In my last piece, I made these points:
1) Obamacare banned new physician-owned hospitals (POHs) and limited the ability of existing POHs to expand.
2) POHs, while at least equal in the quality of care provided by hospitals not run by physicians, were better at saving Medicare dollars (aka, taxpayer money) to the tune of $1.1 billion per year.
3) The top dogs at the biggest non-profit hospitals haul in salaries as high as $33 million per year.
4) The nonprofit hospitals have a decades-long history of plowing money into political campaigns to make sure the pols maintain the status quo.
Even so, these big hospitals routinely “cry poor.”
Did you know that hospitals can (and do) charge Medicare patients more for the very same treatment they would receive in an independent doctor’s office?
That’s because the amount paid by Medicare is permitted to vary, depending on the site where the treatment is provided. Payments are not “site-neutral,” i.e., not the same no matter where the treatment is provided.
According to some estimates, making payments “site-neutral” would save as much as $150 billion over a decade.
Lack of site neutrality incentivizes nonprofit hospitals to buy the practices of independent physicians, eliminating competition that could provide medical services at lower cost.
Year by year, less expensive outlets for medical services disappear by being absorbed into the world of the big, tax-exempt “nonprofits.” The no-profit hospital then benefits from the increased customer traffic that pays its way with higher Medicare dollars.
But wait, there’s more!
Hospitals collect revenue in the form of “facility fees.” The total amount is unknown, but it’s thought to be hundreds of billions of dollars per year.
Would you be surprised to learn that POHs tend to have lower overall facility fees than hospitals not owned by physicians?
But wait. There’s more!
Nonprofit hospitals generate revenue from another source — their financial relationships with their Group Purchasing Organizations (GPOs).
GPOs are middlemen that negotiate contracts for supplies and medications to sell to hospitals, nursing homes, and other facilities.
GPOs don’t manufacture anything. They do not even distribute supplies.
They merely write the contracts.
And they’re allowed by law to receive kickbacks from manufacturers. (The polite term is “rebates.”)
Obviously, a GPO can favor a manufacturer who’s willing to pay the highest kickback… excuse me, “rebate.”
Kickbacks drive up the cost of supplies. For example, a metal surgical screw that costs $1 online can cost $800 under a contract between a hospital and GPO. No wonder hospital bills are so high.
Does the patient benefit from having the best product available? Maybe. Maybe not.
You may be inclined to think that an agency of the federal government would oversee the effects of having provided a “safe harbor” for kickbacks, which are generally illegal in American business. On paper, that’s the job of the Office of Inspector General (OIG) in the Department of Health and Human Services (HHS). That office is supposed to see that the kickba — I’m sorry, rebates — are properly accounted for and reach their intended beneficiaries.
Here’s the problem. The top lobbyist for the GPOs’ industry association revealed in 2018 that since the “safe harbor” permitting these “rebates” was created in 1987, no one from the federal government has requested a look at the books. That’s over 30 years of abdicated responsibility to the taxpayer.
But wait. There’s more!
GPOs “share” a portion of their earnings with the hospitals that sign contracts with them. Consider it a “kickback from the kickback,” a “share back,” if you will.
According to one student of the subject writing in Healthcare Matters, “many hospital executives… [have] learned to rely on that share back as an integral part of their annual compensation.”
Surely, somebody in the federal bureaucracy makes sure that “share backs” are reported accurately. Turns out that this oversight is the job of the Center for Medicare and Medicaid Services (CMS).
Here’s the problem. The Government Accountability Office (GAO) reports that CMS hardly ever checks on the matter.
But wait. There’s more!
And it’s every bit as squalid and conflicted as what’s been described above.
When Dr. G. Keith Smith, founder of the Oklahoma Surgery Center, testified before the Senate in Washington last month, he revealed under oath that when he was not in charge of his own hospital, he struggled to get the quality of supplies he desired for his patients. But now that he operates a POH, he’s free of the nonsense perpetrated by the “nonprofits” and the GPOs.
You can wait until the cows come home for the HHS-OIG and CMS to do their jobs.
In the meantime, insist that your lawmakers prod those inside HHS and CMS who have been charged with oversight to get cracking, while the lawmakers themselves enact legislation to achieve: 1) Price transparency and real competition, 2) an end to Obamacare’s stupid provisions on POHs, and 3) “site-neutrality” in payment of Medicare (taxpayer) dollars — the same payment for the same services, no matter where the services are provided.
Let’s end this outrageous waste of money we pay to support a corrupt, conflicted, and perversely incentivized political-healthcare-corporate complex.
Marion Mass, M.D., is a practicing pediatrician in Bucks County, a leading member of the Free2Care movement, and a member of The Independence‘s advisory board.
Reprinted with permission from The Independence by Marion Mass, M.D.
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
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