Vertical integration favors HOPDs over ASCs

Editor's Note

Medicare and patient out-of-pocket costs are rising as vertical integration results in more procedures moving to hospital outpatient departments (HOPDs) than to ambulatory surgical centers (ASCs), Becker’s ASC Review reported on August 8.

The article summarizes a study published July 25 in Science Direct. Described as "physician vertical integration" that is having an impact on referral patterns, among other factors, the study concludes that "physician–hospital integration results in an approximately 10% increase in referrals to higher-priced facilities instead of lower-priced providers."

Among other key findings, the research cites arthroscopy and colonoscopy as procedures likely to move to an HOPD rather than an ASC after vertical integration. The report notes that for these two procedures, changing from "status quo to fully integrated relationships for all physicians" will lead to a $315.4 million increase in Medicare spending and a $63.1 million increase in patients' out-of-pocket costs.

“The report focused on Medicare systems because, unlike private insurance markets, vertical integration does not allow providers to negotiate higher reimbursements,” Becker’s reports.  

According to the article, choosing an HOPD creates what the Science Direct report calls an “arbitrage” opportunity to increase Medicare payments. The difference in payment is both a motivator for and a consequence of hospitals acquiring physician practices.