Joel B. Finkelstein

WASHINGTON – Community health centers, public hospitals, and other safety net providers are seeing a steadily growing number of low-income patients, while specialty care for these patients is becoming scarce, according to the results of a biennial national survey conducted by the Center for Studying Health System Change.

“The saga continues with rising demands and expectations on safety net providers. They have, lucky them, solidified their lock on the uninsured market in most of our communities,” Robert Hurley, Ph.D., of the department of health administration at Virginia Commonwealth University, Richmond, said at a conference sponsored by the Center for Studying Health System Change (HSC).

For example, despite strong growth in the capacity of community health centers, many still are overwhelmed not only by uninsured patients and immigrants but also, increasingly, by insured patients.

The number of “private insurance patients [is] growing at twice the rate of the general population growth in health centers,” said Daniel Hawkins, senior vice president at the National Association of Community Health Centers.

Health centers have absorbed a 60% increase in patients since 2001 and are now seeing 16 million patients a year. “The privately insured patient population is over 2.1 million out of those 16 million,” he said.

Community health centers are also struggling to meet the demand for specialty care, which has grown scarce for low-income patients in the 12 communities surveyed by HSC.

“If you took away the employed positions in safety net hospitals and the faculty positions in the academic health centers, specialty care would not be available,” Dr. Hurley said at a conference to release the findings of the most recent center survey.

The lack of other sources of care is especially acute in the area of mental health. The number of such visits to community health centers has more than doubled over the past 5 years.

“Wellness care [and] well-child care immunizations are the most common reasons for visits to a health center, but diagnostically, it's diabetes, hypertension, and mental health,” said Mr. Hawkins. “It's not schizophrenia; it's not psychoses; it's all the stress, anxiety, and depression that goes with trying to keep a roof over the family's head … when you're making seven bucks an hour,” said Mr. Hawkins.

WASHINGTON – Community health centers, public hospitals, and other safety net providers are seeing a steadily growing number of low-income patients, while specialty care for these patients is becoming scarce, according to the results of a biennial national survey conducted by the Center for Studying Health System Change.

“The saga continues with rising demands and expectations on safety net providers. They have, lucky them, solidified their lock on the uninsured market in most of our communities,” Robert Hurley, Ph.D., of the department of health administration at Virginia Commonwealth University, Richmond, said at a conference sponsored by the Center for Studying Health System Change (HSC).

For example, despite strong growth in the capacity of community health centers, many still are overwhelmed not only by uninsured patients and immigrants but also, increasingly, by insured patients.

The number of “private insurance patients [is] growing at twice the rate of the general population growth in health centers,” said Daniel Hawkins, senior vice president at the National Association of Community Health Centers.

Health centers have absorbed a 60% increase in patients since 2001 and are now seeing 16 million patients a year. “The privately insured patient population is over 2.1 million out of those 16 million,” he said.

Community health centers are also struggling to meet the demand for specialty care, which has grown scarce for low-income patients in the 12 communities surveyed by HSC.

“If you took away the employed positions in safety net hospitals and the faculty positions in the academic health centers, specialty care would not be available,” Dr. Hurley said at a conference to release the findings of the most recent center survey.

The lack of other sources of care is especially acute in the area of mental health. The number of such visits to community health centers has more than doubled over the past 5 years.

“Wellness care [and] well-child care immunizations are the most common reasons for visits to a health center, but diagnostically, it's diabetes, hypertension, and mental health,” said Mr. Hawkins. “It's not schizophrenia; it's not psychoses; it's all the stress, anxiety, and depression that goes with trying to keep a roof over the family's head … when you're making seven bucks an hour,” said Mr. Hawkins.

WASHINGTON – Community health centers, public hospitals, and other safety net providers are seeing a steadily growing number of low-income patients, while specialty care for these patients is becoming scarce, according to the results of a biennial national survey conducted by the Center for Studying Health System Change.

“The saga continues with rising demands and expectations on safety net providers. They have, lucky them, solidified their lock on the uninsured market in most of our communities,” Robert Hurley, Ph.D., of the department of health administration at Virginia Commonwealth University, Richmond, said at a conference sponsored by the Center for Studying Health System Change (HSC).

