Inside The Physician Payment Gap

There are advantages and disadvantages for being an employed physician. A new one, a recent study revealed, is an economic advantage.

A recent Health Services Research report explored how Medicare’s site-based outpatient billing policy affects so-called integrated physicians (those for which a hospital handles outpatient billing), and non-integrated physicians (those who handle outpatient billing on their own or through their physician group). The research shows that from 2010 to 2016, integrated physicians were reimbursed by Medicare at higher rates than their employed counterparts.

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The Big Number: $114,000

Researchers found that between January 1, 2010 and December 31, 2016, Medicare reimbursement for outpatient services was about $114,000 higher per physician per year if the physician’s outpatient billing were handled by a hospital. This advantage proved to be true when comparing specialties, as well.

• Surgeons: Employed surgeons saw a 224% increase, compared to their self-employed counterparts.
• Primary Care: A 78% increase for these doctors in Medicare reimbursement
• Other specialists: 74% increase

Another Big Number: 180%

The study included more than 2 million so-called physician years, which you can think of as physician billing instances that occurred during the study window. The researchers adjusted for factors such as region and the number of doctors in a given market. When reviewing Medicare billing from the non-integrated physicians in 2010, the researchers found that had these doctors billed from a hospital outpatient department, revenue from their services would have been 180% the size of what they collected. This increased to 199% when reviewing the 2016 data.

What does this mean? Well, a number of interesting things. The researchers note three specifics in their discussion.

1. Higher rates for hospital-based billings, as noted, to the tune of about $114,000 annually.
2. The rates varied across specialties.
   • $63,000 difference for PCPs
   • $178,000 difference for specialists
   • $150,0000 difference for surgeons
3. Site-specific outpatient price updates from Medicare may be pushing physician practice acquisition in a “modest” way.

Number three may prove especially important. The researchers concluded that “payment differences were large and grew over time,” adding that “routine outpatient payment updates from Medicare may prompt some hospital-physician vertical integration, particularly among primary care physicians and medical specialists.” In other words, it’s likely that we’ll see more physician practice acquisition by hospitals.

So what? It turns out these trends have some serious implications for healthcare as a whole. For example:

• The researchers note that their work, and that of others, indicates that the migration of services to hospital outpatient billing is attributable to rising healthcare costs.
• They add that while price goes up, quality of care does not.

The researchers said that while hospital integration of outpatient-focused physician practice is a driving factor, it isn’t the only factor. For example, market concentration (the number of doctors, practices, and hospitals in a given area) is also a contributor. Hospitals may also use physician integration to gain leverage in negotiations over reimbursement rates from payers, the researchers note. Furthermore, physicians may simply prefer to be employed rather than self-employed.

Now, you might be wondering, what’s the best course of action to remedy the situation? Good question. One to which the researchers responded with a collective shrug of the shoulders.

“Antitrust policy is unlikely to be a reliable remedy,” they wrote. “Many office acquisitions are not large enough to trigger antitrust scrutiny, and physicians who are directly hired to work at a hospital facility are not part of acquisitions at all.”

Perhaps further research will clear this up.

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