The payment system is forcing doctors to sell out to hospitals. The trend, and the law, will be unstoppable without reform.
Here’s a dirty little secret about recent attempts to fix ObamaCare. The “reforms,” approved by Senate and House leaders this summer and set to advance in the next Congress, adopt many of the Medicare payment reforms already in the Affordable Care Act. Both favor the consolidation of previously independent doctors into salaried roles inside larger institutions, usually tied to a central hospital, in effect ending independent medical practices.
Republicans must embrace a different vision to this forced reorganization of how medicine is practiced in America if they want to offer an alternative to ObamaCare. The law’s defenders view this consolidation as a necessary step to enable payment provisions that shift the financial risk of delivering medical care onto providers and away from government programs like Medicare. The law’s architects believe that doctors, to better bear financial risk, need to be part of larger, and presumably better-capitalized institutions. Indeed, the law has already gone a long way in achieving that outcome.
A recent Physicians Foundation survey of some 20,000 U.S. doctors found that 35% described themselves as independent, down from 49% in 2012 and 62% in 2008. Once independent doctors become the exception rather than the rule, the continued advance of the ObamaCare agenda will become virtually unstoppable.
Local competition between providers, who vie to contract with health plans, is largely eliminated by these consolidated health systems. Since all health care is local, the lack of competition will soon make it much harder to implement a market-based alternative to ObamaCare. The resulting medical monopolies will make more regulation the most obvious solution to the inevitable cost and quality problems.
A true legislative alternative to ObamaCare would support physician ownership of independent medical practices, and preserve local competition between doctors and choice for patients.
First, Congress should remove the pervasive biases in ObamaCare that favor hospital ownership of medical practices. Payment reforms that create incentives for the coordinated delivery of medical care (like Accountable Care Organizations and payment “bundles”) all turn on arrangements where a single institution owns the doctors. They’re biased against less centralized engagements where independent doctors enter into contractual relationships among themselves.
These ObamaCare payment reforms are fashioned after 1990s-style health maintenance organizations, or HMOs, in which entities like hospitals would get a lump sum of money from Medicare (or now, ObamaCare) for taking on the risk of caring for a large pool of patients. But right now all of these payment schemes are tilted far in favor of having hospitals pool that risk, and not looser networks of doctors.
For one thing, providers who want to participate in the “reformed” physician payment plan must control their own IT infrastructure to comply, as opposed to collaborating freely across space rented in the cloud. This practical need can require IT infrastructure that costs millions of dollars. It makes participation absurdly expensive for anyone but a hospital that already has its own server hub.
Also, waivers of certain anti-kickback provisions (that prevent doctors from forming needed business partnerships) only apply when providers qualify as an Accountable Care Organization. Not surprisingly, ACO qualification is largely dependent on requirements that create the same need for physical infrastructure and bureaucratic overhead that is hard to replicate outside the hospital setting.
To implement real reform, Congress must give independent, private-practice doctors an equal footing. One legislative proposal would let a new class of “independent risk managers” act as third parties to help individual doctors analyze and share the risk of caring for these patient pools. This would make it possible for independent medical offices to band together and bid against hospitals for a pool of patients. Private companies specializing in analyzing and pricing medical risk could serve as brokers and help the doctors know what they’re getting into. But ObamaCare deliberately crowds out this sort of market innovation in favor of hospitals and their existing networks.
Individual, provider-owned medical practices also deserve equal footing when it comes to reimbursement. Right now, Medicare is paying much more for many procedures when performed in a hospital outpatient clinic rather than an independently owned medical office. Things as common as heart scans ($749 versus $503), colonoscopies ($876 versus $402) and even a 15-minute doctor visit ($124 versus $70) all pay more when done by a hospital-based doctor than a privately owned medical office. Obama officials know that hospitals are buying doctor practices to take advantage of this difference. But they favor hospital ownership of doctors and see it as a small cost to pay to drive that migration.
When I talk to physician colleagues, Republican or Democrat, a frequent refrain is that their professional strain would be the same regardless of what happens to ObamaCare. They are wrong. ObamaCare has accelerated many of the detrimental trends doctors see in their profession, and introduced new ones.
Reformers in Washington need to do a better job of explaining how market-based alternatives to ObamaCare are a better outcome for the structure and delivery of health care. And how they intend to preserve the entrepreneurship, autonomy and physician ownership that have long been the hallmark of American medicine.
Dr. Gottlieb, a physician and resident fellow at the American Enterprise Institute, is a member of the Health IT Policy Committee that advises the Department of Health and Human Services. He also invests in and advises health-care companies.