For example, despite strong growth in the capacity of community health centers, many still are overwhelmed not only by uninsured patients and immigrants but also, increasingly, by insured patients.

The number of “private insurance patients [is] growing at twice the rate of the general population growth in health centers,” said Daniel Hawkins, senior vice president at the National Association of Community Health Centers.

Health centers have absorbed a 60% increase in patients since 2001 and are now seeing 16 million patients a year. “The privately insured patient population is over 2.1 million out of those 16 million,” he said.

Community health centers are also struggling to meet the demand for specialty care, which has grown scarce for low-income patients in the 12 communities surveyed by HSC.

“If you took away the employed positions in safety net hospitals and the faculty positions in the academic health centers, specialty care would not be available,” Dr. Hurley said at a conference to release the findings of the most recent center survey.

The lack of other sources of care is especially acute in the area of mental health. The number of such visits to community health centers has more than doubled over the past 5 years.

“Wellness care [and] well-child care immunizations are the most common reasons for visits to a health center, but diagnostically, it's diabetes, hypertension, and mental health,” said Mr. Hawkins. “It's not schizophrenia; it's not psychoses; it's all the stress, anxiety, and depression that goes with trying to keep a roof over the family's head … when you're making seven bucks an hour,” said Mr. Hawkins.

WASHINGTON — Hospitals are getting smart instead of angry about competition from physicians.

“A lot of care is moving from the hospital to the ambulatory sector, some of which is still under the auspices of the hospital, but increasingly into doctor's offices, into physician-owned ambulatory surgery centers, imaging centers, testing facilities,” Dr. Robert Berenson, a senior fellow at the Washington-based think tank the Urban Institute, said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

Physicians often set up these centers in part out of frustration with hospital bureaucracy, but also in response to economic pressures, said Adam Feinstein, a managing director at Lehman Brothers where he coordinates the health care facilities research team.

“Physician incomes have been going down. They have been looking to make up for the lost income, and they're competing more aggressively with the hospitals,” he said.

Over the past 10 years, the number of ambulatory surgery centers has doubled to approximately 5,000. There are now almost as many surgery centers as there are hospitals in the country. By comparison, there are only about 100 specialty hospitals in the United States, despite all the political attention they get.

Jeff Schaub, who rates acute care hospitals for the international credit rating firm Fitch Ratings, pointed out that when hospital leadership does not focus on “what their physicians are doing and want to do, we have seen dozens of places have their outpatient surgery volumes cut in half because docs have gone out and put up buildings.”

To counteract such trends, “what we have seen over the last 5–8 years is tremendous interest on the part of hospitals and systems to do joint ventures with physicians, figuring that they would rather lose half the business than all of it,” he said.

Alternatively, some hospitals have tried to integrate physicians into more of the business decisions, hoping to create a more comfortable environment for them to work and minimizing their desire to go off on their own, Mr. Schaub said.

“It is really interesting how things come full circle,” said Mr. Feinstein. “Hospitals were letting doctors partner with them back in the mid-1990s. There was a lot of scrutiny over this so everyone stopped doing it, and now here we are again and everyone is doing it.”

There are some similarities but also some important differences this time around, Mr. Schaub said.

“In the 1990s, everybody was buying practices just because everybody else was buying practices. Now what I see is a much more strategic focus, whether it's service-line related or to head off entrepreneurs splitting off or to focus on a particular geography. Hospitals in a lot of markets are being more selective than they were 10 years ago,” he said.

WASHINGTON — Hospitals are getting smart instead of angry about competition from physicians.

“A lot of care is moving from the hospital to the ambulatory sector, some of which is still under the auspices of the hospital, but increasingly into doctor's offices, into physician-owned ambulatory surgery centers, imaging centers, testing facilities,” Dr. Robert Berenson, a senior fellow at the Washington-based think tank the Urban Institute, said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

Physicians often set up these centers in part out of frustration with hospital bureaucracy, but also in response to economic pressures, said Adam Feinstein, a managing director at Lehman Brothers where he coordinates the health care facilities research team.

