February Research Round Up: What We’re Reading

The weather was cold, but my heart never warmer. Upon walking into my office, I saw gifts and a note in the corner:

Please enjoy this bouquet of studies and box of assorted data.
We’re breaking down health care costs, A to Zeta.
Patients receive surprise bills after in-network elective surgery,
And private equity firms are acquiring physicians regardless of specialty.
More profit doesn’t always mean more charity,
But with more research comes clarity.
Happy Valentine’s Day,
Health Policy Researchers

Fuglesten Biniek J and Hargraves J. 2018 Health Care Cost and Utilization Report. Health Care Cost Institute, February 13, 2020. Researchers at the Health Care Cost Institute released an annual report on the state of health care spending in the United States. This year, they examined over 2.5 billion medical and prescription drug claims for roughly 40 million individuals enrolled in employer-sponsored health insurance between 2014 and 2018.

What It Finds

  • Per-person spending increased by 18.4 percent to $5,892 between 2014 and 2018, an annual growth rate of 4.3 percent, outpacing the 3.4 percent annual growth rate in per-capita gross domestic product over the same period.
  • Utilization of health care services grew 3.1 percent between 2014 and 2018, while average prices increased 15.0 percent during that period.
  • Average out-of-pocket spending increased 14.5 percent between 2014 and 2018, reaching $907 per person in 2018.
  • After inflation, three-quarters of the rise in per-person spending was due to increased prices for health care services, while increase in quantity of services used accounted for 21 percent.

Why It Matters

To make health care more affordable, we need to understand what drives increases in health care spending. With the majority of rising health care costs rooted in price increases rather than increased utilization, policymakers should focus solutions on the drivers of those price increases.

Chhabra K. Surprise Billing in Elective Surgery. Institute for Healthcare Policy and Innovation, February 11, 2020. Surprise medical bills have been cause for concern at the state and federal level. Elective surgeries at in-network hospitals may involve out-of-network (OON) providers, causing providers to send patients a balance bill if an insurer does not fully reimburse the OON provider for at the charged amount. To assess the factors leading to surprise medical bills in surgical settings, researchers at the University of Michigan analyzed claims data for seven common elective procedures representing almost 350,000 patients who underwent surgery at an in-network hospital with an in-network primary surgeon.

What It Finds

  • Twenty percent of cases across all seven elective procedures resulted in an OON bill for the patient, averaging a $2,011 “potential” surprise bill (data do not reveal whether a balance bill was ultimately sent to the patient after an insurer’s payment, so the average represents OON charges, minus typical insurer payments for those services as provided in-network).
  • Surgical assistants and anesthesiologists drove the highest share of OON bills, each contributing to 37 percent, respectively, of OON bills for elective in-network procedures.
  • Almost 20 percent of orthopedic procedures resulted in an OON bill, frequently for third-party company charges, such as physical therapy or durable medical equipment.
  • The risk for an OON bill was greater for patients with complications, and those insured by an ACA marketplace plan.

Why It Matters

At a time where 60 percent of Americans would go into debt over a $1,000 emergency charge, assessing the risk for patients have to receive a surprise medical bill is vital. Protecting patients from receiving these types of bills, especially when they’ve done due diligence to have in-network care or need emergency care, is a current focus of both state and federal policymakers. Research that illuminates the drivers of OON bills will help as Congress and many states strive to develop and implement comprehensive protections for consumers.

Zhu J, et al. Private Equity Acquisitions of Physician Medical Groups Across Specialties, 2013-2016. JAMA, February 18, 2020. In an attempt to assess the behavior of private equity firms acquiring medical practices, researchers analyzed around 18,000 physician groups acquired between 2013 and 2016.

What It Finds

  • Between 2013 and 2016, 355 physician group practices were acquired by private equity firms, more than doubling in that time period from 59 groups acquired in 2013 to 136 acquired in 2016.
  • Among practices acquired by private equity firms from 2013 to 2016, 60.3 percent accepted Medicaid, while 83.4 percent accepted Medicare.
  • The largest share of physician practices acquired by private equity firms between 2013 and 2016 were in the South (43.9 percent), followed by the Midwest (21.5 percent).
  • Anesthesiologists made up the greatest proportion of private equity-acquired physicians, representing 33.1 percent of total acquired physicians (and 19.4 percent of total acquired physician groups).

Why It Matters

Health systems often cite cost efficiencies and economies of scale as reasons to agree to an acquisition. Private equity firms offer access to large, stable capital that health systems can use to grow and compete. However, private equity firms have a bottom line to protect. Policymakers and researchers should stay alert to possible effects of such acquisitions on consumers, as business interests of private equity firms could compete with concerns over patients’ financial and medical wellbeing.

Bai G, et al. Charity Care Provision by US Nonprofit Hospitals. JAMA Internal Medicine, February 17, 2020. In order for hospitals in the United States to gain nonprofit status, or to become exempt from income, property, and sales taxes, they must provide charity care along with other community benefits. Researchers at Johns Hopkins University studied the differences in charity care for uninsured patients and insured patients, as well as examining how hospitals’ provision of charity care compares across different financial statuses.

What It Finds

  • In 2017, nonprofit hospitals in the U.S. received a net income of $47.9 billion, and provided $9.7 billion in charity care for uninsured patients and $4.5 billion in charity care for insured patients.
  • The hospitals in the top quartile of overall net income accounted for the entire overall net income in 2017, and provided over half of all insured and uninsured charity care.
  • The bottom quartile of hospitals lost the equivalent of 15.8 percent of overall net income and provided 17.1 percent of uninsured and 17.7 percent of insured charity care in 2017.
  • Hospitals with a higher net income spent a lower proportion on charity care than hospitals with a lower net income. For example, hospitals in the top quartile of overall net income spent $5.1 and $11.5 for every $100 of overall income on insured and uninsured charity care respectively, while hospitals in the lowest quartile of overall net income spent $40.9 and $72.3 for every $100 of overall income on insured and uninsured charity care respectively.
  • Hospitals in states that expanded Medicaid provided significantly less charity care than hospitals in non-expansion states.

Why It Matters

This study highlights disparities between nonprofit hospitals with stronger financial performance and counterparts with fewer financial resources. Currently, nonprofit hospitals have authority over the design of their financial assistance policies. State and federal regulators should consider charity care policies that account for a hospital’s relative financial strength and ensure that higher-income hospitals are doing their fair share to protect the uninsured and underinsured. Additionally, states that have not expanded Medicaid should look to states that have and measure the impact of expansion on the amount of total charity care needed.

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