Congress Seeks Input from Advocacy Council Chair Adam Bruggeman, MD, MHA, on Cost of Consolidation

On May 23, Adam Bruggeman, MD, MHA, FAAOS, FAOA, chair of the AAOS Advocacy Council, testified to the House Budget Committee on the consequences of healthcare consolidation. The hearing, titled “Breaking Up Health Care Monopolies: Examining the Budgetary Effects of Health Care Consolidation,” aimed to shed light on the alarming trends and impacts of this phenomenon from a physician’s perspective. (Dr. Bruggeman’s full written testimony is available to view online.)

As an independent practice owner and entrepreneur, Dr. Bruggeman offered unique insights into the pressures driving physicians to sell their practices and opt for employment with larger healthcare systems. Drawing from his firsthand experiences in a rapidly consolidating market, he outlined the far-reaching consequences of both horizontal and vertical integration of practices into hospital systems, emphasizing their impact on patient access and affordability.

Dr. Bruggeman highlighted the direct correlation between consolidation and increased healthcare costs. He cited studies revealing that common orthopaedic procedures, such as knee replacements and spinal fusions, were approximately 30 percent more expensive in concentrated markets compared to competitive markets. This trend, he noted, extends beyond orthopaedics. Research indicates that hospitals engaging in consolidation typically impose prices 40 to 50 percent higher than they would have charged had they not merged, highlighting the broader implications of this industry-wide shift.

His testimony also addressed the factors driving consolidation in the healthcare industry. Dr. Bruggeman pointed out that physicians across the United States are at a breaking point, with one in five intending to leave their practice altogether. Financial pressures from rising costs and declining reimbursements, coupled with growing administrative burdens, make it increasingly difficult for physicians to sustain the financial viability of their practices.

A significant portion of Dr. Bruggeman’s testimony focused on shortfalls in the Medicare physician payment system. He explained that the current system does not account for a doctor’s training, years of experience, ability to handle complex cases, or quality of care provided. This standardized payment approach is unique to physicians compared to other professionals. The impact of budget-neutrality requirements in the Medicare fee-for-service physician payment system was another crucial point, and Dr. Bruggeman explained how these requirements force medical specialties to compete against each other over reimbursement rates, creating uncertainty for physicians and adding no value to patient care.

During the hearing, ranking member Rep. Brendan Boyle addressed a key issue in physician compensation. He mentioned his co-sponsorship of H.R. 2474, a bill designed to provide annual inflation-adjusted payments to healthcare providers. This legislation would index payments to the Medicare Economic Index, aiming to offer physicians greater financial certainty and stability.

Rep. Boyle sought Dr. Bruggeman’s opinion on this approach, asking about its necessity and potential impact. Dr. Bruggeman emphasized the pivotal nature of the current healthcare landscape. He stated, “We’re at a critical juncture right now. The consolidation is occurring not because physicians want to give up their practices and become employed. It’s occurring because they have no choice.”

Dr. Bruggeman went on to explain the financial pressures facing physicians, noting, “Right now, if you’re a physician, you’re looking at getting less than inflation every year while your costs are going up. It just doesn’t make any sense.” He also stressed the importance of financial stability for physicians, stating, “We have to have some economic certainty to the future. We can’t fix what we’ve done before. What happened before is what it is. But going forward, we must have inflationary updates.”

Administrative burdens, particularly prior authorization requirements, were identified as another major reason more physicians are choosing employment over owning their own practices, further fueling consolidation in healthcare. Dr. Bruggeman shared a stark example from his own practice, where 30 percent of his staff are dedicated to administrative tasks, including prior authorization and records requests, created by the bureaucracy of the healthcare system. This shift of resources away from patient care to paperwork not only affects the quality of care but also strains the financial stability of independent practices. These administrative challenges, combined with financial pressures, are forcing many physicians to consider abandoning independent practice in favor of employment by larger healthcare systems.

Dr. Bruggeman also touched on the cybersecurity risks associated with consolidation, citing the recent Change Healthcare cyberattack in February 2024, which directly impacted his practice. He expressed concern that concentrating more healthcare spending through a small number of entities increases vulnerability to cyber threats.

In terms of solutions, Dr. Bruggeman proposed several measures to combat consolidation:

1. reforming the physician payment system by raising the Medicare Physician Fee Schedule budget-neutrality threshold and providing physicians with reimbursement updates that fully account for inflation as measured by the Medicare Economic Index
2. addressing shortcomings in the Medicare Access and CHIP Reauthorization Act of 2015 and the Merit-Based Incentive Payment System to improve how Medicare compensates physicians and other healthcare professionals
3. repealing the moratorium on physician-led hospitals to inject competition into the healthcare market and lower costs

On physician-led hospitals, Rep. Michael Burgess, MD (R-Texas), asked about their role in countering healthcare consolidation. Dr. Bruggeman responded by addressing the restrictions on physician ownership and expansion of hospitals. He suggested that these limitations may have unintended consequences: “If you’re able to knock out all of your competitors and not let physicians build hospitals, not let physicians expand hospitals, what’s going to happen? We’re going to see more consolidation in the hospital market, which is going to drive up costs.”

Dr. Bruggeman also cited data on the performance of physician-owned hospitals: “We know from all the data, physician-owned hospitals provide at least [equal] if not better quality of care, and they do it at a lower cost.” He concluded by stating, “It just makes sense to get rid of that ban.”

Overall, Dr. Bruggeman’s testimony provided a comprehensive overview of the challenges facing independent physicians and the healthcare system due to increasing consolidation. His insights and proposed solutions offer a roadmap for policymakers to consider as they work to address these critical issues in the U.S. healthcare landscape.

AAOS appreciates that the committee recognized Dr. Bruggeman’s expertise and ensured that the perspective of the musculoskeletal care community is considered in discussions about healthcare consolidation and its budgetary impacts. The issue of consolidation in healthcare is complex and far-reaching, with significant implications for patient care, healthcare costs, and the overall stability of the healthcare system.

The committee’s focus on this critical issue is timely, especially given recent events such as the Change Healthcare cyberattack. The incident exposed the dangers of a consolidated healthcare sector, where a disruption to a single major entity resulted in widespread delays in claims processing, severe cash-flow disruptions for physicians, and compromised patient care nationwide. AAOS looks forward to continuing this important dialogue with lawmakers, working collaboratively to develop policies that promote a competitive healthcare landscape, protect patient interests, and ensure the long-term stability and security of our healthcare infrastructure.

Julia Kalusniak is an associate of government relations in the AAOS Office of Government Relations.

References

1. Robinson JC: Hospital market concentration, pricing, and profitability in orthopedic surgery and interventional cardiology. Am J Manag Care 2011;17(6 Spec No.):e241-8.
2. Gale AH: Bigger but not better: hospital mergers increase costs and do not improve quality. Mo Med 2015;112(1):4-5.
3. Sinsky CA, Brown RL, Stillman MJ, et al: COVID-related stress and work intentions in a sample of US health care workers. Mayo Clin Proc Innov Qual Outcomes 2021;5(6):1165-1173.