News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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Aetna’s New Health Plan for Individuals in Kansas City Allows CVS Health Services at MinuteClinics, HealthHUBs and Pharmacies to Be Network Providers

What is not clear is how Aetna might engage independent clinical laboratories as in-network providers for this health insurance plan

For years, Dark Daily and its sister publication The Dark Report have regularly predicted that the traditional fee-for-service reimbursement model of indemnity health insurance that requires beneficiaries to pay a co-pay is on the way out. What is not known is how the nation’s biggest health insurers plan to reinvent themselves, as value-based reimbursement for providers becomes more common.

That may be clearer now, at least for one insurance giant. Aetna recently announced it was incorporating CVS Health services provided at CVS-owned pharmacies and retail clinics into a healthcare plan for individuals in the greater Kansas City, Mo., area. 

The Aetna Connected Plan “combines CVS Health services—including free one to two-day prescription delivery and 20% discounts on thousands of health-related items—with Aetna’s cost-saving I-35 Performance Network to deliver a more convenient and connected member experience, along with up to 20% premium savings compared to comparable PPO products in the market,” states a CVS Health press release.

Members can schedule appointments at CVS Health MinuteClinics, request consultations at CVS HealthHUBs for no copay, and access other services, including telehealth visits, through CVS pharmacies. Essentially, Aetna made network providers for this range of CVS-owned health services.

CVS Health services, according to the press release, include:

  • $0 copay at local HealthHUB and MinuteClinic locations,
  • Free one to two-day prescription delivery,
  • 20% discounts on thousands of health-related items in-store and online,
  • 24/7 pharmacist helpline, and
  • Access to the CVS managed pharmacy network, specialty pharmacy network, and Coram home infusion services.

The Aetna I-35 Performance Network includes:

  • 1,247 primary care doctors,
  • 8,300 specialists,
  • 13 hospitals, and
  • 32 urgent care facilities

The Aetna health plan will be made available next year to employers with 101 or more workers in three counties in Missouri (Clay, Jackson, and Platte) and two counties in Kansas (Johnson and Wyandotte). Aetna claims the premiums for their new plan are 20% less expensive than other similar plans for the region, MedCity News reported.

Jim Boyman VP, Market President-Heartland at Aetna
“It’s all about meeting our members where they are to increase engagement, improve outcomes, and reduce healthcare costs,” said Jim Boyman (above), VP, Market President-Heartland at Aetna, in the press release. “This plan is just one example of how Aetna and CVS Health are combining forces to help people live healthier lives,” he added. “We’re providing a better member experience by reducing costs and simplifying their healthcare journey.” (Photo copyright: LinkedIn.)

AMA Expressed Concerns over CVS Purchase of Aetna

CVS acquired Aetna for $70 billion in late 2018 and the two companies have been working to integrate their businesses ever since. 

There are currently more than 1,000 CVS MinuteClinics located throughout 33 states and the District of Columbia. CVS began opening HealthHUB clinics in the Houston area last year and plans to open more than 1,500 HealthHUBs by the end of 2021, the Houston Chronicle reported.

Critics of the 2018 purchase of Aetna by CVS were concerned that CVS would somehow use Aetna’s 40 million members to drive revenue for its stores. Many groups, including the American Medical Association (AMA), Consumers Union, and pharmacy organizations were opposed to the merger due to anticompetitive concerns.

The AMA felt the merger would reduce competition in some pharmaceutical markets, which could lead to higher premiums and lower the quality of some insurance products. The organization also believed that the merger “faced enormous implementation challenges and was unlikely to realize efficiencies that benefit patients,” the AMA noted in a statement.

“We are very concerned about the consolidation in healthcare because we know that as healthcare systems consolidate, prices tend to go up,” AMA President Barbara McAneny, MD said in the statement. “And we are very concerned that with the CVS purchase of Aetna that drug prices will continue to rise and that is a major pain point of patients all across the country.”

The AMA also stressed concerns regarding how the lack of competition could have negative impacts on the pharmaceutical industry.

“It’s also causing harm to a lot of the parts of the industry,” McAneny added. “Independent pharmacies are going out of business and this consolidation makes them (CVS) just such a stronger player in that market that competition is really difficult.”

