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New research suggests that hospitals with strong financial results could do more to help patients in need of charity care.

According to a research letter published in JAMA Internal Medicine, hospitals that produce high net income spend proportionally less than their peers on charity care for both insured and uninsured patients.

For every $100 of net income earned in 2017, hospitals ranked in the top quartile for net income provided $11.50 in charity care for uninsured patients and $5.10 for insured patients.

Case Study

Across-the-Board Impact of an OB-GYN Hospitalist Program

A Denver facility saw across-the-board improvements in patient satisfaction, maternal quality metrics, decreased subsidy and increased service volume, thanks to the rollout of the first OB-GYN hospitalist program in the state.

See how

In comparison, the third quartile of hospitals provided $72.30 for uninsured patients and $40.90 for insured patients.

While the top quartile of hospitals generated more than 100% of total overall net income measured in the study, those same hospitals provided only a little more than half of total charity care.

Hospitals in the bottom quartile supported more than 17% of total charity care provided, despite incurring substantial net losses.

Researchers also looked at the difference between charity provided to insured and uninsured patients to get a better sense of how much of charitable care provided by hospitals amounts to discretionary spending, according to lead author Ge Bai, Ph.D., CPA, an associate professor at Johns Hopkins Bloomberg School of Public Health.

Where uninsured patients receive charity care in the form of a full or partial discount on their bills, hospitals tend to waive deductible and coinsurance payments for insured patients. The study noted a decrease in the amount of charity care provided by hospitals in states that expanded Medicaid as compared to those that did not.

“Charity care provision to uninsured patients is sensitive to the number of uninsured patients,” Bai told FierceHealthcare by email. “States that adopted Medicaid expansion have a lower proportion of uninsured patients than other states, and thus it is expected that hospitals in the former states would provide less charity care to uninsured patients than hospitals in the latter states. In contrast, charity care provision to insured patients is not subject to the same constraint, and thus is more discretionary.”

While it’s likely that lower demand for charity among uninsured patients produced some part of the decrease in charity spending in states that expanded Medicaid, it’s unclear whether the policy shift had an effect on charity spending for insured patients. Bai indicated a look at pre- and post-Medicaid expansion spending across those categories would be ripe for future research.

The study notes that the healthcare system’s current legal and regulatory framework gives nonprofit hospitals broad discretion in how they draw up their financial assistance policies. The authors recommend that hospitals consider reexamining their eligibility criteria to provide greater financial assistance to both uninsured and underinsured patients.

Providing more assistance voluntarily would likely be better for all parties involved than waiting for policymakers or government regulators to act, according to Bai.

“It’s very challenging to regulate charitable actions, which are directly linked to the financial viability of the entity,” she says. “The cure could be worse than the disease.”

As Congress considers efforts to rein them in, private equity firms are buying up more physician practices, according to a new study.

Private equity firms acquired 355 physician practices from 2013 to 2016, a number that jumped each year of the study, according to a research letter published today in JAMA. The number increased from 59 practices in 2013 to 136 practices in 2016.

Case Study

Across-the-Board Impact of an OB-GYN Hospitalist Program

A Denver facility saw across-the-board improvements in patient satisfaction, maternal quality metrics, decreased subsidy and increased service volume, thanks to the rollout of the first OB-GYN hospitalist program in the state.

See how

With approximately 18,000 group medical practices in the U.S., researchers said while private equity acquisitions increased across specialties during the study period, they still constituted a small proportion of practices. Those acquisitions continued in the years beyond those in the study period.

The 355 practices bought up included 1,426 sites and 5,714 physicians.

The majority of acquired practices (43.9%) were in the southern U.S., the study found. Practices acquired by private equity firms had several sites (a mean of four) and many physicians (a mean of 16.3 in each practice) with a mean of 6.2 physicians affiliated with each site.

The study, which identified group practice acquisitions using the Irving Levin Associates Health Care M&A data set that includes information on healthcare mergers and acquisitions, also looked at which specialties private equity firms were most interested in.

The most commonly acquired medical groups from 2013 to 2016:

  • Anesthesiology practices (19.4%)
     
  • Multispecialty practices (19.4%)
     
  • Emergency medicine (12.1%)
     
  • Family practice (11.0%)
     
  • Dermatology (9.9%)

From 2015 to 2016 there was an increase in the number of acquired cardiology, ophthalmology, radiology, and obstetrics/gynecology practices, according to the research letter.

Industry reports suggest further growth in acquisitions in 2017 and 2018, particularly in ophthalmology, dermatology, urology, orthopedics, and gastroenterology.

Within the acquired practices, anesthesiologists represented 33.1% of all physicians; emergency medicine specialists, 15.8%; family practitioners, 9%; and dermatologists, 5.8%.

That profile of practices with several sites and many doctors matches “private equity firms’ typical investment strategy of acquiring ‘platform’ practices with large community footprints and then growing value by recruiting additional physicians, acquiring smaller groups and expanding market reach,” said the study authors Jane M. Zhu, M.D., of the division of general internal medicine and geriatrics at the Oregon Health & Science University in Portland; Lynn M. Hua, of the department of health care management at the Wharton School of the University of Pennsylvania, in Philadelphia; and Daniel Polsky, Ph.D., of the Carey Business School at Johns Hopkins University in Baltimore.

They noted that more research is needed to understand the effect of the acquisitions to mitigate unintended consequences.

“Private equity firms expect greater than 20% annual returns and these financial incentives may conflict with the need for longer-term investments in practice stability, physician recruitment, quality, and safety,” wrote the researchers.

Ownership by private equity firms may create additional pressures to increase revenue streams (such as elective procedures and ancillary services), direct more referrals internally, and rely on lower-cost clinicians, the authors said.

A limitation of the study is that its data is based on publicly announced transitions and therefore may underestimate the total number of acquisitions, particularly of smaller practices, they said.