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When hospital giants hire your GPs


For Kaiser Health News


When Dr. Sarah Azad followed her mother into the field of obstetrics eight years ago, she thought she’d be in private practice for the rest of her career. At the time, independent practices abounded in Silicon Valley.

“From the time we were young, my mom’s patients loved her. She was a part of their lives. That’s just always how I’ve seen medical care,” she said.

But over the past decade, she’s watched as physician after physician sold their practices and went to work for one of the large hospital systems in town. Today, Dr.,  Azad runs one of the last remaining independent OB-GYN practices in Mountain View.

The number of physician practices employed by hospitals increased by 86 percent from 2012 to 2015, according to a study conducted by Avalere Health for the Physicians Advocacy Institute, a health policy-focused nonprofit.

Perhaps nowhere has the trend been more pronounced than in Northern California.

As large hospital systems like Sutter Health, Stanford Medicine and the University of California at San Francisco gobble up doctor practices, they gain market muscle that pushes costs upward. It’s a key reason why Northern California is now the most expensive place in the country to have a baby.

A study published this week in Health Affairs found that large doctor practices, many owned by hospitals, exceed federal guidelines for market concentration in more than a fifth of the areas studied. But the mergers are typically far too small for federal antitrust authorities to notice.

“When you have less competition, prices go up,” said Martin Gaynor, a healthcare economist at Carnegie Mellon University. “If you’re an insurance company and you don’t reach an agreement with Sutter, then you have a hard time offering an attractive insurance product because it’s so big and pervasive. So you don’t have the same negotiating power, and Sutter can extract higher prices.”

In the San Francisco Bay Area, the reimbursement rate for a vaginal delivery is two to four times higher for physicians who work for large hospital systems than for those who are independent, according to a Kaiser Health News analysis. The news organization examined claims data provided by Amino, a health-cost transparency company, plus results from medical cost calculators available from certain employers to help workers comparison shop.

The extra money for physician services goes to the hospital system, and doctors, now on salary, might take home no more than before. Although switching from independent practice spares OB-GYNs the considerable hassles of negotiating with insurers and running an office, doctors say the lion’s share of the benefit goes to hospital systems — not to physicians or patients.

In Northern California, Sutter, Stanford and UCSF all mentioned quality as a reason why their physician prices are higher, and it might seem intuitive that integrating care among disparate physicians leads to better care.

“Sutter Health-affiliated doctor groups consistently rank among California’s highest performers,” Dr. Jeffrey Burnich, senior vice president at Sutter Health Medical and Market Networks, wrote in an email. In the long run, “by improving care quality and efficiency, we reduce costs.”

But in general, research suggests bigger is not necessarily better.

Fewer patients of small physician-owned practices, for example, are admitted to the hospital for preventable conditions than those of large hospital-owned practices, according to a 2014 study published in Health Affairs. A report from the National Academy of Social Insurance showed that the integrated delivery networks of large hospital systems have raised physician costs without evidence of higher quality. And a recent paper, also published in Health Affairs, found that high-price physician practices, which cost at least 36 percent above average, had no better quality than low-cost practices.

“All of the evidence that we see shows that the quality in these larger systems is the same or worse,” said Kristof Stremikis, associate director for policy at the Pacific Business Group on Health, which represents employers that provide health insurance.

A Personal Connection

On a sunny day last spring, Dr. Azad walked into her patient’s room wearing a colorful headscarf. Just weeks from her due date, Ruby Lin sat on the end of the exam table holding her belly. The two women greeted each other like old friends.

“Hi! You look great,” Ms. Lin told Dr. Azad.

“Thanks — I’m not where I hoped I’d be,” Dr. Azad replied, rolling her eyes and touching her stomach. The doctor gave birth to her fourth child just months earlier and hadn’t lost the “baby weight” she wanted to yet.

Dr. Sarah Azad examines patient Ruby Lin in Mountain View, Calif.  Dr. Azad’s mother was also an obstetrician.

