing their doctor and their treatment. It also means higher healthcare costs since many more people will receive treatment in more expensive hospitals rather than private practice offices. Insurance companies will pass on these higher costs in the form of higher premiums, deductibles, and co-payments.
The new hospital buildings are beautiful and undoubtedly will provide good treatment to many patients. But nothing is free in this world. Are they worth the cost?