Hospital-affiliated doctors drive highest costs by avoiding lower-cost sites

Editor's Note

Patients treated by hospital-affiliated physicians are far less likely to receive specialty procedures in lower-cost settings, while private-equity–affiliated doctors are the most likely to steer patients toward these options, Ambulatory Surgery Center News August 12 reports. The findings come from a Mount Sinai study that examined physician affiliation, site of care, and reimbursement patterns across cardiology, gastroenterology, orthopedics, and urology.

As detailed in the article, cost differences between sites of care are driven largely by facility fees. Ambulatory surgery centers (ASCs) charge far less than hospital outpatient departments (HOPDs), while physician offices do not bill such fees at all. For Medicare, HOPD reimbursement was 24% to 861% higher than the lowest-cost site for the same service. In commercial insurance, gaps were even wider, with some exceeding 1,300%. For example, researchers found a Medicare colonoscopy with lesion removal costs 160% more in an HOPD than in an ASC, a $513 difference. That same procedure costs 219% more in HOPDs under commercial plans, a $2,348 difference.

Across the 32 procedures analyzed, affiliation strongly influenced site-of-care decisions. The outlet reports 63% of patients attributed to private-equity–affiliated doctors received procedures in lower-cost sites, compared with 60% for independent physicians, 55% for corporate-affiliated physicians, and just 37% for hospital-affiliated physicians. These differences held even after adjusting for patient health status, demographics, income, and market factors, indicating that practice structure, not patient complexity, drives the variation.

The researchers concluded that site-neutral payment policies could help contain costs by removing incentives tied to affiliation. Such policies would require Medicare to pay the same rate for the same service regardless of where it is performed. MedPAC, the US Government Accountability Office, and multiple congressional proposals have endorsed this approach. While site neutrality could reduce hospitals’ incentive to acquire physician practices and shift procedures to higher-paying HOPDs, it might also narrow the advantage ASCs currently hold under Medicare.

Industry experts told the outlet that payment differentials shape physician behavior, and that policy reform could redirect incentives. Without action, the study warns, the trend of physician migration into hospital employment will continue to inflate costs. The researchers concluded federal policymakers have the authority to realign payment structures to better match patient needs and cost savings, though hospitals remain opposed and continue to lobby aggressively against such reforms.