The Shocking Bipartisan Congressional Coalition to Lower Healthcare Costs
Bipartisan consensus is extremely rare. With ideological division at record highs, it is noteworthy that a new coalition is forming to address some of the root causes of rising healthcare prices. Right now, members of both houses of Congress on both sides of the aisle are working to stop the existing incentives for hospital consolidation and monopoly pricing in healthcare and increase transparency.
The best thing about the American healthcare system is the number of options patients have. From hospital outpatient departments to independent physician offices, patients can receive care from their choice of providers in a variety of locations. When practices are free to compete for delivering the best price and quality, patients see the best results. On the contrary, when the government starts trying to pick winners, everyone loses.
Data shows that hospital outpatient departments charge significantly higher prices for the same services. One study found that an office visit at a physician practice that is part of a hospital is 21% more expensive than the same visit at an independent office. When it came to chest x-rays, it was 258% more expensive at the hospital’s practice. While one might expect the hospitals would lose customers by charging such high rates, the government has intervened to subsidize these higher rates, only accelerating the growth of health care prices.
Medicare makes up about a quarter of all healthcare spending in the United States and thus plays an outsized role in the healthcare policy discussion. Medicare pays hospitals a “facility fee” as part of every service it provides to Medicare patients. While designed to cover expenses associated with delivery of immediate emergency or complex services, the facility fee is also paid out to any physician offices affiliated with a hospital’s outpatient department, even if they are not located at the hospital and are not providing emergency services. This means that a primary care physician’s office will bring in more revenue from Medicare if they are owned by a hospital.
This perverse incentive results in consolidation, as hospitals buy up all the local independent physician offices leading to even higher prices. A 2018 study found that hospitals were acquiring record numbers of physician practices and raising prices on average 14%. Now, over a third of doctors work directly for a hospital or in practice, at least partially owned by a hospital, and that number continues to rise. The new hospital-owned practices are able to get higher Medicare reimbursements, but they also extract more from patients in out-of-pocket expenses and insurance companies, which leads to higher patient premiums. The cycle of rising prices will not stop unless we take action.
Fortunately, members of Congress have identified these problems and have several proposals that would improve our current situation. The Bipartisan Primary Care and Health Workforce Act sponsored by Sens. Bernie Sanders (I-VT) and Roger Marshall (R-KS) was passed out of its Senate committee in mid-September with bipartisan support. It seeks to implement “site-neutral” policies—that is, giving the same reimbursement for outpatient care regardless of the location or owner of the physician practice. For payment purposes, it should not matter whether a physician practice is owned by a hospital or the doctors themselves.
The bill implements site neutral policies by eliminating Medicare’s facility fees for all services with reimbursement codes under the category “Evaluation and Management.” The Evaluation and Management codes represent the bulk of primary care services that are not hospital services. However, the bill specifically carves out the few emergency room codes and allows Medicare to pay a facility fee for use in these emergency situations. The bill also eliminates the absurd practice of paying a facility fee for telehealth visits that take place virtually.
This bill would also require “off-campus providers”—physician offices owned by a hospital but not located at the hospital—to identify themselves separately from the hospital’s outpatient department. Nick Hut of the Healthcare Financial Management Associate writes that this policy “would help insurers clarify whether a hospital off-campus facility is an outpatient department or, for all intents and purposes, a physician’s office that should be billing at a lower rate.”
The American Hospital Association objects to the legislation and states that it ignores “the fact that HOPDs (hospital out-patient departments) and other outpatient care settings are fundamentally different than other sites of care [because] hospital facilities treat patients who are sicker and have more chronic conditions…” They suggest that eliminating the facility fee would “severely jeopardize access to essential care for patients.” These assertions are far from reality. The bill itself acknowledges the importance of the hospital’s emergency care, which is admittedly more expensive than traditional primary care. Instead, the legislation gives hospital-owned physician practices who provide primary care and other specialty outpatient care the exact same reimbursements as the same providers owned by other entities or individuals, while keeping higher reimbursements for emergency, on-campus, and in-patient care.
In the House of Representatives, bipartisanship has created the Lower Costs, More Transparency Act. Introduced by House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA) and Ranking Member Frank Pallone (D-NJ), the bill requires Medicare to pay the same amount for physician-administered drugs whether it is an independent office or an out-patient practice operated by a hospital. This would help patients, like Kyunghee Lee, a senior who saw the out-of-pocket price of her regular steroid injections to treat arthritis increase from by 10 times after her doctor’s office was bought by a hospital system who, then, added a $1,262 facility fee for the out-patient care. The Congressional Budget Office estimates this provision will result in $3.7 billion in savings for Medicare over the next decade. The savings will be even larger when factoring in the out-of-pocket costs for patients.
In addition, to ending poor reimbursement practices, the House bill promotes transparency. First, it includes the same provision as the Sanders-Marshall bill requiring off-campus providers to identify themselves. Next, it requires hospitals, insurance companies, labs, imaging providers, and ambulatory surgical centers to all publicly list their prices for key healthcare services, allowing patients to be informed with accurate pricing information before receiving care.
All of these provisions would be a significant improvement and allow Americans to take advantage of what is best in American healthcare: competition. Each of these proposals have room for growth. Complete site neutrality for all Medicare services is the best policy, and it is feasible. In the meantime, we must urge our members of Congress to vote on these important pieces of legislation and keep the momentum going. It is important that we take advantage of the bipartisan coalition to improve the lives of millions of Americans and tackle this critical issue.
Dr. Lee Gross is the owner of Epiphany Health & president of Docs 4 Patient Care Foundation.