“Physician incomes have been going down. They have been looking to make up for the lost income, and they're competing more aggressively with the hospitals,” he said.

Over the past 10 years, the number of ambulatory surgery centers has doubled to approximately 5,000. There are now almost as many surgery centers as there are hospitals in the country. By comparison, there are only about 100 specialty hospitals in the United States, despite all the political attention they get.

Jeff Schaub, who rates acute care hospitals for the international credit rating firm Fitch Ratings, pointed out that when hospital leadership does not focus on “what their physicians are doing and want to do, we have seen dozens of places have their outpatient surgery volumes cut in half because docs have gone out and put up buildings.”

To counteract such trends, “what we have seen over the last 5–8 years is tremendous interest on the part of hospitals and systems to do joint ventures with physicians, figuring that they would rather lose half the business than all of it,” he said.

Alternatively, some hospitals have tried to integrate physicians into more of the business decisions, hoping to create a more comfortable environment for them to work and minimizing their desire to go off on their own, Mr. Schaub said.

“It is really interesting how things come full circle,” said Mr. Feinstein. “Hospitals were letting doctors partner with them back in the mid-1990s. There was a lot of scrutiny over this so everyone stopped doing it, and now here we are again and everyone is doing it.”

There are some similarities but also some important differences this time around, Mr. Schaub said.

“In the 1990s, everybody was buying practices just because everybody else was buying practices. Now what I see is a much more strategic focus, whether it's service-line related or to head off entrepreneurs splitting off or to focus on a particular geography. Hospitals in a lot of markets are being more selective than they were 10 years ago,” he said.

WASHINGTON — Hospitals are getting smart instead of angry about competition from physicians.

“A lot of care is moving from the hospital to the ambulatory sector, some of which is still under the auspices of the hospital, but increasingly into doctor's offices, into physician-owned ambulatory surgery centers, imaging centers, testing facilities,” Dr. Robert Berenson, a senior fellow at the Washington-based think tank the Urban Institute, said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

Physicians often set up these centers in part out of frustration with hospital bureaucracy, but also in response to economic pressures, said Adam Feinstein, a managing director at Lehman Brothers where he coordinates the health care facilities research team.

“Physician incomes have been going down. They have been looking to make up for the lost income, and they're competing more aggressively with the hospitals,” he said.

Over the past 10 years, the number of ambulatory surgery centers has doubled to approximately 5,000. There are now almost as many surgery centers as there are hospitals in the country. By comparison, there are only about 100 specialty hospitals in the United States, despite all the political attention they get.

Jeff Schaub, who rates acute care hospitals for the international credit rating firm Fitch Ratings, pointed out that when hospital leadership does not focus on “what their physicians are doing and want to do, we have seen dozens of places have their outpatient surgery volumes cut in half because docs have gone out and put up buildings.”

To counteract such trends, “what we have seen over the last 5–8 years is tremendous interest on the part of hospitals and systems to do joint ventures with physicians, figuring that they would rather lose half the business than all of it,” he said.

Alternatively, some hospitals have tried to integrate physicians into more of the business decisions, hoping to create a more comfortable environment for them to work and minimizing their desire to go off on their own, Mr. Schaub said.

“It is really interesting how things come full circle,” said Mr. Feinstein. “Hospitals were letting doctors partner with them back in the mid-1990s. There was a lot of scrutiny over this so everyone stopped doing it, and now here we are again and everyone is doing it.”

There are some similarities but also some important differences this time around, Mr. Schaub said.

“In the 1990s, everybody was buying practices just because everybody else was buying practices. Now what I see is a much more strategic focus, whether it's service-line related or to head off entrepreneurs splitting off or to focus on a particular geography. Hospitals in a lot of markets are being more selective than they were 10 years ago,” he said.

WASHINGTON – If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary?

That is the question on the minds of a increasing number of people, panelists pointed out at a press briefing on health care costs that was sponsored by the Center for Studying Health System Change.

“A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act. … It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending upon which type of plan they offer, managed care companies receive 10%–20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system. This would induce private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans, according to the philosophy behind the legislation.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment in using private insurers to control costs, said Christine Arnold, a managing director at Morgan Stanley, where she covers the managed care industry. “The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2–4 years,” she said.

