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Market Changes Set Stage for Growing Health Care Cost and Access Problems
Hospitals and Physicians Intensify Competition for Profitable Specialty Services
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"As hospitals and physicians compete more broadly for profitable services, more and more diagnostic and surgical services are shifting from hospitals to physician offices and physician-owned ambulatory centers," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded primarily by The Robert Wood Johnson Foundation.
Competition among hospitalsand between hospitals and physicianshas focused on key, profitable service lines, including cardiac, orthopedic and cancer care, researchers found. Facing stagnant growth in professional fees and pressure from growing malpractice premiums and other practice expenses, physicians increasingly view facility fees as an important new revenue source, according to the study.
The medical building boom and intensified service-line competition identified in the fifth round of HSC site visits potentially have consequences for local health care markets. Whether meeting or creating new demand, the capacity expansions are destined to lead to higher rates of care use and costs.
The intense competition for profitable services also may influence the availability of health care services and patients access to care. For example, many hospitals are struggling to get physician specialists to provide on-call emergency department coverage. Increasingly, hospitals are paying physicians to provide on-call coveragehistorically part of physicians obligation in return for hospital privileges. As specialists provide more services in their practices or in other facilities they have a financial interest in, they become less dependent on having privileges at general hospitals, potentially diminishing access to specialty care for some patients.
"All the signs in the 12 communities are pointing toward higher costs and growing gaps in access to care by income and geographic location," Ginsburg said. "Continuing high cost trends threaten the affordability of health insurance, especially for low-wage workers and small firms, increasing the likelihood that the number of uninsured Americans will continue to rise."
The movement of profitable services out of hospitals and into physician practices and physician-owned facilities poses a threat to some hospitals ability to subsidize care for less profitable services and for low-income patients. And, as hospitals expand lucrative services, some are cutting back on less profitable ones such as inpatient psychiatric care.
The studys findings are detailed in a new HSC Issue BriefInitial Findings from HSCs 2005 Site Visits: Stage Set for Growing Health Care Cost and Access Problemsby Cara S. Lesser, M.P.P., HSC director of site visits; Ginsburg and Laurie Felland, M.S. an HSC health researcher. The Issue Brief and five new Community Reports describing market changes in Indianapolis; Cleveland; Little Rock, Ark.; northern New Jersey; and Orange County, Calif.; are available online at www.hschange.org.
Every two years, HSC researchers visit 12 nationally representative communities across the country, conducting intensive interviews with local health care leaders, including health plans, providers, policy makers, employers and consumer advocates. In addition to the five community reports released recently, HSC will issue reports in the coming months covering Lansing, Mich.; Greenville, S.C.; Syracuse, N.Y.; Boston; Miami; Phoenix; and Seattle.
Other key initial findings from the fifth round of HSC site visits include:
Stakeholder Comments on the HSC Study
Carmela Coyle, senior vice president for policy, American Hospital Association, www.aha.org
"Society faces a balancing act as we weigh the benefits of improved care
and longer lives with the growing cost of health care. Advances in medicine
can dramatically improve the quality of life for patients. This comes with higher
costs, but these investments can make a difference in the health of Americans.
With demand for care increasing and the cost of providing that care on the rise,
Donald W. Fisher, Ph.D., C.A.E., president and CEO, American Medical Group Association, www.amga.org
"The Centers findings underscore the fact that market forces are becoming
the primary drivers of the business of medicine today. While this is understandable,
given the economics of the times, it is imperative that we remain vigilant in
upholding the highest standards of quality and outcomes and, in the process,
change our payment system to one that assures the financial recognition of this
value in medical
Karen Ignagni, president and CEO, Americas Health Insurance Plans, www.ahip.org
"Health insurance plans have developed a new generation of cost containment
tools and techniques that are providing results. For example, the upward trend
in spending on prescription drug benefits has been cut dramatically over the
past three years as these tools and techniques have been more widely used. The
new HSC study looks at emerging patterns in the use of new technologies that
may make it more difficult to bring down cost trends and provide coverage for
more Americans. This points to a key role for government in overall planning
and in evaluating the efficacy of new technologies and their diffusion into
The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nations changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.