A common carrier approach to hospital-based physicians

It would appear that we’re not going to move to a single payer system in health care for at least another 5-10 years, unless employers finally give up on trying to control costs. Given this state of affairs, it would then seem apparent that we ought to try to solve some of the thornier problems created by a multi-payer, fractured and generally unregulated health care market.

Among the structural problems presented by the current system is the lack of collaboration among payers. Even on things that payers might legally be able to work on, they don’t seem that interested in collaboration. The medical home work in some states has brought multiple payers together, but on virtually all other issues, payers are resistant to or legally prevented from adopting common practices.

This is unfortunate because it is the variations in how health plans pay and administer claims and benefits that drives much of the cost in the delivery system. If we could find a way to eliminate or simplify some of these administrative policies, or, failing that, have all plans adopt common policies, a lot of excess cost would be driven from the system. I have an earlier blog post that calls for a national fee schedule as one example.

Another potential for collaboration is in the area of hospital-based physicians, known in the industry as PARE groups--pathology, anesthesia, radiology and emergency physicians. These groups, especially emergency physicians, have very different dynamics that drive their businesses. They must take all patients regardless of ability to pay. Because they work strictly in a hospital setting for the most part (there are some exceptions), if the hospital accepts a patient, the doctor must accept that patient as well regardless of the patient’s ability to pay. Because ERs are the front door to the delivery system, they get more than their fair share of non-payers or low payers like Medicaid, which makes up a disproportionate share of ER visits.

What these physicians do is simply shift their excess costs to private, commercial payers. Each private payer negotiates its own deal with these providers, though increasingly, these doctors are choosing not to participate in provider networks feeling they can’t get a good enough deal. The result is often charges that are 2-5 times Medicare rates and if plans won’t pay, physician groups try to collect from patients. Patients are shocked when they get a bill from one of these providers (if the state allows the physician to balance bill) when they thought they were in a contracted hospital and using a contracted surgeon.

HMOs are forced to pay the bill by the provider because they are prohibited by law from refusing to, but PPOs and other plan types don’t have these prohibitions and patients are put in the middle. States like California have been hot beds of disputes between plans, providers, patients and the state, which recently upheld a ban on balance billing. The other complicating factor for plans and patients, as well has hospitals, is that virtually all of the hospital-based physicians across the country practice in groups that are essentially monopolies within the delivery networks in which they practice.‭ In some geographic areas, they are absolute monopolies representing the only group that practices in a certain region. In most regions, there is at least one other competing entity, but hospitals often choose a single group of anesthesiologists, radiologists or pathologists to provide these services. Another complicating factor is the high rates of pay for this group of physicians. It is not uncommon for a radiologist to earn in excess of $400,000 a year and many do much better. But this is a wholly different matter for another post another day.

This set of issues has fostered an unequal relationship between health plans and providers to negotiate competitive rates.‭ The result is an increasingly contentious set of negotiations or a resort to non-traditional means to settle disputes. This means more lawsuits by plans against providers for using their monopoly power to drive up costs. It means providers suing plans and states to allow them to balance bill members. All of this is waste and it drives wedges between the parties.

A non-market solution is needed

Given the importance of having PARE groups in all payer networks and the very critical need of communities to have access to these physicians,‭ ‬it seems logical that all payers‭ ‬should come together with employer groups, government, hospitals and other community leaders to set rates.‭ P‬atients need and demand access to emergency rooms,‭ ‬anesthesiologists,‭ ‬pathologists and radiologists.‭ ‬None of these providers can pick and choose whom they serve and they cannot limit the amount of charity care they provide.‭ ‬It is thus incumbent upon the community, the state or the nation to develop an all-payer approach that provides universal access  at common rates.‭ ‬While this effort would prove difficult to pull off,‭ ‬it would end the bitter struggles among the parties and become a model for the kind of solutions that would move us forward instead of continuing more discord and excess cost.

Creating the legal and regulatory framework for common payments would require leadership from either state governments or Congress, but this is the kind of initiative that might gain wide support because of the unique nature of these providers and the critical role they play in health care.  It is my contention that many of the hospital-based physicians would welcome this approach.  I have talked to at least two who thought it would be an interesting approach to a difficult problem. 

When markets fail to develop an appropriate answer for a critical service, governments or communities must step in to correct that failure. There is no better place to have government play this role than in payment to hospital-based physicians. Importantly, administrative costs would decline markedly if this approach were adopted.