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

“We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu,” Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums were growing by double digits. That resulted in a political backlash. At the time, it was Hillary Clinton's universal care plan that further popularized health maintenance organizations.

“HMOs had this huge period of proliferation and you got the cost trending down in the mid-1990s to … really low single digits,” said Mr. Raskin. Then, the economy picked back up–and so did medical cost trends–and double-digit growth returned in the late 1990s into the early 2000s. Now, he said, the discussion is again focusing on “more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back and so is universal health care.”

WASHINGTON – If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary?

That is the question on the minds of a increasing number of people, panelists pointed out at a press briefing on health care costs that was sponsored by the Center for Studying Health System Change.

“A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act. … It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending upon which type of plan they offer, managed care companies receive 10%–20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system. This would induce private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans, according to the philosophy behind the legislation.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment in using private insurers to control costs, said Christine Arnold, a managing director at Morgan Stanley, where she covers the managed care industry. “The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2–4 years,” she said.

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

“We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu,” Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums were growing by double digits. That resulted in a political backlash. At the time, it was Hillary Clinton's universal care plan that further popularized health maintenance organizations.

“HMOs had this huge period of proliferation and you got the cost trending down in the mid-1990s to … really low single digits,” said Mr. Raskin. Then, the economy picked back up–and so did medical cost trends–and double-digit growth returned in the late 1990s into the early 2000s. Now, he said, the discussion is again focusing on “more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back and so is universal health care.”

WASHINGTON – If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary?

That is the question on the minds of a increasing number of people, panelists pointed out at a press briefing on health care costs that was sponsored by the Center for Studying Health System Change.

“A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act. … It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending upon which type of plan they offer, managed care companies receive 10%–20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system. This would induce private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans, according to the philosophy behind the legislation.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment in using private insurers to control costs, said Christine Arnold, a managing director at Morgan Stanley, where she covers the managed care industry. “The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2–4 years,” she said.

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

“We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu,” Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums were growing by double digits. That resulted in a political backlash. At the time, it was Hillary Clinton's universal care plan that further popularized health maintenance organizations.

“HMOs had this huge period of proliferation and you got the cost trending down in the mid-1990s to … really low single digits,” said Mr. Raskin. Then, the economy picked back up–and so did medical cost trends–and double-digit growth returned in the late 1990s into the early 2000s. Now, he said, the discussion is again focusing on “more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back and so is universal health care.”

WASHINGTON — If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary?

That is the question on the minds of a growing number of people, panelists said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

“A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act. … It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending on which type of plan they offer, managed care companies receive 10%–20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system. According to the philosophy behind the legislation, this would induce private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment in using private insurers to control costs, said Christine Arnold, who covers the managed care industry as a managing director at Morgan Stanley.

“The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2–4 years,” Ms. Arnold said.

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

“We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu,” Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums were growing by double digits. Those increases resulted in a political backlash. At the time, it was Hillary Clinton's universal care plan that further popularized health maintenance organizations.

“HMOs had this huge period of proliferation, and you got the cost trending down in the mid-1990s to … really low single digits,” Mr. Raskin said.

Then the economy picked back up—and so did medical cost trends—and double-digit growth returned in the late 1990s into the early 2000s. Now, he said, the discussion is again focusing on “more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back and so is universal health care.”

WASHINGTON — If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary?

That is the question on the minds of a growing number of people, panelists said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

“A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act. … It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending on which type of plan they offer, managed care companies receive 10%–20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system. According to the philosophy behind the legislation, this would induce private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment in using private insurers to control costs, said Christine Arnold, who covers the managed care industry as a managing director at Morgan Stanley.

“The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2–4 years,” Ms. Arnold said.

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

“We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu,” Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums were growing by double digits. Those increases resulted in a political backlash. At the time, it was Hillary Clinton's universal care plan that further popularized health maintenance organizations.

“HMOs had this huge period of proliferation, and you got the cost trending down in the mid-1990s to … really low single digits,” Mr. Raskin said.