Despite the opposition, the CVS and Aetna merger received final approved from regulators last year. Before the merger was approved, the two companies had to convince state attorneys general, antitrust regulators, and Congress that the consolidation would not result in anticompetitive practices and impair independent drugstores and other national chains. 

Will Aetna Engage Independent Clinical Laboratories?

Aetna’s new health plan is another example of how the nation’s biggest health insurers are adapting away from fee-for-service and to value-based reimbursement for healthcare providers. Clinical laboratory managers will want to watch how CVS and Aetna do or do not work with independent laboratory companies to collect lab specimens at the pharmacies and provide testing.

—JP Schlingman

Related Information:

Connecting the Dots in Health Care: Combining CVS Health Services with Aetna’s Cost-Saving Performance Network

Aetna Unveils Plan Nudging Members to CVS Clinics, Pharmacies

Aetna Launches New Plan Design That Puts Focus on CVS’ Health Services

Aetna Rolls out New Plan Built around CVS Pharmacies, Retail Clinics

New Aetna Health Plan Leverages CVS’ Retail Reach

CVS Launches HealthHUB as Part of Health Care Expansion

CVS-Aetna Merger

CVS Announces Plans to Add More Clinical Services to Its Minute Clinic Locations, Including Certain Medical Laboratory Tests

Consumer Trend to Use Walk-In and Urgent Care Clinics Instead of Traditional Primary Care Offices Could Impact Clinical Laboratory Test Ordering/Revenue

Thirty US Congress Members Ask HHS To Send COVID-19 Testing Funds Directly to Clinical Laboratories

US Representatives want clinical laboratories to have better support for their increased efforts to expand testing for the coronavirus

On June 8, Congressmen Tom Reed (NY-23), Scott Peters (CA-52), and 28 other members of the US House of Representatives sent a letter to Secretary of the Department of Health and Human Services (HHS) Alex Azar requesting that funds from the Paycheck Protection Program and Health Care Enhancement Act (H.R.266) be sent directly to clinical laboratories that have heavily invested in increasing their COVID-19 testing capacity.

In their letter, the Representatives wrote, “As you are aware, the recently enacted Paycheck Protection Program and Health Care Enhancement Act (PPPHCE Act) invests $25 billion in the [Public Health and Social Services Emergency Fund (PHSSEF)], including $11 billion for states, localities, territories, and tribes, to enhance all aspects of COVID-19 testing capacity. This funding is in addition to the funds already appropriated to the PHSSEF under the CARES Act.

“While laboratories are eligible, along with other providers, for these funds,” they continued, “there have been no federal funds specifically designated for the laboratories that have stepped up in this public health crisis and have made significant investments to expand access to COVID-19 testing despite 40-60 percent reductions in regular commercial volume due to the economic lockdowns.

“As laboratories work to maintain their investments in critical resources for testing platforms, reagents, swabs, and PPE, as well as hiring, training, and overtime pay for the laboratory workforce, we urge HHS to direct a portion of funding that has not already been allocated towards these efforts. These funds will ensure that labs can continue to rapidly scale up diagnostic and antibody testing, particularly for healthcare workers, first responders, and other Americans on the frontlines of this pandemic,” concluded the Representatives.

ACLA President Made Similar Plea for Direct Funding to Clinical Laboratories

As Dark Daily reported in “Federal Government Is Sending Nearly $11 Billion to States for COVID-19 Clinical Laboratory Testing and Testing-Related Activities,” in April, Julie Khani, President of the American Clinical Laboratory Association (ACLA), sent a similar letter to Azar urging the HHS to provide some of the stimulus money directly to clinical laboratories.

“In order to deliver accurate, reliable results for patients at a national scale, we must allocate funding to support [clinical laboratories’] expanded efforts,” she said in a statement following an April 27 meeting at the White House.

In her letter, Khani wrote, “It is essential that HHS allocate $10 billion from the fund to support labs’ further expansion of testing capacity to fulfill the testing needs of all of the states and to protect the lives and livelihood of all Americans.

“Further,” she continued, “HHS should note that investing in the nation’s laboratories will not only enhance testing capacity in the short-term, but it also will allow the country to benefit from a robust testing infrastructure for the duration of the COVID-19 pandemic and beyond.”

