Cardiologists: Is your contract with the hospital up for renewal?

shutterstock_276282683A Sermo doctor discusses contract issues for Cardiologists working with hospitals in their piece, Is your contract with the hospital up for renewal?

Over the past decade, over 50% of cardiologists have become affiliated with their hospital, either through being purchased outright or through lease arrangements. In some cases, the driving force for the hospital was to maintain or expand its referral basis for in-patient procedures including cardiac catheterizations and PCIs, along with EP studies and Open Heart Surgery. Optimizing market share obviously played an important part in negotiations, and often allowed cardiologists to “demand” a premium for their practices or their services.

However, a second motivating force was the differential in reimbursements that developed over the past ten years between out-patient cardiac testing (specifically nuclear stress testing and echocardiography) done in private offices and hospital out-patient facilities. Although the differential was in large part  due to a lack of response to a CMS survey by private practitioners about their costs (compared to hospital answers), organized cardiology was unable to convince CMS or Congress that this was a fallacious situation. And so, payments to private offices were slashed as much as 50% compared to the hospital payments (which remained seemingly “unscathed.”)

It was this differential that “enticed” hospitals to purchase or lease private practices, now “owning” these offices and billing as “out-patient” hospital facilities. And this differential could also be used to help entice cardiologists into the fold.  The only complaints were from patients who were now faced with higher costs for testing done in the same facility, now a “hospital cost center,” supporting the rest of the hospital’s activities.

So what has changed that may affect future contracts? Most importantly, appropriateness criteria (AUC) have been developed and adopted by most insurance companies, and accepted by cardiologists as not only appropriate care, but also to reduce unnecessary testing and to reduce unnecessary expenditures.  And, surely it also was an attempt to self-police so it was not done to us by outside forces.

And despite this differential, attempts to end IOASE (in-office ancillary services exemption) has been proposed in Congress to make it illegal for cardiologists who have remained independent (among other physician specialists) to provide in office imaging.  The impetus is to prevent self-referrals by physicians – with increased referrals to hospital out-patient facilities (and independent radiologists.)  Of course, what is lost is that these tests will now cost twice as much as if they were done in the office.

It appears the IOASE will hopefully not pass in Congress . And CMS has proposed, (although it is delaying implementation) the requirement that physicians ordering advanced imaging (such as CT, MR, SPECT) consult AUC through a qualified clinical support system (developed by professional medical specialty societies). Presumably this could hold the supporters of ending IOASE at bay.

But, what has AUC done to the actual number of tests done – specifically to SPECT. The increased payments to hospitals through HOPPS could enable hospitals to negotiate liberally with cardiologists. Meanwhile, through AUC, the number of SPECTs has dropped in half – and hospital administrators are sure to bring up that point.

And now there is discussion to equalize payment for out patient testing between private offices and hospital out-patient facilities. This will further complicate negotiations – and most likely give both parties more to think about – even if there is less profits to divide. And imagine if the end result is that equalization means a reduction to the payments to private offices!

So, should you expect difficulties in negotiations as your contract comes up for renewal?

And if you haven’t finalized initial negotiations with your hospital and are not yet affiliated, MedPAC and Congress may have a surprise coming for you!