Profitable hospital services moving to private offices, surgical centers

Growing trend may ultimately raise health care costs and reduce patients' access to specialty care, HSC researchers say.

The Center for Studying Health System Change said competition for profitable specialty services is driving a medical building boom that could mean higher costs and less access for some patients.

Many physicians are moving some profitable diagnostic and surgical services into their private practices and outpatient centers, according to the study by HSC, a nonpartisan policy research organization. An economic crunch brought by stagnating professional fees, growing malpractice insurance premiums and other costs are spurring many physicians to seek such alternative revenue sources.

The new HSC study focused on 12 U.S. communities, and showed that competition among hospitals, and between hospitals and physicians, is strongest in profitable service areas such as orthopedics, cardiology and cancer care. The trend is particularly strong in well-insured populations, said the authors, Cara S. Lesser, MPP, HSC president Paul B. Ginsburg, Ph.D. and Laurie Felland, MS.

Fewer specialists, on-call physicians

This trend may raise health care costs and reduce patients’ access to specialized care because fewer physicians are choosing to practice their specialties at hospitals, according to HSC. When physicians move their services’ base from hospitals to their own facilities, hospitals lose lucrative income streams and that threatens some hospitals’ ability to subsidize less profitable services and low-income patients. Other hospitals are expanding more lucrative services and reducing less profitable services such as inpatient psychiatric care, the HSC said.

Lower funding/higher costs

The study showed that employers and health insurers have initiated few measures to stem rising costs, other than increasing patient cost sharing, the study said. The decline of tightly managed care has coincided with health plans developing new, “consumer-driven” product designs intended to induce consumers’ cost-conscious decisions. Many insurers have developed products with health savings accounts and health reimbursement accounts, the authors said. (Read a related article on health savings accounts in the October issue of Orthopedics Today.)

Also, many community health centers and hospitals’ funding has not kept up with the rising number of uninsured patients, the researchers said. State and local governments are stretched to the limit providing coverage and subsidizing health care, they said.

In another notable finding, the study showed that many hospitals are improving quality and investing in information technology to compete among themselves and to meet patients’ rising expectations. But, “Overall, the promise of quality improvement initiatives and IT investments pales in comparison to the scope of the cost and access problems confronting the health care system today,” the HSC concluded. “If current trends continue unabated, communities are likely to face growing numbers of uninsured people and increasing disparities in access to care by income and geographic location.”

For more information:
Ginsburg P, Lesser C, Felland L. Center for Studying Health Care Change Issue Brief: Initial Findings from HSC’s 2005 site Visits: Stage Set for Growing Health Care Cost and Access Problems. Issue Brief No. 97. August 2005. Published online on the Center for Studying Health Care Change’s Web site. Available at http://www.hschange.org/CONTENT/776/. Accessed Sept. 2005.