President Trump signed H.R.266 into law on April 24. It includes $25 billion earmarked for research, development, validation, manufacturing, purchasing, administering, and expanding capacity for COVID-19 testing. According to the language of H.R.266, that includes, “tests for both active infection and prior exposure, including molecular, antigen, and serological tests, the manufacturing, procurement and distribution of tests, testing equipment and testing supplies, including personal protective equipment needed for administering tests, the development and validation of rapid, molecular point-of-care tests, and other tests, support for workforce, epidemiology, to scale up academic, commercial, public health, and hospital laboratories, to conduct surveillance and contact tracing, support development of COVID-19 testing plans, and other related activities related to COVID-19 testing.”

“As the demand for testing continues to grow, clinical laboratories need dedicated funding to plan for challenges that lie ahead. Strong federal coordination and leadership is essential, and we’re looking forward to working with HHS to ensure that laboratories have the resources necessary to continue to expand our role at the forefront of the nation’s response,” said Julie Khani (above), President of the American Clinical Laboratory Association (ACLA), in a press release following the June 8 letter sent to HHS by 30 members of Congress requesting funds from H.R.266 be sent directly to clinical laboratories. Khani will be speaking on federal policies now impacting clinical laboratories at the upcoming 25th annual Executive War College on Laboratory and Pathology Management in New Orleans on July 14-15. (Photo copyright: ACLA.)

Financial Struggles for Hospitals and Clinical Laboratories

This new round of stimulus funding comes at a time when many providers and clinical laboratories are struggling financially, despite the influx of COVID-19 patients.

“Across the country, laboratories have made significant investments to expand capacity, including purchasing new platforms, retraining staff, and managing the skyrocketing cost of supplies. To continue to make these investments and expand patient access to high-quality testing in every community, laboratories will need designated resources. Without sustainable funding, we cannot achieve sustainable testing,” said Khani in an ACLA statement.

As the COVID-19 coronavirus pandemic evolves, federal regulations, as well as emergency funding for COVID-19 testing that is provided by federal legislation, will evolve in unexpected ways. For that reason, clinical laboratory leaders will want to closely track announcements by such federal agencies as the Department of Health and Human Services, the Centers for Medicare and Medicaid Services, the Food and Drug Administration, the Centers for Disease Control and Prevention, and the Federal Emergency Management Administration as decisions are made about how to assign the $25 billion authorized in H.R.266 for “testing.”

—Stephen Beale

Related Information:

Reps. Reed and Peters Lead 28 House Members in Calling on HHS to Allocate Additional Federal Support to Clinical Laboratories for COVID-Testing

Reed Leads Members in Requesting More Widespread COVID-19 Testing

Amid Growing Demand for Testing, Lawmakers Call on HHS to Designate Resources for Clinical Laboratories

The Paycheck Protection Program and Health Care Enhancement Act: Summary of Key Health Provisions

H.R.266 – Paycheck Protection Program and Health Care Enhancement Act

Special Bulletin: HHS Announces How it Will Distribute Additional Funds to Providers Under CARES Act

What Clinical Diagnostic Laboratories and Manufacturers Need to Know about the CARES Act

Latest Updates on the CARES Act Public Health and Social Service Emergency Fund

Lab Test Volumes Plummet as Patients Put Off Care

COVID-19 Bonanza: Stimulus Hands Health Industry Billions Not Directly Related to Pandemic

$75B Relief Bill Provides ‘Much-Needed Lifeline’ to For-Profit Hospitals

7 Healthcare-Related Items You May Have Missed in the $2T Coronavirus Stimulus Package

Coronavirus Strains Cash-Strapped Hospitals, Could Cause Up to 100 to Close Within A Year

ACLA Statement on Expanding Access to Testing

ACLA Letter to HHS on PHSSEF Direct COVID19 Test Funding

Federal Government Is Sending Nearly $11 Billion to States for COVID-19 Clinical Laboratory Testing and Testing-Related Activities

Medical Tourism Lowers Healthcare Costs for Companies and Their Employees, But Is It Good Medicine for Patients and Can Clinical Laboratories Participate?

Some companies save so much in healthcare cost they pay their employees to participate in medical tourism programs

Medical tourism is not new, but it’s changing, and clinical laboratories have a role to play in the models employers use to save money on their employees’ health coverage costs.

