Mike Wilson, chief executive of Providence Health Care Eastern Washington, said the system does conduct market-power investigations before buying practices. In at least one ongoing case, the system has declined to buy a doctor's office over concerns that the deal would attract antitrust scrutiny, choosing instead to try to form an affiliation that doesn't involve an acquisition.
Asked whether he was afraid a competitor in Spokane might buy the practice instead, Wilson said of the doctor's office: “We are in conversations with that group at this point in time.”
Wilson said the FTC's view of the risks to consumers from provider consolidations stands in contrast to the positive aspects of such deals extolled by other federal entities. Those benefits include efficiency in coordinating care between doctors and hospitals, systems' ability to recruit physicians, and the access to care provided by not-for-profit systems regardless of patients' ability to pay.
“The goals of healthcare reform in creating a delivery network—we have proven in Spokane that they bump up against the FTC rules, and we believe that those should be somehow resolved,” Wilson said. “And we are probably not the only community that feels that way.”
However Tracy Wertz, a senior deputy attorney general in the Pennsylvania, noted in a speech in Washington last month that greater efficiency among providers doesn't necessarily lead to lower prices for consumers. Sometimes the opposite may be true. In a May 4 presentation to members of the American Health Lawyers Association and the American Bar Association, Wertz said larger physician practices may gain market power to command higher prices from insurers, especially if they combine with hospitals, which bill for much higher overhead costs than stand-alone doctor practices. Wertz also cast doubt on the efficiency argument, noting that cost-savings are less likely to be passed on to consumers if a deal ends up eliminating the kind of strong market competition that would otherwise force providers to offer better prices.
Her office was involved in another of the often-cited physician-merger cases—a simultaneously filed federal lawsuit and consent judgment in 2011 regarding Urology of Central Pennsylvania, which was created following the merger of five doctors' practices in 2005. Investigators contended the merger led the practice to offer fewer services and request higher prices from insurers.
Another nationally studied case involved MaineHealth, a seven-hospital system based in Portland that in 2011 agreed to a sweeping consent decree with the state attorney general's office as a condition of buying two cardiology clinics in town. The agreement requires the system to maintain physician prices, limit its overall operating profit to no more than 3% of its operating revenue until 2016, and meet patient-safety goals.
Meanwhile in Idaho, observers say it's clear that the business strategies of St. Luke's are paying off. Dr. Joseph Williams, one of 10 physician co-owners of the independent Idaho Urologic Institute in Meridian, said it's impossible to miss all the St. Luke's signage erected on prime real estate that has been bought up and converted to not-for-profit status in the greater Boise area. “I think that they charge premium prices for the care that their newly purchased clinics provide, and it is apparent that they are doing well from a profitability standpoint, as evidenced by their property acquisitions,” Williams said.
On the contrary, St. Luke's CEO Pate said physician prices are “pretty much set statewide” by private insurers and government payers. “No, it's not a matter of increasing physician prices,” Pate said. “In fact it is really the other side which is my interest. More and more physicians have gone to not taking charity patients, not accepting Medicaid. And now even a growing number of physicians who will not take on any new Medicare patients,” he said. “By our taking on physician practices, as a nonprofit tax-exempt system, we are actually promoting access because we will take on patients regardless of ability to pay.”
TAKEAWAY: Antitrust regulators are taking closer looks at hospitals buying physician practices as providers rush to integrate under the mantle of healthcare reform.