Photo by Jenny Gold/KHN

This was Ms. Lin’s second baby with Dr. Azad as her physician. “I get very nervous about seeing doctors and especially OB-GYNs, and Dr. Azad is the only one I’m comfortable with,” said Ms. Lin.

This sort of well-established, personal relationship is Dr. Azad’s favorite part of being a doctor, and she considers it a hallmark of independent practice. At the larger practices owned by hospital systems, she said, patients may be more likely to have the doctor on call deliver their baby rather than the obstetrician whom they’ve grown to know over months.

But  Dr. Azad says that running a medical practice in one of the most expensive parts of the country is getting harder. “Rent goes up 3 percent per year. Water and utilities went up 18 percent last year alone. But seven years later, [the insurers] are still paying me the same amount, despite any efforts to negotiate.”

At first, Dr. Azad tried reaching out to the insurance companies directly to ask for higher rates. They refused even to meet with her, she said. Then she hired a consultant to negotiate on her behalf. Nothing worked.

“One insurance contract responded saying, ’You don’t even have 2 percent of market share. Basically drop our contract or not — it doesn’t affect us,’” she said. Another insurer told her they couldn’t raise her rates because they had to pay too much to the larger health systems in town, she said.

Independent doctors in the Bay Area are reimbursed, on average, a median $2,408.45 for a routine vaginal delivery, which includes prenatal and postnatal visits, according to the Kaiser Health News analysis of Amino claims data.

That compares with $5,238.13 for the same bundle of services for Stanford physicians and $8,049.84 for doctors employed by University of California-San Francisco.

Health data company Amino provided Kaiser Health News (KHN) with median billing amounts for Bay Area obstetricians. KHN used a Medicare provider database to determine where each doctor worked. In cases where the doctor’s employment status was unclear, a reporter retrieved the information by calling the health system or physician directly. KHN then calculated the average median billing amount for a routine vaginal birth for each health system.

The Amino database did not contain many claims from doctors employed by Sutter, so KHN also reviewed OB-GYN charges on several insurers’ online cost estimators. The review found that obstetricians employed by Sutter Health are reimbursed about three times more for the same service than independent doctors, or about $6,452 for a vaginal delivery.

Many doctors are mystified as to why prices vary so dramatically — independent or not.

Same Office, Same Pay

After nearly a quarter-century in independent practice, OB-GYN Ken Weber sold his practice to Stanford, where he now works. His office is in the same place, across the street from  Dr. Azad. Both physicians admit patients to the same local hospital.

But insurers now pay about twice as much for his services as before.

He still makes the same amount, he said. Stanford’s health system gets the rest.

“It doesn’t make sense to me from the insurance company’s standpoint, because they’re losing all these doctors to the bigger groups and having to pay more. And if they just had negotiated with us fairly, I think we could come to some middle ground,” Weber said.

Dr. Weber said he hung on to his independent practice as long as possible, but he grew increasingly frustrated. “It’s hard to know that you’re doing the same work someone else does at Sutter or Stanford or wherever,” yet insurers are paying more for patients to see the other person, he said.

Nonetheless, there have been some real benefits to selling his practice, he added: He no longer has to worry about dealing with billing or maintaining compliance with the new electronic health-record regulations.

For their part, the big Bay Area hospital systems caution against oversimplifying the many factors that go into paying for obstetrical care. A Stanford spokeswoman, Samantha Dorman, said the health system incurred significant costs when it integrated new provider groups. For instance, many were not yet on electronic health records and needed updated equipment. Dorman added that Stanford reduced physician charges a few years ago to be more in line with other practices.

A UCSF spokeswoman said that just looking at physician reimbursement rates was misleading because while the system charges more for physician services, it charges less for other hospital services. Overall, she said, their costs are competitive.

For its part, Sutter suggested that it was not accurate or fair to judge physician price discrepancies on online cost calculators. According to  the aforementioned Dr. Burnich of its Medical and Market Networks service, the rates provided are inconsistent and often out-of-date.