Employers that manage the entire process—from securing passports for their employees, to ensuring they have access to high-quality care outside the country’s borders—report saving money as well as simplifying the process for their employees. An apparent win-win.

However, questions linger about:

  • Availability of diagnostic testing and clinical laboratories;
  • If patients treated outside the US receive adequate protections; and
  • Whether the quality of care is equal to that in the US.

One recent example of a company helping employers and employees receive high quality care outside of the US is NASH—the North American Specialty Hospital. NASH was featured in a Kaiser Health News (KHN) article that described one patient’s experience traveling to Cancún for a surgical procedure.

Location, Pre-Existing Conditions, Length of Stay, Etc., Affect Final Bill in US

One of NASH’s corporate clients is Ashley Furniture Industries. Headquartered in Arcadia, Wis., the American home furnishings manufacturer and retailer employs approximately 17,000 people, including Terry Ferguson. Terry’s wife, Donna, is the patient highlighted in the KHN story.

One of the healthcare providers NASH partners with is Galenia Hospital, a 55-bed general services hospital in Cancún, Mexico. NASH leases the entire third floor of the hospital. Galenia is next door to a Four Points Sheraton Hotel, making lodging a simple matter for medical tourists.

Currently, NASH focuses on orthopedic surgeries such as total knee replacements, the medical procedure Donna Ferguson underwent.

A 2015 BlueCross BlueShield study showed that costs for total-knee-replacement surgery in the US averaged about $31,000. However, depending on where the surgery takes place, it can cost as low as $11,317 (Alabama) and as high as $69,654 (New York City). Pre-existing conditions, length of time in the operating room, number of days in the hospital, and numerous other factors contribute to the final bill.

NASH, however, sets the final price is up front.

Some Companies Pay Their Employees to Use Medical Tourism

With the average cost for the surgery coming in at around $12,000, the cost savings to employers is so great some companies actually pay employees who are willing to travel for procedures, KHN reported. Donna Ferguson paid no co-pays for her surgery, paid nothing out of pocket for travel or lodging while in Cancún, and the Ferguson’s received a $5,000 check from Ashley Furniture.

Ferguson told KHN, “It’s been a great experience. Even if I had to pay, I would come back here because it’s just a different level of care—they treat you like family.”

That’s important for hospitals, clinical laboratories, and all healthcare providers in America to consider. In the minds of patients, quality of care starts with their experience at the hands of the provider.

Donna Ferguson (center) is shown above meeting Thomas Parisi, MD, JD (left), a surgeon with the Orthopedic Institute of Wisconsin, for the first time in Cancún the day before he performed her knee replacement surgery. Clinical laboratory tests, X-rays, and other diagnostics took place in the US prior to Ferguson’s authorization to undergo surgery in Mexico. (Photo copyright: Rocco Saint-Mleux/KHN.)

Clinical Laboratory Tests in US, Surgery in Mexico

Prior to traveling outside the US for surgery, Ferguson underwent a physical exam, X-rays, and other diagnostic testing to ensure the treatment approach was the best for her. Once that was confirmed, IndusHealth, Ashely’s medical travel plan administrator, “coordinated [Donna’s] medical care and made travel arrangements, including obtaining passports, airline tickets, hotel and meals,” for both Donna and Terry Ferguson, KHN reported.

It seems reasonable to assume that NASH has agreements with multiple clinical pathology laboratories and healthcare facilities throughout the US for patients to get the tests they need prior to surgery. Partnerships with medical tourism companies may well represent an avenue for pathology laboratories to pursue.

Protections for Patients

So, why hasn’t medical tourism become the healthcare juggernaut some experts predicted? Managed Care suggests one reason is that Americans tend to be skeptical of the quality of care they will receive in a foreign facility.

“Building a familiar culture in a foreign destination may be appealing to some American consumers, but I do not see it as a sustainable business,” Health consultant Irving Stackpole, PhD, MEd, Psychology, told KHN. “It’s not unusual for people thinking about this to have doctors, family, and friends who will see this as a high-risk undertaking.”

Several factors helped Ferguson feel better about her decision to travel to Mexico for surgery. One is that Galenia is credentialed.

Managed Care notes, “A number of organizations credential international facilities. The American Medical Association guidelines for medical tourism recommend that foreign medical providers have accreditation from the Joint Commission International or a similar organization.”

