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Dr. Michael Ciampi took over his father’s practice, located in the home on Stevens Avenue in Portland where he and his five siblings were raised, in 1999. Back then, he was one of many independent doctors in Maine.
That changed a decade ago when Ciampi moved his practice to a facility run by an offshoot of Mercy Health System of Maine, parent to Mercy Hospital. Ciampi’s father recommended the move as a way to relieve Ciampi of the burdens of running a practice, from billing paperwork to nonexistent paid time off.
At the time, moves such as Ciampi’s weren’t as common, and today, 80 percent of all primary care doctors in Maine are affiliated with hospitals or federally supported community health centers, according to the Maine Medical Association.
In some rural areas, no independent physicians remain.
Beginning in the late 1990s, health care mergers swept across Maine and the rest of the country, cementing hospitals’ market power and, many would argue, freedom to charge higher prices. In the beginning, mergers were driven by the rise of health maintenance organizations, also known as HMOs. More recently, the recession has sparked merger talks.
More than a dozen health care mergers have been proposed or completed in Maine over the last decade — a planned deal between Mercy, Ciampi’s former employer, and Eastern Maine Healthcare Systems of Brewer as the most recent.
Today, 18 of Maine’s 38 acute-care and psychiatric hospitals are members or affiliates of the state’s two largest hospital systems, EMHS and Portland’s MaineHealth.
The growing clout of hospital systems, both in Maine and nationwide, has wide-ranging implications for the cost and quality of medical treatment. Some say it has diminished insurers’ bargaining power, leading to higher prices.
Others contend that big, sophisticated systems are best positioned to halt the rise of health care costs by transforming how care is paid for and delivered.
Increasingly, decisions about the hospitals that anchor many Maine communities are made in the boardrooms of big health systems, from whether a hospital continues to deliver babies, perform certain surgeries, or in the case of Boothbay Harbor, keep its emergency room open.
Many doctors are lured to hospitals by the promise of financial stability because Medicare pays substantially more for many services if they’re performed at a hospital versus a private doctor’s office.
Hospitals can charge an additional facility fee, meant to compensate them for the cost of greater infrastructure, that independent doctors can’t. Hospitals, sometimes paid twice as much for the same service, offer doctors higher salaries and relief from the substantial burden of back-office tasks such as billing.
While hospitals may lose money on the practice itself, especially in less lucrative areas such as primary care, they typically make it up on additional services for the practice’s patients, such as lab work, X-rays, and referrals to surgeons and cardiologists within their systems.
Those added fees include specialty services such as cardiology and gastroenterology, explained David Howes, president and CEO of Martin’s Point Healthcare. Martin’s Point provides health care at clinics throughout the state and offers several health insurance plans.
“It has been my impression when we look at the total cost of care, that as services move into the hospitals in Maine … almost always the cost of those services increases,” he said.
Insurance agents have noted a similar pattern, said Joel Allumbaugh, president of the Maine Association of Health Underwriters and CEO of National Worksite Benefit Group Inc., an employee benefits insurance agency.
“In our experience working with health insurance programs, cost of services are almost always higher when affiliated with a hospital versus an independent practice,” he said.
In many cases, financially strapped independent physician practices would otherwise have closed up shop, said Frank McGinty, executive vice president and treasurer for MaineHealth. Many doctors, faced with shrinking reimbursements, stopped accepting patients with government-sponsored insurance, he said. Being acquired by a hospital obligates doctors to provide care to all patients regardless of their ability to pay, he said.
“Hospitals have stepped into the lurch and employed physicians in order to preserve an important resource in the community,” McGinty said.
Health care economists broadly agree the now ubiquitous consolidation among health care providers is a major reason for rising prices in the U.S., according to a November 2012 research report by Catalyst for Payment Reform, a national nonprofit that works on behalf of large employers and others to improve the value of health care.
Health care spending in Maine averaged $8,521 per person in 2009, among the fastest-growing and highest expenditures in the nation. Maine was the fifth most expensive state for hospital care.
Consumers feel the brunt of those higher health care costs in the form of rising insurance premiums, stripped down benefits and lower wages.
But health provider consolidation can also lead to more efficient operations, by eliminating duplicated activities and staff, and foster better care and improved quality through more coordination, researchers have found.
“Despite the potential benefits, there is also fear — based on well-documented historical trends — that unless we manage it carefully, massing provider market power will lead to even higher prices and revenues … without correlated improvements to quality,” the November report stated.
McGinty countered that there’s little evidence that consolidation has led to higher prices here in Maine. Michelle Hood, president and CEO of EMHS, said prices may rise in regions of the country where consolidation limits competition, but most Maine communities have only one hospital anyway.
As hospital systems grow larger, insurers have a harder time bargaining for lower prices because they count on those systems’ doctors to serve their policyholders, Howes said.
