CBO testimony blames physician employment for rising costs

Chapin White, director of health analysis for the Congressional Budget Office, delivered testimony May 23 in the U.S. House of Representatives Committee on Ways and Means subcommittee about how consolidation in healthcare, and specifically hospital employment of physicians, is increasing healthcare costs.

Mr. White detailed the CBO's suggestions on how federal policy can slow consolidation.

Any steps policymakers take to support private practice and discourage health systems employing physicians, would be welcomed by the ASC industry. When primary care and referring physicians become employed by hospitals, they're often unable to refer patients outside of the network and employed surgeons are often prohibited from performing cases in independent ASCs. When physician practices are purchased by the hospital, associated costs typically increase.

In the testimony, Mr. White reported physicians employed by hospitals increased from 29% in 2012 to 41% in 2022. And the employment has grown since then, although exact estimates vary. In an April 2024 report, Avalere estimated more than 77% of U.S. physicians are employed by either hospitals, health systems or corporate entities, with employed ranks growing 5.1% in the last year.

There were more than 44,000 practices acquired between January 2019 and January 2024, and 58.5% are now owned by non-physicians. Health systems own around 28.4% of physician practices, according to the report.

"The federal government subsidizes health care for enrollees in private health insurance and for enrollees in public health care programs, and consolidation increases costs in both cases. Consolidation can affect the federal budget by increasing prices in private health insurance, by increasing the intensity of services provided through public programs, or by shifting those services to more costly settings," states the summary of the testimony posted on the CBO's website.

The CBO sees consolidation trends continuing over the next decade. But lawmakers could take steps to stem the growth, including:

  • Establishing more site-neutral payments
  • Expanding antitrust capacity for federal agencies

Acting on the CBO's suggestions would avoid around 25% of expected consolidation growth according to the report. Surgery centers may see additional case volume if government and commercial payers incentivize patients to have outpatient procedures done in ASCs instead of hospitals.

Ashish Jha, MD, dean of the Brown University School of Public Health, also testified before Congress and offered additional action items to support private practice. His No. 1 issue was Medicare reimbursing private practice the same as health systems for the same services.

The current Medicare payment system "totally perverts the marketplace," Dr. Jha testified.

“There is now this very large incentive for hospitals to buy up physician practices, and that doesn’t increase access, it doesn’t increase quality — all it does is allow Medicare to pay a lot more, and consumers to pay a lot more through private insurance," he said, according to a Brown news release.

Dr. Jha also raised the issue of commercial insurers developing Medicare Advantage plans, which he said has increased service denials. He suggested more antitrust law enforcement and transparency on medical practice ownership as well as reconfiguring physician pay to increase with inflation, according to the report.

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