Competition between hospitals and physicians to expand profitable specialty services may hinder access to care for Americans with low incomes and may curtail hospitals' primary care services. Economist Paul Ginsburg, Ph.D., offered this forecast at the primary care forum sponsored by AAFP's Robert Graham Center in Washington Oct. 13.
Trend Analysis
Health Care Competition May Hurt Primary Care and the Poor
By Jane Stoever
10/17/2005
Hospitals and physicians are expanding subspecialty services in a way that may drain resources from primary care, says economist Paul Ginsburg, Ph.D.
Ginsburg, president of the Washington-based Center for Studying Health System Change and founding executive director of the Physician Payment Review Commission (now the Medicare Payment Advisory Commission), reviewed initial findings from 1,008 interviews the center conducted this year with public and private health system leaders in 12 U.S. communities. The center identifies changes via surveys and interviews and then informs policy-makers.
Hospitals are expanding in the areas of cardiovascular care, orthopedics, neurosurgery and oncology, Ginsburg said. "What do those four areas have in common? They're more profitable for the hospital than the 'average' service. This (investment in income producers) should be a real concern to primary care physicians. The prices at present are distorted. Some services are more profitable than others, and everyone out there in the health system understands it, everyone except the people in Washington."
As if hospital expansion weren't enough, physicians themselves are setting up surgi-centers, endoscopy sites and imaging facilities, Ginsburg said, and physicians are adding services in their offices and sometimes merging practices to be able to purchase equipment for the services.
Physician expansion into historically profitable cost centers may threaten hospitals' continued ability to cross-subsidize the care they provide for uninsured people, Ginsburg said. "Hospitals traditionally used the surpluses from the profitable services to pay for some of their community-benefit activities. To the degree that specialized entities can compete (with hospitals) for very highly profitable services, then less of this cross-subsidization can go on."
The physician expansion is not the only element discouraging cross-subsidization. Another factor was explained by Andrew Bazemore, M.D., assistant director of the Graham Center, in an interview after the forum. In the past, large health care organizations, including hospitals, purchased primary care practices and subsidized them through higher-income-generating services. Organizations that are now building subspecialty centers may be using their excess income for that instead of primary care -- bad news for FP employees and their patients, said Bazemore.
Ironically, the degree of the building going on by hospitals and physicians "turns out to overshoot demand and leads to excess capacity. This likely will increase unit costs," said Ginsburg.
Ginsburg also focused on the rising number of uninsured people: "We're seeing eroding insurance coverage at the same time as the economy expands. Safety-net providers report they're seeing more uninsured people asking for their services. As more and more people are unable to afford health insurance premiums, it (being uninsured) is working into the middle class, and this builds political support" for coverage for more people. He credited many states with generally protecting Medicaid from severe budget cuts at a time of financial crisis.
Noting another trend, Ginsburg said many hospitals have adopted quality initiatives. Hospital leaders interviewed said key catalysts to improving quality include the Joint Commission on Accreditation of Healthcare Organizations and such initiatives as the Institute for Healthcare Improvement's 100,000 Lives Campaign, which aims to prevent premature deaths in hospitals through safety measures. In addition, Ginsburg noted, "Hospitals see there could be payment based on performance measures."
The Center for Studying Health System Change and health care journals will release more detail on the study's findings during the next 12 to 15 months. Ginsburg only gave participants in the health policy forum a sneak peek at the study's results.
Hospitals are expanding in the areas of cardiovascular care, orthopedics, neurosurgery and oncology, Ginsburg said. "What do those four areas have in common? They're more profitable for the hospital than the 'average' service. This (investment in income producers) should be a real concern to primary care physicians. The prices at present are distorted. Some services are more profitable than others, and everyone out there in the health system understands it, everyone except the people in Washington."
As if hospital expansion weren't enough, physicians themselves are setting up surgi-centers, endoscopy sites and imaging facilities, Ginsburg said, and physicians are adding services in their offices and sometimes merging practices to be able to purchase equipment for the services.
Physician expansion into historically profitable cost centers may threaten hospitals' continued ability to cross-subsidize the care they provide for uninsured people, Ginsburg said. "Hospitals traditionally used the surpluses from the profitable services to pay for some of their community-benefit activities. To the degree that specialized entities can compete (with hospitals) for very highly profitable services, then less of this cross-subsidization can go on."
The physician expansion is not the only element discouraging cross-subsidization. Another factor was explained by Andrew Bazemore, M.D., assistant director of the Graham Center, in an interview after the forum. In the past, large health care organizations, including hospitals, purchased primary care practices and subsidized them through higher-income-generating services. Organizations that are now building subspecialty centers may be using their excess income for that instead of primary care -- bad news for FP employees and their patients, said Bazemore.
Ironically, the degree of the building going on by hospitals and physicians "turns out to overshoot demand and leads to excess capacity. This likely will increase unit costs," said Ginsburg.
Ginsburg also focused on the rising number of uninsured people: "We're seeing eroding insurance coverage at the same time as the economy expands. Safety-net providers report they're seeing more uninsured people asking for their services. As more and more people are unable to afford health insurance premiums, it (being uninsured) is working into the middle class, and this builds political support" for coverage for more people. He credited many states with generally protecting Medicaid from severe budget cuts at a time of financial crisis.
Noting another trend, Ginsburg said many hospitals have adopted quality initiatives. Hospital leaders interviewed said key catalysts to improving quality include the Joint Commission on Accreditation of Healthcare Organizations and such initiatives as the Institute for Healthcare Improvement's 100,000 Lives Campaign, which aims to prevent premature deaths in hospitals through safety measures. In addition, Ginsburg noted, "Hospitals see there could be payment based on performance measures."
The Center for Studying Health System Change and health care journals will release more detail on the study's findings during the next 12 to 15 months. Ginsburg only gave participants in the health policy forum a sneak peek at the study's results.
