I have always been somewhat dubious about the claim that hospital mergers and the development of integrated delivery systems (IDSs) will provide less expensive and higher quality care. A recent article discussed this idea in depth (see: The Downside of Merging Doctors and Hospitals). Below is an excerpt from it:
One approach...[to the fragmentation of healthcare] is to consolidate more of the health care you need in one organization called an integrated delivery system. An I.D.S. owns one or several hospitals and also employs physicians across multiple specialties. It may also provide nursing home and rehabilitation care. In some cases, an integrated delivery system may offer its own health insurance plans. Advocates of this approach claim that the coordinated care an I.D.S. offers is not only better for patients but also reduces duplication and avoids unnecessary services, thus lowering costs. Kaiser Permanente, Intermountain Healthcare, the Mayo Clinic and Geisinger Health System are some of the integrated delivery systems with reputations for high quality and low costs. However, the evidence suggests that an I.D.S. doesn’t always improve patient care and keep costs down. Some studies have found an I.D.S. is more likely to use evidence-based care or is better able to manage care. But other studies offer more mixed conclusions. A study published in Health Services Research found that after Minneapolis-St. Paul area hospitals acquired physician practices, there were small improvements in cancer screening and emergency room use. But it also found more unnecessary hospitalizations. Other research that examined 15 nationally prominent integrated delivery systems found no meaningful differences in the quality of care provided by their flagship hospitals, compared with their main competitors. And it turned out that the I.D.S. hospitals were more costly. A study published last year in JAMA Internal Medicine found that prices paid for outpatient care by private insurers are higher for organizations that employ more physicians, as integrated delivery systems do. One reason is that insurers pay an additional “facility fee” for care provided in a hospital setting, even if the same care could be provided in a community clinic.
Simply having an IDS structure does not guarantee integration of care. It takes far more than this. However, having a single electronic record (EHR) for an IDS can go a long way toward reaching this goal. Unfortunately, there is information clutter in the EHR records, partly due to providers cutting-and-pasting information (see: OIG Says Cut-and-Paste in EHRs Can Lead to Medicare Overcharges; Veteran Clinician Critiques the Current EHR -- Both Good and Bad; Copy-and-Paste Errors with EHRs; Some Possible Solutions to the Problem).
Large, complex IDS's often deliver higher quality care but at a higher price. The added facility fees mentioned above contribute to this. In the long run, our reimbursement system will continue to largely determine the cost for care. It's going to take some time but value-based-care and MACRA should reduce the cost of care and increase its quality. What is entirely clear is that physicians and IDSs need to work together to reach these goals. It does appear that basing MD compensation on RVUs, as is common in many hospital systems, may in and of itself increase the cost of care. Here's a quote from an article discussing this point (see: The Tangled Hospital-Physician Relationship):
The movement of formerly FFS-based private practitioners to hospital salaried employment is conceptually appealing to policymakers because it seemingly dilutes physicians’ incentive to render more services than patients need, and also offers the potential for better coordinated care. The reality, however, appears to be that salaried employment actually increases health costs. Market pressures have pushed hospital compensation and practice expenses for some specialties far above what they actually generate in cash collections. Losses in excess of $200,000 per hospital employed physician are not unusual, according to the Medical Group Management Association. Hospitals make up the cash losses on the practices by placing their employed physicians on RVU-based incentive compensation formulae....These formulae encourage the employed physician to maximize consultative requests for other specialists, as well to use in-house imaging and laboratory services (which are highly profitable to the hospital). In effect, physician care has become a “loss leader” for the hospital’s profitable diagnostic and surgical services.