The monthly number of diagnostic imaging exams performed at hospitals for Medicare patients sharply increases after health systems buy up physician practices, researchers reported Monday in Health Affairs.
In fact, almost immediately after such vertical integration, imaging utilization increased by 26.3 exams per 1,000 beneficiaries. At the same time, those performed in non-hospital settings dropped by 44.5 per 1,000.
And this practice-level change quickly drives up healthcare costs. The average reimbursement for five common imaging exams jumped by more than $6 over the four-year study period, translating to a $40 million increase in Medicare spending.
Some experts have argued this growing ownership trend results in better care coordination and spending on higher quality services, but first author Christopher M. Whaley, a healthcare policy researcher at RAND Corp., and colleagues suggest otherwise.
“Importantly, it is difficult to argue that the additional spending is related to better quality of care, as these specific services are likely to be highly standardized—and hence undifferentiated—across diagnostic providers,” Whaley and co-authors added in the study. “The increased payment is instead a reflection of pre-existing Medicare payment rates that reimburse hospitals more for these services than they reimburse competing providers (for example, stand-alone imaging centers and freestanding diagnostic laboratory companies).”
Many recent investigations have discovered that, along with price increases and spending, referral patterns and care setting choices change after providers are integrated into hospitals and health systems. One study published this week by Health Affairs noted inappropriate MRI referrals jumped by more than 20% following such employment changes.
Looking further at this trend, the researchers analyzed Medicare fee-for-service claims data from 2013-2016, keying in on five common CT and MR imaging exams and five routine lab tests.
In addition to the aforementioned spike in imaging utilization and spending, hospital-based lab tests increased by 44.5 per 1,000 beneficiaries, and non-hospital-based tests dropped by 36 per 1,000, the researchers reported. These two shifts combined sent Medicare fee-for-service spending skyward, to the tune of $73.1 million.
The findings add to mounting evidence linking consolidation to higher healthcare costs, the authors noted, and shine a light on long-standing reimbursement practices that likely need tweaking.
Whaley and colleagues also encouraged further research into the drivers of vertical integration, as the trend may be here to stay.
“Medicare administrators and industry regulators seem likely to face more, rather than less, vertical integration in the coming years,” the authors added. “They will need a collage of evidence, including studies that examine other services, payers, and outcomes, to support the inevitable—and potentially contentious—decisions that are likely to follow.”
The study was supported by the RAND Center of Excellence on Health System Performance, as well as the National Institute on Aging. Read the entire article here (paywall).