The cost of health care consolidation: less choice, higher bills, fewer independent physicians

Independent physician practice is under existential pressure and patients are bearing the ultimate cost, said three advocates working with the U.S. Women's Health Alliance (USWHA).

Organization President Jack Feltz, M.D., Alliance member Rebecca Herrero, M.D., MBA, FACOG, president and CEO of Women’s Health Associates of Southern Nevada, and attorney Daniel B. Frier, Esq., co-managing partner of Frier Levitt, spoke to Medical Economics about the problems and potential solutions that could bolster the financial conditions confronting physicians in independent practice.

Structural payment disparities allow hospitals to outbid and absorb private practices, eroding patient choice and driving up costs. Proposed federal legislation, the Independent Medical Practice Sustainability and Patient Access Act, aims at leveling that playing field by narrowing reimbursement gaps and clarifying fair-market-value standards, while preserving the long-term physician-patient relationships they say define quality care.

This transcript has been edited for length and clarity.

Medical Economics: How would you describe the current business and financial environment for physicians in independent practice?

Rebecca Herrero, M.D., MBA, FACOG: It can be difficult. Across many specialties, there is a shortage of physicians. And particularly with ob-gyns, because of our lifestyle can be very difficult, working during the day in an office, taking call at night, and with younger physicians coming out of residency, having different needs, different asks regarding a work-life balance, it's just challenging right now, challenging to find physician providers to care for all of the women across the nation that need to be cared for, and so this becomes an access problem. We also know, something dear and true to my heart, is that many women have work family conflicts because of child-rearing responsibilities that pull them out of the workforce or creates this internal strife regarding how to be a practicing physician, how to care for their patients best, but also how to be a mother and part of a family unit.

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Medical Economics: Can you both explain why you're passionate about it? Why are you strong advocates for independent practice?

Jack Feltz, M.D.: This goes back probably for me over 40 years when I began in practice, where the relationship with my patients was incredibly personal. Practices were small independent businesses that allowed the physician and the patient to really have that bond that was special. I remember my first office that I opened, my mother helped sew the curtains, my father helped me build the reception desk, and I hung out a shingle and started providing care. Well, fast forward 40 years later, there have been enormous advances in health care. I still believe I give personalized care, as most of our private practicing physicians do, to our patients. But with this enormous corporatization of health care, vertical integration of hospital systems, big health plan corporations, practicing has become much more strained and more difficult to maintain that personalized relationship, to compete with these Goliaths to stay in practice. We fight for it every day. That's why we are part of Unified Women's Healthcare, that's why we are part of the U.S. Women's Health Alliance. But it is becoming more challenging every day.

Rebecca Herrero, M.D., MBA, FACOG: I can echo exactly what Dr. Feltz said, in that I went into private practice so that I could have that long-term relationship with my patients. I'm sure Dr. Feltz has done the same when he was practicing obstetrics — I'm now delivering patients that I delivered, and I love just getting in a room, an exam room with a patient, and before we get to the nitty gritties of why they're there and what their concerns are, just bonding with them and said, hey, how are the kids? How are the grandkids? And that's what I love about it. In private practice, you have that opportunity. If you're a hospital-based physician, a lot of times it's a more of a transactional relationship where you see a patient once or twice, but then they go to somebody else. And in private practice, it's just building and maintaining those long-term relationships, getting to know a patient and providing the health care that she needs.

Medical Economics: You worked with members of the Alliance to craft some legislation, and members also had traveled to Washington to meet with lawmakers about the Independent Medical Practice Sustainability and Patient Access Act. What happened with that trip, and what is happening with the legislation?

