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Heaton in Indianapolis Business Journal: Independent Doctors Fear Loss of Referrals

Posted 10:39 PM by

Some health care experts are asking whether patient referrals from hospital-owned doctors to independent facilities will become a rarity as the consolidation of hospitals and doctors continues. If they do, it could render independent medical practices scarce.

It’s getting harder and harder for medical practices to remain independent as overhead costs rise even as reimbursements remain flat. That has pushed a steady stream of physicians and other health care providers into the arms of hospitals over the past three years, both in Indianapolis and around the country.

In addition, the federal Medicare program for seniors—the nation’s largest health plan—is giving bonuses and other financial incentives to health care providers who jointly take responsibility for the health of specific patients and successfully show that they deliver high-quality care at low costs.

That development, which has been mimicked by some private health plans, has fueled even more consolidation among hospitals and doctors.

Health plans pay hospitals more money than independent physician and therapist practices to compensate for unfunded requirements in federal law, which other health care providers do not face.

For example, hospitals must stabilize patients before referring them to another facility. Hospitals also must be open 24 hours a day. And hospitals must accept all government-sponsored health plans, such as the poorly paying Medicaid program.

But when hospitals acquire physician practices or other outpatient facilities, they don’t start operating them 24 hours a day and they don’t necessarily start accepting Medicaid patients. But they do start billing health plans under the auspices of the hospital, thereby collecting higher reimbursement payments while still enjoying the lower operating costs of physician offices.

Federal laws do not allow hospitals to directly reward physicians—even their own employees—for referring patients to other doctors or facilities owned by the hospital system. But they can ask—and they do.

St. Francis Medical Group, part of the Mishawaka-based Franciscan Alliance hospital system, includes provisions in its employment contracts that require doctors to refer patients to other providers in the Franciscan Alliance—except if a patient or a health plan requests otherwise, said Dr. Isaac J. Myers II, president of the medical group.

Exceptions are also allowed if Franciscan cannot provide care as soon as the patient needs, or if Franciscan doesn’t have the particular specialist needed by the patient.

Such policies are common in hospitals’ employment agreements with physicians, said Mike Heaton, a physician accountant at Indianapolis-based Katz Sapper & Miller. Referrals are key because they keep a hospital’s operating rooms and beds filled with patients.

This article excerpted from the Indianapolis Business Journal. For the full text, please click here.

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