Galenia Hospital has accreditation from the Joint Commission International, the General Health Council of Mexico, as well as diamond-level accreditation from Canada’s Qmentum International Accreditation Program.

In addition to a credentialed facility and a highly trained surgeon, NASH also provides US malpractice insurance coverage, giving patients recourse in the event something goes wrong. Ferguson and American patients like her would be able to sue in the US if care under this arrangement was not successful.

Medical Tourism Pays Surgeon’s Full Fee

One fascinating twist in this story is that an American physician was flown to Cancun to perform this operation and was paid his full fee. The surgeon scheduled to perform Ferguson’s operation, Thomas Parisi, MD, JD, trained at the Mayo Clinic. He traveled from Wisconsin to Cancún to perform the procedure. “Dr. Parisi trained at Mayo, and you can’t do any better than that,” Ferguson told KHN.

KHN reported that Parisi spent less than 24 hours in Cancun and was paid $2,700 for this surgery. That fee is three times of the amount Medicare pays for this procedure. Further, Parisi’s fee was significantly above what many managed care plans would negotiate for this type of surgery.

American-trained physicians are common at many of the facilities credentialed by the Joint Commission International. “Many overseas hospitals are staffed in part by physicians and other health professionals who were trained in US hospitals. One hospital in India has 200 US-trained board-certified surgeons,” wrote James E. Dalen, MD, MPH, ScD, and Joseph S. Alpert, MD, in “Medical Tourists: Incoming and Outgoing,” published in The American Journal of Medicine (AMJMED).

“In the past, medical tourism has been mostly a blind leap to a country far away, to unknown hospitals and unknown doctors with unknown supplies, to a place without US medical malpractice insurance. We are making the experience completely different and removing as much uncertainty as we can,” James Polsfut, CEO and Chairman, North American Specialty Hospital (NASH), told KHN.

Clinical laboratories in America may find opportunities providing testing services to medical tourism organizations like NASH. It’s worth investigating.

 —Dava Stewart

Related Information:

To Save Money, American Patients and Surgeons Meet in Cancun

Blue Cross Blue Shield Association Study Reveals Extreme Cost Variations for Knee and Hip Replacement Surgeries

Understanding Knee Replacement Costs: What’s on the Bill?  

NASH Self-Pay Medical Tourism

Medical Tourism: Once Ready for Takeoff, Now Stuck at the Gate

Medical Tourists: Incoming and Outgoing

Medical Tourism Continues to Flourish as U.S. Patients Seek Lower Cost Healthcare in Overseas Countries

Healthcare Reform in the United States May Actually Increase Medical Tourism

Utah Public Employees Receive Transportation and a $500 Cash Bonus to Purchase Prescriptions in Mexico

Walmart Flies Employees to Top Hospitals for Surgeries in a Bid to Cut Healthcare Costs

Latest AMA Benchmark Survey Shows Number of Physicians Employed by Health Networks Now Exceeds Those in Independent Practice

As physicians continue to re-evaluate their career strategies, clinical laboratories must closely monitor changes to test ordering from formerly self-employed doctors

For the first time, more doctors are employed by health networks than are in private practice. That’s according to a recent report from the American Medical Association (AMA). In a press release, the AMA describes the event as “the continuation of a long-term trend that has slowly shifted the distribution of physicians away from ownership of private practices.”

This trend impacts independent clinical laboratories and anatomic pathology groups because hospital-based physicians have reasons to order tests from in-house medical laboratories. Thus, a reduction in independent self-employed doctors could also mean reductions in test orders from those physicians.

To make its conclusions, the AMA drew on six years’ worth of Physician Practice Benchmark Survey data, gathered from 2012-2018. In its published Policy Research Perspectives report, the AMA describes the findings as “one of the more dramatic changes over this six-year span.”

Independence versus Employment

According to the new release, employed physicians made up 47.4% of all patient care doctors in 2018—an increase of 6% since 2012. Meanwhile, self-employed doctors represented 45.9% of physicians in patient care—down 7% (from 53.2%) since 2012. 

“Due to this swing, for the first time in 2018, there were fewer physician owners than employed physicians,” the AMA researchers wrote in their report.