Daniel B. Frier, Esq.: This trip and this legislation is the culmination of a lot of work, a lot of time, and energy spent by the U.S. Women’s Health Alliance. Dr. Feltz mentioned that the goal, the purpose of the alliance is. it's very patient-centric. But in order to be patient centric, the individuals that are on the front lines of treating those patients have to be treated fairly, and in almost every conversation that happens about reimbursement, about the care of patients, physicians are left out of the conversation. And physicians obviously are the only element within the system that actually know how to treat patients. I've been very, very blessed with the ability to work with the amazing team at the Alliance, the Advocacy Committee along with the board as a whole to work with them to help develop this proposed legislation. We've been down a couple times to Congress, and they're receptive to the concept of legislation. This is not a fast process, but we found a number of people very receptive to it, some staffers that really understand it and can explain it to the representatives, some representatives we met with. So it's gaining momentum.

Medical Economics: Regulating anti-competitive hospital conduct: What's an example of that, and what would be a good regulatory solution?

Daniel B. Frier, Esq.: First of all, we're not anti-hospital. Hospitals are a necessary part of the system. But the way that the reimbursement model has been crafted over the years, the same treatment that a physician can provide at a relatively modest level terms of cost could cost five, 10, 12 times more in a hospital setting, and hospitals get huge amount of reimbursement for the very same procedures, and physicians get very low reimbursement often for that procedure. So, what's happened is hospitals, because they make so much money with these procedures, they've had the ability to recruit physicians out of private practice, and it's very hard for private practices to compete with that because they can't afford to pay those physicians what hospitals can in the short term. Hospitals are essentially luring physicians out of private practice to get the shore up their referral source, and the physicians are joining the hospitals, and in many instances, in many cases, in many areas around the country, there are no more private practicing physicians, and it's entirely because there's an unfair competitive advantage that hospitals have. Another example, briefly, is that hospitals, not-for-profit hospitals, can provide loan forgiveness on student on medical student debt. So if a medical student or residents coming out of residency and deciding where they're going to go practice, and they may want to practice with a private practice, but they know that if they go to a hospital, they can get their medical school debt forgiven, it's almost impossible to compete with that.

It's really the patients, because once the private practices in a particular area have evaporated, patient choice is eliminated, right? Access to care is reduced. Patients now don't have a choice, they have to go to a hospital-based physician, and there are some disadvantages to that, disadvantages to not having that choice.

Jack Feltz, M.D.: I would add to that, number one, it is really about the patient's access and affordability, patient copays, deductibles go up, their benefits plan becomes more expensive, you see double digit inflation in their insurance, and the leading cause of bankruptcy in America is health care debt, family bankruptcy is health care debt, and there's no surprise. The issue is if you're getting the same quality of care, which many studies have shown there's no difference in care between a hospital-based physician and an independent practicing physician, so, why would you pay 20%, 50%, 70% more for that care, and then go into incredible debt because of it? This is what our independent physicians are fighting against. It's not that we don't enjoy our hospitals, we don't enjoy our hospital-employed colleagues. We just think an even playing field will create innovation, fair competition, which is always good for patients, and those patients, by the way, are all of our families across the country.

Rebecca Herrero, M.D., MBA, FACOG: Just personally, as a practicing physician, patients are so much more satisfied with the procedures when they're able to be done in the office, and of course, these are going to be relatively low complexity, low low-risk procedures, but if they can do it in an office setting in which they're familiar with the staff, they're already familiar with the setting because they've been in the office, they enjoy it more. And as Dr. Feltz pointed out, the co-pays or the patient responsibility is significantly less because they don't have the high bill for the surgical center or for the hospital. These are going to be done in many cases without an anesthesiologist, and so for many reasons patients are generally much more satisfied with these type of procedures if they are performed in a physician's office rather than in a hospital setting.

Medical Economics: As long as you create fair market conditions, it sounds like physicians would compete well in those fair conditions.

Jack Feltz, M.D.: I think that's exactly correct. I think most independent physicians, our large organizations, the U.S. Women's Health Alliance, that's why I think our membership has grown so dramatically, because we just want fair conditions, to continue to be in our offices taking care of patients. Going to Capitol Hill, as Dr. Herrero, myself, and Dan Frier, do, takes us out of our office, which we don't like, because we'd rather be in the office seeing our patients. But if we don't get involved, if we don't become part of the solution, then private practice will disappear. Dr. Herrero, myself, we could both be in the office now, seeing patients. Instead, we're on this interview, instead, we're on Capitol Hill with many of our colleagues, because we're passionate about saving private practice. We think it is the cornerstone of health care in the country. We believe that it it should be reinforced, it should be supported, and not disintegrate. And so we're very passionate on behalf of our patients.