Then the economy picked back up—and so did medical cost trends—and double-digit growth returned in the late 1990s into the early 2000s. Now, he said, the discussion is again focusing on “more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back and so is universal health care.”

WASHINGTON — If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary?

That is the question on the minds of a growing number of people, panelists said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

“A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act. … It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending on which type of plan they offer, managed care companies receive 10%–20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system. According to the philosophy behind the legislation, this would induce private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment in using private insurers to control costs, said Christine Arnold, who covers the managed care industry as a managing director at Morgan Stanley.

“The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2–4 years,” Ms. Arnold said.

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

“We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu,” Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums were growing by double digits. Those increases resulted in a political backlash. At the time, it was Hillary Clinton's universal care plan that further popularized health maintenance organizations.

“HMOs had this huge period of proliferation, and you got the cost trending down in the mid-1990s to … really low single digits,” Mr. Raskin said.

Then the economy picked back up—and so did medical cost trends—and double-digit growth returned in the late 1990s into the early 2000s. Now, he said, the discussion is again focusing on “more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back and so is universal health care.”

WASHINGTON — If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on an average beneficiary?

That was the question from a growing number of people, said panelists at a press briefing on health care costs sponsored by the Center for Studying Health System Change. "A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act…. It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control," said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending upon which type of plan they offer, managed care companies receive 10%-20% above what Medicare spends on the average beneficiary in the fee-for-service system. This induces private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans, according to the philosophy behind the legislation.

It's 4 years later, and some are wondering what they are buying with the millions of extra dollars flowing to private insurers. Physicians on the government's Medicare Physician Advisory Commission (MedPAC) have called on Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment, said Christine Arnold, a managing director at Morgan Stanley who covers the managed care industry. "The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2-4 years."

It is not just in the Medicare program that cost-saving techniques are being questioned. Health savings accounts and other consumer-driven approaches are losing favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, confirms that trend. After a few years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on the false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

"We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu," Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums grew by double digits, resulting in political backlash. Hillary Clinton's universal care plan further popularized health maintenance organizations. "HMOs had this huge period of proliferation and you got the cost trending down in the mid-1990s to… really low single digits," said Mr. Raskin. Then, the economy picked back up—along with medical costs—and double-digit growth returned. Now, the discussion is again focusing on "more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back and so is universal health care."

WASHINGTON — If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on an average beneficiary?

That was the question from a growing number of people, said panelists at a press briefing on health care costs sponsored by the Center for Studying Health System Change. "A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act…. It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control," said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending upon which type of plan they offer, managed care companies receive 10%-20% above what Medicare spends on the average beneficiary in the fee-for-service system. This induces private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans, according to the philosophy behind the legislation.

It's 4 years later, and some are wondering what they are buying with the millions of extra dollars flowing to private insurers. Physicians on the government's Medicare Physician Advisory Commission (MedPAC) have called on Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment, said Christine Arnold, a managing director at Morgan Stanley who covers the managed care industry. "The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2-4 years."

It is not just in the Medicare program that cost-saving techniques are being questioned. Health savings accounts and other consumer-driven approaches are losing favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, confirms that trend. After a few years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on the false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

"We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu," Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums grew by double digits, resulting in political backlash. Hillary Clinton's universal care plan further popularized health maintenance organizations. "HMOs had this huge period of proliferation and you got the cost trending down in the mid-1990s to… really low single digits," said Mr. Raskin. Then, the economy picked back up—along with medical costs—and double-digit growth returned. Now, the discussion is again focusing on "more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back and so is universal health care."

WASHINGTON — If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on an average beneficiary?

That was the question from a growing number of people, said panelists at a press briefing on health care costs sponsored by the Center for Studying Health System Change. "A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act…. It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control," said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending upon which type of plan they offer, managed care companies receive 10%-20% above what Medicare spends on the average beneficiary in the fee-for-service system. This induces private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans, according to the philosophy behind the legislation.

It's 4 years later, and some are wondering what they are buying with the millions of extra dollars flowing to private insurers. Physicians on the government's Medicare Physician Advisory Commission (MedPAC) have called on Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment, said Christine Arnold, a managing director at Morgan Stanley who covers the managed care industry. "The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2-4 years."

