Monday, May 21, 2007
Health care monopolies raise prices
From the RoundTable blog
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Lawrence K. Monahan
Monahan has practiced medicine for 33 years, has been a leader at Carilion, and is chairman of the board of the Roanoke Valley Academy of Medicine.
I write concerning The Roanoke Times report on May 5, headlined "Eye docs find new partner in center," and specifically concerning the words in that article, "competition inflates the cost of medical care, the consultants wrote, while hospitals that employ their own physicians can eliminate that inflation."
Actually, the facts are quite the opposite from what you report. Competition reduces the charges and costs to patients, to employers who frequently pay for their employees' health insurance premiums, and to their health insurance companies. For example:
n Carilion's own publication "What Carilion Clinic Means to You": "Will healthcare at Carilion Clinic be more expensive? As with most consumer goods and services, healthcare costs are rising."
Carilion CEO Ed Murphy has said the same thing in his presentations to at least two hospital medical staff meetings: Costs at the Carilion Clinic will not decrease.
n The article "Strategic Integration of Hospitals and Physicians," by Cuellar (School of Public Health at Columbia University, NY) and Gertler (School of Business, University of California, at Berkeley, California) in the Journal of Health Economics: "We find that integration has little effect on efficiency, but is associated with an increase in prices, especially when the integrated organization is exclusive and occurs in less competitive markets;" and "Specifically, we find that integrated organizations have higher prices."
n The same authors, in "How the Expansion of Hospital Systems Has Affected Consumers," Volume 24, No. 1, of Health Affairs: "Furthermore, the evidence suggests that system formation has primarily served to increase market power, not improve patient care quality or hospital efficiency."
n Local private physicians and their practices have already demonstrated right here in Roanoke that they can reduce charges and costs to their patients, compared with Carilion facilities that offer similar services.
Vistar (the private medical practice to which your May 5 article refers) has established an independent, private, outpatient surgi-center in Salem, the Roanoke Valley Center for Sight, where they perform outpatient procedures such as cataract removal.
The average facility charge by Carilion for a cataract operation has been $5,000, compared to only $800 at the Vistar Center, a savings of $4,200 per procedure.
Since it opened, Vistar has performed 23,000 cataract procedures. So at a savings of $4,200 per procedure, they have saved Roanoke area patients a total of $96 million over what the hospital would have charged.
n At The Endoscopy Center of Southwest Virginia, outpatient upper and lower endoscopies (EGD's and colonoscopies) are performed by private gastroenterologists, at a facility fee of only one-sixth to one-eighth of what the hospital currently charges.
n At the Center for Advanced Imaging, private diagnostic and interventional radiologists perform MRI scans at a cost of only about one-half of what the hospital currently charges.
n Our long-term experience in the United States tells us that monopolies are really good only for the provider (the monopoly itself) and are not good for common folks.
Look at OPEC and gasoline prices. Look at the success of private companies such as UPS, and FedEx, in service and price, over the former "monopoly" of the U.S. Post Office. There are similar examples in electric power, gas and telephone service.
The facts do not support CEO Murphy's contention, nor your article's quotation, that "competition inflates the cost of medical care, the consultants wrote, while hospitals that employ their own physicians can eliminate that inflation."
Carilion already employs more than 300 physicians; Carilion's charges are already higher than those in the private sector; and nationally respected experts supply the truth: Monopolistic health care delivery systems charge and cost more, not less.