The AMA has conducted its benchmark surveys every other year since 2012. They are nationally representative surveys of doctors to record employment status, practice size, specialties, and ownership.

“Change continues in the delivery of healthcare and physicians are responding by re-evaluating their practice arrangements. Physicians must assess many factors and carefully determine settings they find professionally rewarding when considering independence or employment,” said Barbara L. McAneny, MD, FASCO, MACP (above), in the AMA news release. McAneny is a board-certified medical oncologist/hematologist, President of the American Medical Association, and CEO/co-founder of New Mexico Cancer Center. (Photo copyright: HMP.)

Who Employs Doctors?

Physicians can be employed by other doctors in physician-owned practices, by hospitals directly, and by hospital-owned medical practices. 

Most, however, work for other doctors, reported Fierce Healthcare. In a summary of the latest AMA survey data, Fierce noted that:

  • 54% of doctors are owners, employees, or contractors in practices owned by physicians—compared to 60% in 2012;
  • 8% of doctors work directly for a hospital—up from 5.6% in 2012;
  • 26.7% of doctors are employed by hospital-owned practices—up from 23.4% in 2012; and
  • 34.7% of doctors work for a hospital or a practice partly owned by a hospital in 2018—up from 29% in 2012.

The AMA partly attributed the increase in employed physicians to age: 70% of doctors under the age of 40 reported as employees in 2018, compared to 38.2% of doctors 55 and over who reported as employed.

Family Practice Physicians Most Likely to Become Employed by Hospitals

Other intriguing data points include the percentages of practice ownership among medical specialties.  

Pathology was not broken out. However, the AMA’s report did state that, “surgical subspecialties had the highest share of owners (64.5%) followed by obstetrics/gynecology (53.8%) and internal medicine subspecialties (51.7%).

“Emergency medicine had the lowest share of owners (26.2%) and the highest share of independent contractors (27.3%). Family practice was the specialty with the highest share of employed physicians (57.4%),” the report concluded.

The AMA researchers also noted that the number of doctors seeking employment in healthcare networks may be decreasing. “The trend away from physician-owned practices and toward working directly for a hospital or for a hospital-owned practice appears to be slowing—more than half of that shift occurred in the first two years of [the benchmark survey] period [2012 to 2018].”

The AMA also noted that the success or failure of accountable care organizations (ACOs) could have an effect on hospital acquisition of private practices. “Should evolving models of care not deliver on their theoretical savings or improvements, that might put a break on consolidation,” the researchers wrote.

It’s critical that clinical laboratories continue to improve the quality and efficiency of outreach services to retain and grow medical laboratory testing business that increasingly may come from health networks versus physician-owned private medical practices.    

—Donna Marie Pocius

Related Information:

2018 Benchmark Survey and Policy Research Perspective (PDF): Updated Data on Physician Practice Arrangements: For the First Time, Fewer Physicians Are Owners Than Employees

Employed Physicians Outnumber Self-Employed

For the First Time, Employed Physicians Outnumber Self-Employed Doctors, AMA Study FindsEmployed Physicians Now Outnumber Self-Employed Doctors

First Time Ever: Less than Half of All Healthcare Practices in America are Physician Owned—Are Doctors Giving Up Their Independence and Will Independent Clinical Laboratories Lose Test Orders to Hospital Labs?

Often when a hospital health system buys an independent physicians’ practice, the new owner would like its clinical laboratory to serve that medical group

After a hospital or health system buys a physicians’ practice, it is common that the new owner has its in-house medical laboratory provide lab testing to the newly-acquired medical group. Such a purchase is generally good for hospital labs, but not so good for any independent lab that, prior to the sale, had been serving the newly-sold medical practice.

Therefore, when hospitals purchase thousands of physician practices, the impact on the nation’s independent clinical laboratories has the potential to be significant. That’s one conclusion contained in a newly updated report based on co-research by Physicians Advocacy Institute (PAI) and Avalere Health, a healthcare and life sciences consulting firm headquartered in Washington, D.C.

Clinical Laboratory Test Orders Drop as Physicians Join Hospital Staff

According to a PAI news release, hospitals acquired 5,000 independent physician practices between July 2015 and July 2016. Building on a previous Avalere-PAI study, the data suggest that over four years (from mid-2012 to mid-2016) the percentage of hospital-employed physicians increased by more than 63%. In other words, 42% of doctors were employed by hospitals in July 2016, as compared to 25% of doctors in July 2012, a proportion that nearly doubled in just four years!

