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Is Physician Integration Driving Up the Cost of Care?

Rene Letourneau, for HealthLeaders Media, July 15, 2013

Deveny believes physician integration can lower costs by centralizing back office functions, reducing the duplication of expensive medical tests, and producing economies of scale for supply purchasing.

"Our intent and our model are to integrate to lower the cost of care. When you integrate physicians, you can drive down supply chain costs and improve operations. Not only are you employing physicians to provide service, but you are using their skill sets in other ways. For example, we wouldn't have been able to reduce readmissions without having significant integration of physicians," he says.

Although Deveny sees physician integration as a way to bring healthcare costs down, he is in the clear minority compared with ACPE poll respondents, less than 5% of whom agree.

One respondent who believes the opposite is true is David B. McDermott, MD, medical director of inpatient and emergency services at Mayo Regional Hospital, a 25-bed critical access hospital in Dover-Foxcroft, Maine.

McDermott thinks there are a few factors contributing to the hike in costs when a hospital buys a physician practice, including stricter compliance requirements.  

"... [T]he practices now have to be compliant with hospital licensing standards which are, in most cases, more stringent than solo offices. More regulations translate to more staffing, which translates to increased costs," he says.

McDermott also points to an increased need for physician leadership within the health system as another reason for higher costs.

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