When doctors sell out, hospitals cash in

Everything was the same about Mike Rosenberg’s routine visit to Atlanta Cancer Care in February – everything, that is, but the bill.

Rosenberg went to the same office and saw the same staff to get the same blood work and the same medication he gets every month.

But the cost difference was remarkable: Rosenberg’s out-of-pocket charge increased from $20 to $212. What his insurer had to pay exploded from $2,735 to $5,661.

This has to be a mistake, Rosenberg thought, but there was no mistake. He learned instead that the higher charges resulted from a carefully planned business move. In January, Northside Hospital took over two of Georgia’s largest oncology groups – Atlanta Cancer Care and Georgia Cancer Specialists.

Because it is a hospital, Northside can bill at significantly higher rates for the same services at the same offices. Northside and the doctors who executed the deal say the change is positive for patients because it will enable the clinics to offer a host of new services. Plus, they say, it was a necessary step for survival in a transforming health care marketplace.

Rosenberg isn’t convinced. “How does Northside Hospital have the audacity to say that charging me 10 times as much as my oncologist and charging my insurance company over $20,000 more annually for the same chemotherapy without any service improvement is better for cancer patients?” he said.

In today’s health care marketplace, the hospital is simply riding the wave.

“This is not something that is specific to cancer or oncology and it’s not something that is specific to Northside per se, and it’s not specific to Atlanta,” said Rich Novack, mid-South region president for Cigna, a large insurance company. “It’s a national phenomenon.”

» Hospital bills to Medicare all over the map

» Interactive: Compare metro Atlanta hospital charges

Why hospital systems keep growing

Go big or go home. Today’s health care mantra means that hospitals are eager to make these kinds of deals. They believe building large healthcare “systems” with multiple hospitals, physician practices and many other health care services will help them prevail in the market of the future.

Northside is already a key player in that market. The not-for-profit operates three hospitals on Atlanta’s north side with its flagship in Sandy Springs. On its most recent tax return, for the fiscal year ended in September 2011, Northside reported earning more than $1 billion in revenue. It also reported paying CEO Robert Quattrocchi $2.1 million. The deal with the two oncology practices is part of its strategy to become a national player in cancer care.

If hospitals are eager to buy, many doctors are also eager to sell. With Medicare and private insurers putting the squeeze on how much they can charge, doctors all over metro Atlanta have given up running their own practices. One particularly lucrative part of their business — medical tests and drugs administered in the doctor’s office — no longer generates nearly as much income as it used to.

The doctors who head up the oncology practices said cuts in their payments, combined with increases in overhead, left them with little choice: they couldn’t afford not to make a change.

“Ultimately, you know the right decision was made and it was made in the best interest of our patients and the best interests of our group to be able to deliver the best care,” said Dr. Al Soltan, president of Georgia Cancer Specialists.

Northside would not reveal the terms of the deal. But a spokesman said the hospital paid fair market value to take over assets of each practice, while also assuming leases for office space and hiring most of the employees of the practices. The physicians and some other staff are paid through a contract with the practices.

While the offices look much the same except for the Northside sign on the door, the deal means that seeing the doctor is officially an outpatient hospital visit. A hospital may charge far more than a private doctor charges for the same service simply because it’s a hospital. Hospitals are more expensive to run than doctors’ offices, and they often dole out free care to people without insurance. As a result, Medicare and the insurance companies provide much higher reimbursements for hospital services such as oncology.

The care of privately insured patients receiving chemotherapy in a hospital outpatient setting was 24 percent higher than those receiving treatment in a physician’s office, according to a study last year by Avalere Health.

Northside said that although patients may not yet see the benefits, the deal is resulting in millions of dollars in new investments in the practices.

 “We understand that under the previous model it cost less than it costs now,” said Lewis Redd, a longtime consultant for Northside who was a key player in the deal. “We’re trying to do everything we can to make it work for the individuals and provide more services and spend the money on things that really help patients and cure cancer in the long term.”

‘A calamity of errors with his account’

Northside did send letters to patients alerting them that the change was coming and that the way the billing was handled would change, with new bills coming from Northside. They were also assured that they would continue to see the same staff members in the same offices. But patients unhappy with the change say they weren’t prepared for the new outpatient facility charges. Some also say the deal has handed them the headache of dealing with Northside’s bureaucratic billing office. Among the complaints:

  • Gail Schwartz was diagnosed in 2011 with a “rare, but livable” form of leukemia. She takes daily medication that has kept her well and has regular appointments with a hematologist at Atlanta Cancer Care. After the deal, she started getting bills from both Northside and the doctor’s practice and her costs increased.

“I’m getting the same great care I’ve always gotten,” said Schwartz, whose chronic condition means that her treatment has no endpoint. “I’m getting an extra bill because they put Northside’s name on the building.”

Schwartz and her husband are both elementary school teachers who haven’t had raises in years, suffer pay cuts through furlough days while also being hit with higher costs for their insurance plans. Northside’s billing department advised the couple to sign-up for a payment plan. “I explained that making payments on double the bills won’t actually help,” Mike Schwartz said.

To them, Northside seems to be benefiting, not the patients. ‘This is a greed issue,” Mike said.