To make one point, both Dr. Herrero and myself, we could easily become hospital-employed physicians, potentially our salaries would go up because of that. It's not because we don't have choices. We don't want those choices because we do not believe they're in the best interest of our patients. We believe private practice is in the best interest of our patients, and that's why we fight this battle every day on behalf of doctors across the country and the patients they care for, to stay in private practice. It is in no way, shape, or form our only choice, but we believe it's the best choice for our patients.

Rebecca Herrero, M.D., MBA, FACOG: I know when I myself seek out medical care. I seek out private practice providers for the reasons that Dr. Feltz outlined. I believe that I'm getting more personalized care that is in my best interest. Once again, not stating that those that work for a hospital system or bad physicians or poor physicians, we're not going to give out good care, but that's just not the kind of care that I want for myself.

Medical Economics: The legislation also deals with proposals that would stabilize physician payment. What would you like to see?

Daniel B. Frier, Esq.: A couple things that the legislation does to address hospital disparities. Number one, it shores up some definitions that are inside already existing laws. For example, there's a law, the Anti-Kickback Statute, and Stark separate law that essentially require physicians to be paid fair market value for from hospitals, because if they're paid more than fair market value, the idea is that they're being paid to make referrals, and that's not legal. One of the things that the legislation proposes is to redefine or clarify the meaning of what's commercially reasonable and fair market value. The idea that that that a hospital can effectively lose money paying a physician on the professional fees that they generate year over year over year, and call that commercially reasonable, doesn't make sense to us, and we want the legislation to make that very clear.

Another part of the legislation deals with hospital with outpatient procedures, and there are a bunch of a number of procedures that can be done both in an office setting or an ASC (ambulatory surgical center) setting or a hospital outpatient department (HOPD) setting. In those instances we're asking that the delta between what physicians get reimbursed in their office for that procedure, versus what a hospital gets reimbursed in an outpatient department, that that delta be narrowed a bit.

We've elected not to seek a reduction in what the hospital gets paid. There's all sorts of proposed legislation already out there to reduce that amount of money, to reduce the disparity between different locations where service is provided. We've decided not to take that route in this legislation, although we're not opposed to what I've just said.

Our route is, pay physicians a little bit more. Now, what we believe that will result in is a reduction in total cost of care. This is where we're sort of outside the box, because the concept is, if you pay physicians a little bit more for the procedures that can be done in an HOPD, a hospital outpatient department, that more physicians will be able to stay in private practice, and if more physicians can stay in private practice, they won't enter into these relationships with hospitals where they are pressured to refer to the hospital, which is a higher cost solution for patients. So under this idea more patients will be able to stay with their physicians in private practice, and at a lower cost, because the doctors are getting a little bit more money, enough to keep them in business and not force them into the arms of the hospitals, and it creates a competitive environment where hospitals exist alongside private practices, which has always been the way things work best.

Jack Feltz, M.D.: I'll add to that because I think the importance of what Dan just said is pivotal. Where there's a community need for a subspecialist, that's fine, that's a hospital employed model that has to occur. But where there's plenty of community physicians, hospitals, and private practicing physicians should work together to come up with solutions: how to improve care, make care more accessible, and make care more affordable. Instead, there's an enormous amount of time, resources and energy wasted on this ridiculous, unfair, competitive landscape, this vertical integration that's happening, benefiting no one, certainly not benefiting our patients. I don't think at the end — it's certainly not benefiting private practitioners, but I don't think at the end it's going to benefit hospitals. Congress is clear that they can't see this health care inflation continue. So let's spend our resources working together, hospitals, private practicing physicians, to improve the care we give versus competing and no one wins.