Two rulings in one week in a case involving an Idaho hospital’s purchase of a physician group gave health care journalists a couple of significant stories to cover. The first one set a legal precedent, and the second one gave us a rare up-close look into how hospitals can drive up costs when acquiring physician groups.
Interestingly, the judge cited the work of two health care journalists who have covered the issue of rising health care costs in the past year as being among the reasons to unseal documents the parties in the case wanted to keep from the public.
In the first ruling on Jan. 24, B. Lynn Winmill, chief judge of the U.S. District Court in Idaho, found that St. Luke’s Health System in Boise violated antitrust law (specifically, the Clayton Act and the Idaho Competition Act) when it acquired the Saltzer Medical Group, a 40-physician practice in nearby Nampa.
“This case represents the first time that a federal court has decided a case against a physician practice acquisition,” the health law practice of Epstein Becker & Green wrote on Friday in an alert to clients. The court ordered St. Luke’s to unwind the merger, although the hospital said it would appeal. Covering Health carried this story last week.
In the second ruling, on Jan. 28, Winmill unsealed documents that St. Luke’s and Blue Cross of Idaho wanted to keep from the public. In ruling to lift the veil, Winmill wrote, cited the work of health care journalists Elizabeth Rosenthal of The New York Times and Steven Brill of Time as being instrumental in his decision:
St. Luke’s and Blue Cross object to revealing specific figures and percentages regarding hospital-based billing. The practice of hospital-based billing has been widely-publicized, however. See Rosenthal, “As Hospital Prices Soar, a Stitch Tops $500,” New York Times (Dec. 2, 2013); Brill, “Bitter Pill,” Time magazine (Feb. 20, 2013).
So what did the parties want to keep sealed? Audrey Dutton, a business and health care reporter for The Idaho Statesman, revealed that in 2012, the top hospital in the St. Luke’s system was receiving reimbursements 21 percent higher than the average Idaho hospital was getting; that after the Saltzer acquisition St. Luke’s would be able to bill for routine lab tests and X-rays at the higher ‘hospital-based’ rates, which Blue Cross estimated would be 30 percent to 35 percent higher than average. And, she wrote, St. Luke’s estimated that it could gain an extra $750,000 through hospital-based billing from commercial payers for lab work and $900,000 extra for diagnostic imaging.
She also wrote that St. Luke’s hired a consultant to analyze the benefit of billing at the higher hospital rate rather than at the rate the physicians could bill if they did work outside the hospital. The consultant estimated that billing at the hospital-based rate would be more than 60 percent higher than billing at the rate allowed if the work were done in a physician’s office.
This issue of billing at the higher in-hospital rate is one that Rosenthal covered on Jan. 18 in an article, “Patients’ Costs Skyrocket; Specialists’ Incomes Soar.” This article was part of the same series, titled “Paying Till It Hurts,” as the one Winmill cited in his ruling.
Billing at the higher in-hospital rate has been criticized as needlessly driving up health care costs. In March, the National Commission on Physician Payment Reform issued a report outlining recommendations to control health care spending. One recommendation called for paying equal rates for the same physician services regardless of specialty or setting. “Over the past years, there has been a trend to reimburse medical services performed in outpatient facilities at a lower rate than those same services when provided in hospitals. For example, Medicare pays $450 for an echocardiogram done in a hospital and only $180 for the same procedure in a physician’s office,” the commission said in a press release.
After reviewing the facts in this case and the documents the parties wanted to keep from the public, the questions journalists can ask about other similar deals are numerous. Here are just two, for example: When hospitals acquire physician groups so that they can develop accountable care organizations (as St. Luke’s said it hoped to do with the Saltzer acquisition), would they be able to control costs more effectively if they billed at the physician-office rate rather than at the in-hospital rate? And are the costs of running hospitals so high that they need to charge much higher rates in order to stay open?