Editorial and Health Care

Health care is not 'business as usual'

October 8, 2012
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Grand Rapids Business Journal this week reports on the growing trend of physician recruitment to large health care entities, the resulting closures of private practices, and the escalation of prices in the process. It is another example of the underlying factors pushing health care costs to almost 20 percent of the GDP. It is certainly less obvious in general reporting with regard to impact on overall cost increases, but it is another example of why health benefit costs continue to rise for employers.

Even while physician shortages continue to increase across the country — and especially in Michigan — the impact of the current trend exacerbates the problem and escalates the shortages. Nationally, according to The Wall Street Journal, the Association of American Medical Colleges reported the U.S. will find itself short 62,900 physicians in the next five years, and more than 91,500 by 2020. The pending crisis in Michigan is on Gov. Rick Snyder’s agenda dashboard, and is one reason for the proliferation in medical colleges in Grand Rapids, Kalamazoo and the proposed program at Central Michigan University.

The issue has been one of more private than public discussion among physicians for a decade, but when Spectrum Health bear-hugged Michigan Medical PC into a “unit” owned by Spectrum, such discussion became more apparent and grew increasingly alarmed. So, too, when Spectrum “merged” the West Michigan Heart practice group into its system. The Business Journal noted in comment at the time that the large health system also had revoked hospital privileges of those physicians operating outside the groups it owns.

In the report updating such efforts this week, further measure is given to the cost impacts of such required alliances. While standard business expectation anticipates lowering costs by bulk use, the cost for physician services and medical imaging diagnoses has actually increased. It is another example of why health care cannot be compared to private enterprise or “free market” principles.

One of the sources for the report this week (see page 1), physician Fred Davis, who owns ProCare Systems, noted: “A big hospital system, prices for tests, for procedures and evaluations and things actually go up. And so that is another reason why a private practice that’s run efficiently can actually effectively compete on cost.”

Further impact is caused as hospital systems give priority to physicians on staff for test results, often delaying results to independent physicians — or forcing them into the hospital group. Alliance for Health director Lody Zwarensteyn said doctors’ work does tend to become more expensive when they are within a medical care system, as opposed to working in their own private practice. He attributes that to what he calls “corporate pricing,” in which a large organization requires a unit charge for each individual service it provides, whereas a doctor in private practice may typically charge one set fee.

Another factor that can add to cost is what Zwarensteyn calls “conflict of duty.” For example, a hospital may urge its staff to use its own under-utilized lab. “Who is the doctor’s duty to? The patient or the employer?” said Zwarensteyn.

Employers must recognize that the business of health care is not “business as usual,” and must understand the underlying impact to their revenue stream as benefit costs reflect such impacts.

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