The agreements between hospitals and insurers have “gag clauses” barring either party from divulging rates. The bottom line, for many patients, is that it’s almost impossible to determine either the cost or the value of the various health care providers available to them. This is particularly problematic for patients with high-deductible plans, who may be on the hook for a significant portion of those costs.

Meanwhile, the type of consolidation that  Dr. Azad has witnessed in Northern California is spreading quickly throughout the country, and it is extremely difficult to reverse.

The most consolidated places like Northern California, Pittsburgh and Boston have become a “poster child of what not to do,” said economist Gaynor of Carnegie Mellon. “We should look at places that have consolidated and think about how to avoid that.”

Kaiser Health News correspondent Sydney Lupkin contributed to this report.

Calif. battle over nurse-midwives’ scope of practice


Midwife checks on a mother.


For Kaiser Health News


A California bill that would let certified nurse-midwives  practice independently is pitting the state’s physicians against its hospitals, even though both sides support the main goal of the legislation.

The California Hospital Association and the California Medical Association, which represents physicians agree that nurse-midwives have the training and qualifications to practice without physician supervision.

But they differ sharply over whether hospitals should be able to employ midwives directly — a dispute the certified nurse-midwives fear could derail the proposed law.

“We are very much caught in the middle,” said Linda Walsh, president of the California Nurse-Midwives Association.

The bill would override an existing law that requires certified nurse-midwives to practice under the supervision of medical doctors. California is one of only six states that requires full supervision. Several other states mandate other forms of collaboration, such as in prescribing medications.

The American College of Nurse-Midwives has been chipping away for decades at state laws that require physician supervision, and it has finally passed the tipping point nationally, said Jesse Bushman, director of federal government affairs for the organization. Nurse-midwives aren’t seeking permission to go off and do whatever they want without consulting anyone, Bushman said. “They’re just asking to be able to do what they are trained to do.”

In states where nurse-midwives can practice independently, there is more access to care, he said, citing a recent report published by the George Washington University’s Jacobs Institute of Women’s Health.

There are more than 11,200 nurse-midwives around the nation, including about 1,200 in California. They provide maternity care, family planning services and other primary care for women.

In 2013, California eliminated the physician supervision requirement for licensed midwives, who require significantly less training than nurse-midwives. Unlike licensed midwives, certified nurse-midwives must become registered nurses and obtain a graduate degree in midwifery. They primarily deliver babies in hospitals, while licensed midwives usually work in homes or birth centers.

Walsh said that her association is trying to make it easier for certified nurse-midwives to practice around the state, especially in areas where there may not be any obstetricians. It can be challenging to find physicians willing to oversee nurse-midwives, because of the responsibility and liability involved, she said.

“We have an access issue in California,” Walsh said. “Yet we have this supervisory language that prevents an increase in access for the people who need it most.”

Lisa Catterall, who works in a hospital-based midwifery practice at Feather River Hospital, in Paradise, Calif., said  that getting physician supervision is not easy. For one thing, some nurse-midwives have to pay extra malpractice insurance in addition to paying doctors for their supervision. Even with the supervision, the doctors are not required to be present to oversee the care, added Catterall, who delivers about 100 babies a year and sees patients from throughout the rural region north of Sacramento where her hospital is situated.

The debate between the doctors and the hospitals centers on the state’s prohibition of what’s known as the “corporate practice of medicine.” California does not allow corporations, including hospitals, to hire physicians, though there are several exceptions. The intent of the ban is to avoid undue corporate influence on doctors’ medical judgment and patient care. Under current law, hospitals can hire nurse-midwives, though many don’t.

One of the bill’s co-authors, Assemblywoman Autumn Burke, recently withdrew an amendment that would have mirrored the law applying to doctors by barring hospitals from hiring nurse-midwives. With that provision withdrawn, the California Medical Association now opposes the legislation and the California Hospital Association supports it.