  • Marilyn Matlock goes to Atlanta Cancer Care four times a year for blood work to monitor where she stands with a type of blood cancer that hasn’t progressed to the point of needing treatment. Matlock said she is being charged $109 extra for the blood work even though she said nothing about how it’s processed has changed and that it’s only a 10-minute appointment. “It’s a way for Northside to make money,” she said. And she doesn’t like it.

“Mine is probably just a tiny drop in the bucket of what a lot of people are having to pay,” she said, “but it’s still the principle of thing. There is absolutely no added value.”

  • Bryan Thompson was already worried about having to pay more for his cancer treatment — he and his wife spend more than half their income on medical care and insurance. But the Georgia Tech grad, who is now disabled by his illness, has become equally concerned about getting improperly billed since Northside took over Georgia Cancer Specialists.

Thompson has received an expensive drug he needs for his treatment at no charge through a special program offered by Novartis, the drug’s manufacturer. Georgia Cancer Specialists, his oncology office, administers the drug to him. But after the deal, first Northside charged Medicare, Thompson’s insurer, for the drug. After Thompson protested, Northside reversed that charge only to send Thompson himself a bill for more than $16,000. Thompson appealed, once again.

“This gave the appearance of fraud — or incompetence,” Thompson said.

Northside said it has removed the charge and admitted that there were “a calamity of errors with his account.”

Thompson said he never had difficulty with the billing when it was handled by Georgia Cancer Specialists— even though it was a large practice. But his encounters with Northside’s billing office have presented a series of frustrations. Other patients who have called to question bills say they too have come away frustrated.

“The larger the organization, the more errors they make and the poorer their customer service,” Thompson said. “I mean, there’s no telling how many letters I wrote and how many people I talked to before I finally got to a person willing to give me their name and phone number and said they would fix it.”

But it ended up taking more calls to finally get the issue resolved, he said.

‘It didn’t come willingly; it was cost-driven’

Cancer patients often get the same treatment for months in a row. That made the billing change obvious to many patients . But countless patients have experienced similar billing increases, whether they noticed or not.

Cardiologists were among the first physicians to make the switch, when Medicare put the squeeze on the profits they were making on tests conducted in their offices. The birth of the Piedmont Heart Institute at Atlanta’s Piedmont Healthcare was one of the early, bold moves of physicians surrendering their independence to go to work for a health system.

Other large practices involving almost every type of specialty have since followed suit.

Doctors may have one-upped Medicare’s cost-cutting attempts by moving to hospital systems – which are the most expensive venue for treatment whether it’s a heart test or cancer care.

“They are finding a way to do the same service and get paid more for it,” said Bill Custer, a health care expert at Georgia State University.

But Custer and other health care economists said Medicare and private insurers want to eventually change the rules again, by subjecting doctors and hospitals to an entirely new approach to paying for care. Under those models, they are expected to contract with large networks of doctors and hospitals and make payments that reward quality and efficiency, not just volume.

The higher payments resulting from Northside deal are “not a permanent impact,” Custer said, “but it is a consequence of a changing system.”

Dr. Robert Jansen, president of the WellStar Medical Group, said acquisitions of practices by large health systems will continue as physicians look for “a safe harbor” as insurers and the government change the way they pay for health care.

Jansen and other experts said the Northside deal stood out because of the size of the practices. Georgia Cancer Specialists sees 16,000 new patients a year and almost 700 every day at its 27 offices across Georgia, said Soltan, the practice president. Atlanta Cancer Care, meanwhile, sees about 8,000 new patients a year and 500 to 600 daily at seven locations, said Dr. Thomas Seay, an oncologist at the practice.

After spending years building these large practices, a deal with a hospital wasn’t something the doctors who lead the practices had in mind.

“It didn’t come willingly,” Seay said. “It was a cost-driven move.”

What doctors often fear about such a change is losing their independence. But at this point, Seay said, Medicare and insurance companies exert ever more influence on how they practice, so there wasn’t much left to lose.

“The 800-pound gorilla in the room is the notion that physicians have autonomy, because in point of fact that couldn’t be further from the truth in 2013,” Dr. Seay said.

‘At the end of the day, we are a business entity’

Soltan said oncologists who operated their own chemotherapy rooms used to be able to mark up the costs of the drugs by about 20 percent and those profits could be used to run the infusion operations as well as other programs for patients, such as help with nutrition, yoga and other support to help patients cope with a difficult illness.

Over time, Medicare and other payers have gradually cut the markups down to about 4 percent, with more cuts expected. The idea, Soltan said, is that physicians shouldn’t risk having a financial benefit influence what they prescribe — something Soltan said no ethical doctor would consider.

But that squeeze and other cutbacks, at the same time overhead has been rising at physician offices, means that doctors have had to eliminate patient benefits they believe are important, while also reducing staffing levels. The numbers, Soltan and Seay both said, just weren’t where they needed to be and something had to change.

“At the end of the day, we are a business entity,” Soltan said. “Unless you are able to survive, you can’t really deliver your mission.”

Soltan, who has been doctoring for decades, says patients are seeing just the very first steps in a dramatic transformation of the way the nation’s health care system works. All the little independent physician offices will eventually be rolled up into a system that will be called on to offer better quality and more efficiency.

“You are seeing the labor pain of that process,” Soltan said. “It’s going to happen but it’s just going to take some time. We felt as a large group that we really have to integrate with a big health care delivery system so we’re not left out and we’re not coming from behind, trying to play catch up.”

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