It is not just in the Medicare program that cost-saving techniques are being questioned. Health savings accounts and other consumer-driven approaches are losing favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, confirms that trend. After a few years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on the false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

"We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu," Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums grew by double digits, resulting in political backlash. Hillary Clinton's universal care plan further popularized health maintenance organizations. "HMOs had this huge period of proliferation and you got the cost trending down in the mid-1990s to… really low single digits," said Mr. Raskin. Then, the economy picked back up—along with medical costs—and double-digit growth returned. Now, the discussion is again focusing on "more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back and so is universal health care."

WASHINGTON – If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary?

That is the question on the minds of a growing number of people, said panelists at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

“A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act…. It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending upon which type of plan they offer, managed care companies receive 10%-20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system. This would induce private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans, according to the philosophy behind the legislation.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment in using private insurers to control costs, said Christine Arnold, a managing director at Morgan Stanley, where she covers the managed care industry.

“The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2-4 years,” she said.

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

“We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu,” Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc. During the late 1980s and early 1990s, health care premiums were growing by double digits. That resulted in a political backlash. At the time, it was Hillary Clinton's universal care plan that further popularized health maintenance organizations.

“HMOs had this huge period of proliferation, and you got the cost trending down in the mid-1990s to … really low single digits,” said Mr. Raskin. Then, the economy picked back up–and so did medical cost trends–and double-digit growth returned in the late 1990s into the early 2000s. Now, he said, the discussion is again focusing on “more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back, and so is universal health care.”

WASHINGTON – If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary?

That is the question on the minds of a growing number of people, said panelists at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

“A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act…. It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending upon which type of plan they offer, managed care companies receive 10%-20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system. This would induce private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans, according to the philosophy behind the legislation.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment in using private insurers to control costs, said Christine Arnold, a managing director at Morgan Stanley, where she covers the managed care industry.

“The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2-4 years,” she said.

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

“We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu,” Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc. During the late 1980s and early 1990s, health care premiums were growing by double digits. That resulted in a political backlash. At the time, it was Hillary Clinton's universal care plan that further popularized health maintenance organizations.

“HMOs had this huge period of proliferation, and you got the cost trending down in the mid-1990s to … really low single digits,” said Mr. Raskin. Then, the economy picked back up–and so did medical cost trends–and double-digit growth returned in the late 1990s into the early 2000s. Now, he said, the discussion is again focusing on “more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back, and so is universal health care.”

WASHINGTON – If competition drives prices down, why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary?

That is the question on the minds of a growing number of people, said panelists at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

“A lot of folks are suffering from amnesia about this whole issue. In 2003, we passed something called the Medicare Modernization Act…. It was about how are we going to solve the baby boomer problem, how are we going to bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided that the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending upon which type of plan they offer, managed care companies receive 10%-20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system. This would induce private insurers to offer managed Medicare products and enable them to offer more benefits to attract beneficiaries into the private plans, according to the philosophy behind the legislation.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

However, it may be too early to pull the plug on this experiment in using private insurers to control costs, said Christine Arnold, a managing director at Morgan Stanley, where she covers the managed care industry.

“The managed care companies that I speak to say that they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2-4 years,” she said.

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade organization, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, last year the number of people in the plans grew by less than a third.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co.

“We're incentivizing them with the benefit structure, but then we're really not giving them the tools to make better decisions. It's sort of like giving somebody $100 to go out to dinner and then not putting the prices on the menu,” Mr. Simpson said.

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc. During the late 1980s and early 1990s, health care premiums were growing by double digits. That resulted in a political backlash. At the time, it was Hillary Clinton's universal care plan that further popularized health maintenance organizations.

“HMOs had this huge period of proliferation, and you got the cost trending down in the mid-1990s to … really low single digits,” said Mr. Raskin. Then, the economy picked back up–and so did medical cost trends–and double-digit growth returned in the late 1990s into the early 2000s. Now, he said, the discussion is again focusing on “more government intervention. It's 2007 and 2008, and guess what: Hillary Clinton is back, and so is universal health care.”