The physicians’ group believes that the healthcare decisions of nurse-midwives employed directly by hospitals could be influenced by their administrators, and it says it will only back the bill if the amendment is reinstated.

Patients should have the same consumer protections whether they see a nurse-midwife or a doctor, said Juan Thomas, a lobbyist with the medical association. “It should be a level playing field,” he said. “We believe very strongly that the corporate practice of medicine bar language provides an important layer of patient protection.”

The California Hospital Association, meanwhile, won’t support the bill if the amendment is reinstated. The association believes hospitals need to retain the freedom to hire nurse-midwives.

A ban on hiring would make it more difficult for nurse-midwives to work in hospitals, forcing them into roundabout contracts that are “unduly cumbersome, unduly burdensome and unnecessary,” said Jackie Garman, a vice president of the hospital association.

In addition, Garman said, some nurse-midwives are already employed by hospitals. “What happens to them?” she asked.

The nonprofit Pacific Business Group on Health recently announced its support of the midwife bill, saying it would help expand women’s choices in pregnancy care and lead to better maternal health. In the spring, the group had sponsored a roundtable with more than 30 organizations from around California to discuss increasing access to nurse-midwives.

“It is really hard to argue with the evidence about the value that midwives offer pregnant women,” said Brynn Rubinstein, the group’s senior manager for transforming maternity care. “They are delivering more patient-friendly care, yielding better outcomes and saving money for purchasers,” she said. “But they are not always easy to find.”

Research shows that patients of certified nurse-midwives have fewer cesarean deliveries and lower epidural rates.

Assemblywoman Burke’s office is continuing to talk to representatives of both the physicians and the hospitals to try and find a solution to the contentious issue of whether hospitals should be allowed to hire nurse-midwives, said Allison Ruff, a senior aide to Burke.

“For both of them, it is an issue they don’t want to compromise on,” she said. “The bill became a pawn in the fight between the hospitals and the physicians. It still is.”


Some firms, labor groups accuse Sutter of abusing power


Some companies and labor groups accuse Sacramento, Calif.-based Sutter Health of abusing its market power by demanding that, in the words of Becker’s Hospital Review, “companies either sign an arbitration agreement to resolve any legal disputes with the health system or pay significantly higher rates for their employees’ medical treatment.”

The accusations are from a March 16 court filing by David Lansky, CEO of the Pacific Business Group on Health, which represents such companies as Wells Fargo Bank and Chevron as well as the California Public Employees’ Retirement System.

Companies that refuse to sign the arbitration agreement must pay 95 percent of Sutter’s full charges for the care employees receive at Sutter’s hospitals, surgery centers and clinics.

Mr. Lansky says that large companies employing people in Northern California must have Sutter in their workers’ insurance networks because of the system’s size. The system includes 24 hospitals and 34 surgery centers.

“Their choice is between two unacceptable alternatives. Pay 95 percent out-of-network pricing for enrollees that access Sutter services, or agree to give up their claims in this litigation.”

Sutter, for its part, denies trying to keep companies from joining the class-action suit, and asserts  that the contract terms, including the arbitration provision, are reasonable.


In California: 4 ‘perturbations’ in healthcare sector


In this HealthAffairs podcast , Arnold Milstein, M.D., discusses important aspects of the California health-policy landscape. Milstein, a professor of medicine at Stanford University and medical director of the Pacific Business Group on Health, discusses four “perturbations” in the California healthcare market, as summarized below by HealthAffairs editors:

  • “Increased transparency, specifically at the level of the healthcare provider.
  • “Experiments in patient incentives—that go beyond incentives to choose less expensive plans or medications—in the form of narrow and tiered networks and reference pricing.
  • “Private Accountable Care initiatives led notably by Anthem and Blue Shield plans, reinforced by the Medicare Accountable Care Organization (ACO) program and California’s traditional robust managed-care market.
  • “Provider consolidation, propelled by hospital acquisition of or close affiliation with physician groups.”



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