As more physicians move from owning their private practice to becoming employees of the new owner, independent labs serving those medical practices are at risk of losing the lab test referrals from the practice.

Of course, this can be a boon for hospital-based or healthcare system labs that see an uptick in lab test referrals, as more physician practices or outreach customers join the hospital team. However, surveys show, for hospitals, acquiring and owning more doctors’ practices can be problematic.


“As payers and hospitals continue [to] drive consolidation across the healthcare system, it is becoming more and more difficult for a physician to maintain an independent practice,” stated Robert Seligson (above), PAI President and CEO of the North Carolina Medical Society, in the PAI news release. “Payment policies mandated by insurers and [the] government heavily favor large health systems, creating a competitive advantage that stacks the deck against independent physicians, who are already struggling to survive under expensive, time-consuming administrative and regulatory burdens.” (Photo copyright: Physicians Advocacy Institute.)

Newly Acquired Doctors Impacting Hospital Finances

The newest data, released by PAI in 2018, suggest that from July 2015 to July 2016 hospitals were actively buying physician practices:

  • 5,000 physician practices were acquired by hospitals;
  • 8% to 47% growth in hospital-owned practices in every region of the U.S.; and,
  • More than 33% of Midwest physician practices were hospital-owned in 2016.

The data also indicated that more doctors had chosen to become employed by healthcare systems, giving up their independent status. From mid-2015 to mid-2016:

  • 14,000 more physicians became hospital employees;
  • 11% increase in employed physicians; and
  • 5% to 22% growth of hospital-employed doctors in every U.S. region, with more than 50% in the Midwest, 37% in the south, and 33% in Alaska and Hawaii.

This has had the expected impact on hospital finances. The 2017 American Medical Association (AMA) Physician Practice Benchmark Survey suggests hospital purchases of medical groups appear to be slowing, as hospitals’ cost to employ physicians increases, Modern Healthcare noted.

“Physician compensation is one of the fastest growing expenses in health systems. It has become as high as 10% of total expenses for some systems. The burden is not sustainable,” Joel French, Chief Executive Officer, SCI Solutions, told Modern Healthcare. 

Medicare Pays More to Hospitals for the Same Services

The PAI-Avalere report also noted that Medicare pays more for certain services when performed in hospital outpatient departments instead of doctors’ offices.

A blog post in the American Journal of Managed Care (AJMC) detailed a few of the differences:

  • $5,148 for hospital cardiac imaging compared to $2,862 in a doctor’s office;
  • $1,784 for a colonoscopy in-hospital versus $1,322 in a physician’s office; and,
  • $525 for in-hospital evaluation and management services compared to $406 in the doctor’s office.

“The shift toward more physicians employed by hospitals could mean higher costs for the entire healthcare system,” Kelly Kenney, PAI Executive Vice President, stated in the PAI news release.

Practice Ownership Effects Quality of Care

While the PAI-Avalere analysis explored physician employment’s impact on payment for some services, another study explored its effects on quality of care.

Researchers analyzed data from three national surveys of physician practices. Their report, published in the American Journal of Managed Care (AJMC), found that in hospital-owned physician practices, there was more use of recommended care management processes (CMPs), such as, disease registries and nurse coordinators.

“The current findings suggest that hospital acquisition of practices may have beneficial effects for patients with chronic illnesses,” the researchers wrote in AJMC.

As medical groups change owners, independent clinical laboratories must work hard to retain the testing business—especially when the new owner is a hospital or healthcare system with its own in-hospital medical laboratories.

—Donna Marie Pocius

Related Information:

Updated Physician Practice Acquisition Study: National and Regional Changes in Physician Employment 2012-2016

Five Thousand Independent Physician Practices Acquired by Hospitals in 12 Months

Hospital Ownership of Physician Practices Increases Nearly 90% in Three Years

Hospital Acquisition of Independent Physician Practices Continues to Increase

American Medical Association Physician Practice Benchmark Survey

For the First Time Ever, Less Than Half of Physicians are Independent

Trends in Hospital Ownership of Physician Practices and the Effect on Processes to Improve Quality