“In Bangor, one has no choice but to have Eastern Maine Healthcare in your network,” he said. “In southern Maine, you have no choice but to have MaineHealth.”
McGinty, meanwhile, believes big insurers such as Anthem and Cigna, with billions of dollars in assets, are more than capable of representing their customers’ interests.
“It’s not like this is a marketplace in which large hospital systems are dealing with weak, ineffectual payers,” he said. “Quite the contrary.”
Some of the recent flurry in hospital acquisitions has been driven by financial circumstances, said Andrew Coburn, a rural health expert and chair of the Master of Public Health program at the Muskie School of Public Service at the University of Southern Maine.
MaineHealth acquired Goodall Hospital, for example, as the Sanford hospital faced serious financial challenges, he said.
“You never know the motive,” Coburn said. “To some extent, it may be a charitable purpose in some of these acquisitions and mergers … On the other hand, what those mergers and acquisitions do is solidify the market area for these systems. That can be a good thing or a bad thing.”
EMHS’ oversight of Blue Hill Memorial Hospital kept the hospital afloat after its endowment took a hit with the recession, Hood said.
“Blue Hill’s board has said publicly that was it not for the system and the work we do there, they probably would not have been able to keep the doors open,” Hood said.
As hospital systems continue to extend their reach, they’re grappling with a new health care landscape marked by lower reimbursements, a shift away from paying doctors for each test and procedure, and more patients who can’t pay their medical bills.
In trying to determine what those changes will mean for their organizations, hospital systems are looking to streamline how they deliver care in a variety of settings.
Most are plotting a course that will shift routine cases away from expensive hospital care to more affordable networks made up of physician practices, urgent care clinics and other facilities.
The trend has reared its head in Maine with the planned closure of the emergency room at St. Andrews Hospital in Boothbay Harbor. The hospital, a member of MaineHealth, has cited low patient counts and other financial concerns for the move, which is fiercely opposed by some locals. After the ER closure, the hospital would become an urgent care center.
“We’re not going to need the same infrastructure going forward that we’ve traditionally had,” Coburn said. “That can be very painful because it does mean that some services we probably won’t need and some services we will.”
Rural hospitals in particular will be faced with difficult decisions, said Colin McHugh, regional vice president of provider engagement and contracting for Anthem Blue Cross and Blue Shield in Maine.
“These larger systems that have acquired these rural hospitals that are economically challenged, they’re going to be forced to have some tough conversations,” he said.
MaineHealth also in recent years has brought into its fold Southern Maine Medical Center in Saco and Pen Bay Medical Center in Rockport.
Further north, EMHS has begun merger talks with Portland’s Mercy Hospital, and Central Maine Healthcare continues to eye Brunswick’s Parkview Adventist Medical Center (though the proposal has been suspended).
At the same time, hospital systems are feeling pressure from insurance purchasers, including large employers, to rein in prices, said McHugh.
“When a hospital does acquire another hospital, there is a certain level of accountability they feel to at least demonstrate to the public that they are acting in the best interest of the community, that they are trying to contain prices, and that they are trying to deliver on the promises they made for the reason for the acquisition,” he said. “That is, to lower administrative costs, and gain clinical efficiencies and administrative efficiencies.”
From Anthem’s perspective, when hospitals merge, the rate of cost increases doesn’t change much from before the transaction to after, he said.
Hospital consolidation will benefit consumers as the health care industry moves toward new models that tie payments to how well doctors, nurses and other providers work together to improve patients’ health, McHugh said.
Bigger systems have the size and scale to take on that challenge, while independent and rural hospitals face a tougher road, he said.
MaineHealth has leveraged the system’s resources to streamline how care is delivered, invest in quality improvements and reduce costs, such as by purchasing goods and services at lower prices than a single hospital could secure, McGinty said.
“We’ve been able to accomplish improvements in quality and reduction in the costs of services that wouldn’t have been possible if the hospitals had remained independent organizations,” he said.
The physician’s dilemma
While some, including Ciampi, think the merger trend led to less personal care with patients increasingly shifted to mid-level providers such as nurse practitioners, the doctor acknowledges one upside.
“To be fair, hospitals have a lot more services,” he said. “You have one-stop shopping where you can see your doctor and you can have your X-rays and your blood tests and advanced images all under one roof.”
Nevertheless, Ciampi said he grew increasingly dismayed by the realities of working under a ”big impersonal system.” He had less control over his schedule and decisions about care as “productivity” took a front seat, he said.
So Ciampi took the practice back, four years later. It’s now located in South Portland and, in a nod to its history, is attached to Ciampi’s home.
“As an independent physician, it’s been very hard to stay in practice,” Ciampi said, citing ever-changing insurance regulations that increase doctors’ overhead costs, coupled with stagnant reimbursement rates through Medicare.
“That’s really the dilemma that physicians are in right now — do you want security or do you want independence?” Ciampi said.