For decades, doctors in picturesque Boise, Idaho, were part of a tight-knit community, freely referring patients to the specialists or hospitals of their choice and exchanging information about the latest medical treatments.
But that began to change a few years ago, when the city’s largest hospital, St. Luke’s Health System, began rapidly buying physician practices all over town, from general practitioners to cardiologists to orthopedic surgeons.
Today, Boise is a medical battleground.
A little over half of the 1,400 doctors in southwestern Idaho are employed by St. Luke’s or its smaller competitor, St. Alphonsus Regional Medical Center.
Many of the independent doctors complain that both hospitals, but especially St. Luke’s, have too much power over every aspect of the medical pipeline, dictating which tests and procedures to perform, how much to charge and which patients to admit.
In interviews, they said their referrals from doctors now employed by St. Luke’s had dropped sharply, while patients, in many cases, were paying more there for the same level of treatment.
Boise’s experience reflects a growing national trend toward consolidation. Across the country, doctors who sold their practices and signed on as employees have similar criticisms. In lawsuits and interviews, they describe growing pressure to meet the financial goals of their new employers — often by performing unnecessary tests and procedures or by admitting patients who do not need a hospital stay.
In Boise, just a few weeks ago, even the hospitals were at war. St. Alphonsus went to court seeking an injunction to stop St. Luke’s from buying another physician practice group, arguing that the hospital’s dominance in the market was enabling it to drive up prices and to demand exclusive or preferential agreements with insurers. The price of a colonoscopy has quadrupled in some instances, and in other cases St. Luke’s charges nearly three times as much for laboratory work as nearby facilities, according to the St. Alphonsus complaint.
Federal and state officials have also joined the fray. In one of a handful of similar cases, the Federal Trade Commission and the Idaho attorney general are investigating whether St. Luke’s has become too powerful in Boise, using its newfound leverage to stifle competition.
Dr. David C. Pate, chief executive of St. Luke’s, denied the assertions by St. Alphonsus that the hospital’s acquisitions had limited patient choice or always resulted in higher prices. In some cases, Dr. Pate said, services that had been underpriced were raised to reflect market value. St. Luke’s, he argued, is simply embracing the new model of health care, which he predicted would lead over the long term to lower overall costs as fewer unnecessary tests and procedures were performed.
Regulators expressed some skepticism about the results, for patients, of rapid consolidation, although the trend is still too new to know for sure. “We’re seeing a lot more consolidation than we did 10 years ago,” said Jeffrey Perry, an assistant director in the F.T.C.’s Bureau of Competition. “Historically, what we’ve seen with the consolidation in the health care industry is that prices go up, but quality does not improve.”
A Drive to Consolidate
An array of new economic realities, from reduced Medicare reimbursements to higher technology costs, is driving consolidation in health care and transforming the practice of medicine in Boise and other communities large and small. In one manifestation of the trend, hospitals, private equity firms and even health insurance companies are acquiring physician practices at a rapid rate.
Today, about 39 percent of doctors nationwide are independent, down from 57 percent in 2000, according to estimates by Accenture, a consulting firm.
Many policy experts praise the shift away from independent practices as a way of making health care less fragmented and expensive. Systems that employ doctors, modeled after well-known organizations like Kaiser Permanente, are better able to coordinate patient care and to find ways to deliver improved services at lower costs, these advocates say. Indeed, consolidation is encouraged by some aspects of the Obama administration’s health care law.
“If you’re going to be paid for value, for performance, you’ve got to perform together,” said Dr. Ricardo Martinez, chief medical officer for North Highland, an Atlanta-based consultant that works with hospitals.
The recent trend is reminiscent of the consolidation that swept the industry in the 1990s in response to the creation of health maintenance organizations, or H.M.O.’s — but there is one major difference. Then, hospitals had difficulty managing the practices, contending that doctors did not work as hard when they were employees as they had as private operators. Now, hospitals are writing contracts more in their own favor.
