The cost of treating cancer skyrockets when doctors merge with hospitals

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Medical mergers boosting treatment cost for cancer patients

Laura Ingle reports from New York City

Cancer costs are the Wild West of medicine, according to experts.  More and more hospitals across the country are buying up private oncology practices, and taking advantage of a loophole in a federal program, making millions of dollars in the process and skyrocketing the cost of treatment.

Hospitals, which have a lot of overhead and regularly treat patients who can’t pay, are always looking for ways to increase their bottom line.  Private practitioners, fed up with the stress of managing the business end of medicine, want a guaranteed salary and a steady flow of patients.  The cure: Doctors’ offices becoming “Hospital Outpatient Centers.”

“In part what we’re seeing is that hospitals and physician groups are merging and when they merge they have more bargaining power to extract higher reimbursement fees,” said Rena Conti, a professor at the University of Chicago who studies the economics of medicine.

Beverly Brown, a breast cancer patient in her 70s, said her chemotherapy treatment nearly tripled when her doctor sold his practice.

“It started out – let me say –  $6,000 every three weeks and then it was raised to $15,000 every three weeks.  It was the same drug, the same person gave it to me, the same facility was giving out, it just cost more money,” she said.

Now there’s a new sheriff in town, in the form of insurance companies which say enough is enough.

Highmark, Beverly's insurer and the largest health plan in Pennsylvania, stopped paying out higher reimbursements for chemotherapy drugs.

“A drug is a drug is a drug. We are not going to pay differently depending on where that drug is given,”  said Dr. Donald Fischer, Highmark’s Chief Medical Officer. “There's no difference in the drug being given, where it's being given, who's giving it, dose of the drug or the outcome related to that. No improvement in quality or value, but a marked increase in the price.”

Fischer warned that higher prices ultimately trickle down to everyone in the form of higher premiums.  The new trend, he says, has an especially hard impact on companies that self-insure.

“We had an employer who in fact the first year this happened with the facility-based pricing incurred an extra 3 million dollars in cost to their bottom line,” he said.

The American Hospital Association (AHA), which represents nearly five thousand medical facilities nationwide, defends the higher costs.

In a statement to Fox News, it said, “When a physician goes to work for a hospital, it may appear to a patient that nothing has changed, but by law, that facility now must comply with a more comprehensive scope of licensing, accreditation and other regulatory requirements than do free-standing physician offices or clinics.”

The AHA also points out hospitals take on a higher financial risk than do most private practices.

“For example, hospitals must provide services 24 hours a day and 7 days a week; generally treat sicker patients than those who go to physician offices; and must comply with extensive federal, state and local laws. These requirements are either un- or underfunded. In addition, hospitals treat everyone, regardless of their ability to pay,” the organization said.

While hospitals do carry most of the burden of caring for the needy, Fischer said private insurance companies also help offset costs by reimbursing hospitals at higher rates than government programs like Medicare and Medicaid.

Additionally, many hospitals qualify for government initiatives that help with expenses, such as the Public Health Service Act.  Known as “340B,” this government safety net gives medical centers access to medicine at huge discounts, meant for the poor.

“Thanks to the 340B program, these providers are able to offer enhanced services to their vulnerable populations, including providing free or low-cost medications to millions of our most vulnerable patients,” a spokesman for Safety Net Hospitals for Pharmaceutical Access (SNHPA) told Fox News in a statement.

SNHPA represents health systems which participate in the discounted drug program.

However, critics say these medical centers rarely pass the savings on to insured patients – like those they pick up when they buy private practices.  Instead, they continue billing at the market rate – and sometimes higher – for the drugs.

The cost of treating cancer in the United States is more than $127 billion dollars a year and that number is projected to grow 27 percent in the next six years, according to the National Cancer Institute.

As costs rise, Professor Conti predicts major changes in the industry.

“The way in which I think this is going to play out is that we will see bundled payment or other types of caps on reimbursement for both physicians and also for hospitals where essentially they will no longer be gaining revenue from the use of chemotherapy,” Conti said.

- Ron Ralston is producer for Fox News Channel in the Northeast Bureau.  He can be followed on Twitter @RonRalston