Dear Friend,

At first it sounded like some needed balance, but then it didn't.

You're undoubtedly familiar with the concept of surprise medical billing, the situation in which an out-of-network, hospital-based group, say an anesthesia group or radiology group, is working at a hospital that is in-network. Forget about freedom to contract: the law essentially pressures an out-of-network group to accept in-network, or worse, levels of payment.

Well, surprise! The concept of a surprise bill has spread. In early July 2023, the Biden administration proposed that there should be restrictions on hospital surprise billing.

But what’s a hospital surprise bill? Well, it’s something slightly different from the concept applied to physicians.

Apparently, it's the situation in which, for example, a patient, we'll call her Ms. Smith, goes to her cardiologist in January of some year for some test. The cardiologist bills Ms. Smith $300 for the test at the office. Ms. Smith comes back six months later, gets the same test, in the same office but now gets billed a few hundred dollars by the physician’s office and $1,000 by the hospital as a facility fee.

What! What facility and why a fee?

The answer lies in the fact that in the interim between Ms. Smith’s two visits, the cardiologist sold his practice to the hospital and the former medical office became a hospital outpatient clinic, i.e., part of the hospital facility. What do you know, “Suite 201” is now a “facility” and there’s now a facility fee.

Stories abound about these sorts of “surprises”. [The darkly funniest one that I heard concerned a patient who was billed a facility fee for a telehealth visit because the doctor connected to the call from a hospital.]

Before you start snickering or delighting in the schadenfreude of hospitals getting whacked with surprise billing prohibitions in the same manner as physicians, what’s sauce for the goose is not always sauce for the gander. That's because the Biden administration is not proposing a policy that would prohibit or put caps on this fees, but instead is proposing that hospitals should be required to disclose facility fees up front. I suppose that disclosure is better than no disclosure, but it’s not exactly the same "solution" imposed on supposed physician surprise medical billing. That bread's been buttered only on one side, and that side isn't yours.

At first, I thought it was a joke.

The healthcare world was supposedly abuzz when the New England Journal of Medicine published a report of a study that shows that consolidation in the hospital industry doesn’t lead to higher patient satisfaction or to higher quality.

Gee, who woulda thunk it?

After all, we know that if we want a high quality meal, we don't go to a 10 table Michelin starred restaurant, we go to a very large and efficient joint, like McDonald's. Oh, we don't do that?

Despite what hospitals argue when they're looking for regulatory and political support, they don’t merge to create quality: They merge to reduce competition and to raise prices.

But mostly they merge because the hospital industry is in chaos.

The number of hospital closures and bankruptcies continues to climb. The percentage of cases flowing out of hospitals to physician-owned, freestanding facilities continues to grow.

As a result, hospitals cling together for survival like B-list actors in a low budget horror movie.

Here are the real lessons for you:

1. Don’t go into the hospital business.
   
2. Be very wary of allowing a hospital into any physician venture.
   
3. Don’t hire a hospital administrator to run your physician-owned ASC or other facility (which is another way of looking at point #2).
   
4. Focus on why the hospital business is in disarray: It no longer has a compelling business model.
   

And, then, with your free time, consider becoming my collaborator on a research grant request. We’ll study why anyone would perform a study to see if hospital mergers lead to higher quality. Apparently, there’s a lot of money available for this kind of stuff and there’s no reason why we shouldn’t try to get our fair share.