It all started with the neurosurgeons. “I was in situations in El Paso where we had no neurosurgery, and we had to ship patients out to other cities,” recalled Dr. Juan Fitz, an emergency physician with Covenant Medical Group in Lubbock, Tex. “Now we're finding it here in Lubbock: With maxillofacial, we have no call; [with] neurology, we have no call.”

It's a problem hospitals and emergency departments across the country are facing more often.

Many are finding it difficult to find physicians willing to accept emergency calls, forcing emergency departments to find nearby cities where patients can see specialists. “There is a tremendous crisis developing on the surgical side to staff the in-house care that must take place after the emergency department,” Dr. C. William Schwab recently told the U.S. House Committee on Oversight and Government Reform.

Hospitals are already experiencing a shortage of physicians, specifically surgeons, willing to be on call for the emergency department. That is a problem that will become even more profound as the nation's 80 million baby boomers age, said Dr. Schwab, chief of the division of trauma and surgical critical care at the University of Pennsylvania Medical Center in Philadelphia.

Dr. Schwab cited the findings of an Institute of Medicine panel on which he served. That panel warned that the increasing difficulty of finding specialists to take emergency calls is one of the most troubling trends faced by U.S. emergency departments.

“Providing emergency call has become unattractive to many specialists in critical fields such as neurosurgery and orthopedics,” according to the institute's June 2006 report, “Hospital-Based Emergency Care: At the Breaking Point.”

There are several factors involved, such as the difficulty specialists face in trying to collect payment for on-call services, especially from uninsured patients. There are also liability concerns unique to the emergency department.

“Patients are often sicker, and emergency procedures are frequently performed, in the middle of the night or on weekends, when the hospital's staffing and capabilities are not at their peak. A national survey of neurosurgeons found that 36% had been sued by patients seen through the ED,” the report continues.

And the problem is getting worse, Dr. Ramon W. Johnson, an emergency physician at Mission Hospital, Mission Viejo, Calif., and a member of the American College of Emergency Physicians board of directors, said at the House hearing.

Dr. Johnson cited the results of a national survey of emergency department directors conducted in the spring of 2004 and again in the summer of 2005. The ACEP survey found that access to specialists deteriorated over the year. In 2004, 67% of the departments reported having too few specialists on call, while by the next year the number had risen to 73%. More than half said the problem was due to physicians leaving the hospital to practice elsewhere.

The survey found that the top five specialists in short supply were orthopedists, plastic surgeons, neurosurgeons, otolaryngologists, and hand surgeons. Many of those who are still willing to take emergency calls have agreed to fewer on-call coverage hours.

In the past few years, physicians have found they have much more say over whether they accept emergency calls. Although taking emergency calls was once a requirement to maintain hospital privileges, physicians now have a greater ability to perform outpatient procedures in their offices, at ambulatory centers, or elsewhere besides the hospital, explained Dr. Robert Berenson at a recent forum held by the Center for Studying Health System Change.

“This is a big issue. Hospitals are working very hard to try to draw lines as to which physicians they are going to compensate for taking call or for caring for uninsured patients,” said Dr. Berenson, a senior fellow at the Urban Institute, Washington. “It has not yet become standard that all docs are getting paid by the hospital for ER call, but it is increasingly a cost of business.”

Given that choice, specialists may prefer not to take emergency calls, in part because of the impact it has on their lifestyles and in part because being on call all night can cut into their ability to keep regular office hours, said Dr. Fitz. “Unfortunately, it is a problem across the country that has been around for some time, at least for the past 5 years, and it has just gotten worse [over time],” he said.

Recently, the emergency department in Lubbock has found itself with a shortage of on-call neurologists. Within only a couple of months, the number of neurologists willing to take emergency calls dropped from half a dozen to none. “If somebody comes in with a stroke, there's nobody to call,” said Dr. Fitz.

Dr. William Schwab testified before a House committee about the on-call crisis. Sheri Mattes/Elsevier Global Medical News

It all started with the neurosurgeons. “I was in situations in El Paso where we had no neurosurgery, and we had to ship patients out to other cities,” recalled Dr. Juan Fitz, an emergency physician with Covenant Medical Group in Lubbock, Tex. “Now we're finding it here in Lubbock: With maxillofacial, we have no call; [with] neurology, we have no call.”

It's a problem hospitals and emergency departments across the country are facing more often.

Many are finding it difficult to find physicians willing to accept emergency calls, forcing emergency departments to find nearby cities where patients can see specialists. “There is a tremendous crisis developing on the surgical side to staff the in-house care that must take place after the emergency department,” Dr. C. William Schwab recently told the U.S. House Committee on Oversight and Government Reform.

Hospitals are already experiencing a shortage of physicians, specifically surgeons, willing to be on call for the emergency department. That is a problem that will become even more profound as the nation's 80 million baby boomers age, said Dr. Schwab, chief of the division of trauma and surgical critical care at the University of Pennsylvania Medical Center in Philadelphia.

Dr. Schwab cited the findings of an Institute of Medicine panel on which he served. That panel warned that the increasing difficulty of finding specialists to take emergency calls is one of the most troubling trends faced by U.S. emergency departments.

“Providing emergency call has become unattractive to many specialists in critical fields such as neurosurgery and orthopedics,” according to the institute's June 2006 report, “Hospital-Based Emergency Care: At the Breaking Point.”

There are several factors involved, such as the difficulty specialists face in trying to collect payment for on-call services, especially from uninsured patients. There are also liability concerns unique to the emergency department.

“Patients are often sicker, and emergency procedures are frequently performed, in the middle of the night or on weekends, when the hospital's staffing and capabilities are not at their peak. A national survey of neurosurgeons found that 36% had been sued by patients seen through the ED,” the report continues.

And the problem is getting worse, Dr. Ramon W. Johnson, an emergency physician at Mission Hospital, Mission Viejo, Calif., and a member of the American College of Emergency Physicians board of directors, said at the House hearing.

Dr. Johnson cited the results of a national survey of emergency department directors conducted in the spring of 2004 and again in the summer of 2005. The ACEP survey found that access to specialists deteriorated over the year. In 2004, 67% of the departments reported having too few specialists on call, while by the next year the number had risen to 73%. More than half said the problem was due to physicians leaving the hospital to practice elsewhere.

The survey found that the top five specialists in short supply were orthopedists, plastic surgeons, neurosurgeons, otolaryngologists, and hand surgeons. Many of those who are still willing to take emergency calls have agreed to fewer on-call coverage hours.

In the past few years, physicians have found they have much more say over whether they accept emergency calls. Although taking emergency calls was once a requirement to maintain hospital privileges, physicians now have a greater ability to perform outpatient procedures in their offices, at ambulatory centers, or elsewhere besides the hospital, explained Dr. Robert Berenson at a recent forum held by the Center for Studying Health System Change.

“This is a big issue. Hospitals are working very hard to try to draw lines as to which physicians they are going to compensate for taking call or for caring for uninsured patients,” said Dr. Berenson, a senior fellow at the Urban Institute, Washington. “It has not yet become standard that all docs are getting paid by the hospital for ER call, but it is increasingly a cost of business.”

Given that choice, specialists may prefer not to take emergency calls, in part because of the impact it has on their lifestyles and in part because being on call all night can cut into their ability to keep regular office hours, said Dr. Fitz. “Unfortunately, it is a problem across the country that has been around for some time, at least for the past 5 years, and it has just gotten worse [over time],” he said.

Recently, the emergency department in Lubbock has found itself with a shortage of on-call neurologists. Within only a couple of months, the number of neurologists willing to take emergency calls dropped from half a dozen to none. “If somebody comes in with a stroke, there's nobody to call,” said Dr. Fitz.

Dr. William Schwab testified before a House committee about the on-call crisis. Sheri Mattes/Elsevier Global Medical News

It all started with the neurosurgeons. “I was in situations in El Paso where we had no neurosurgery, and we had to ship patients out to other cities,” recalled Dr. Juan Fitz, an emergency physician with Covenant Medical Group in Lubbock, Tex. “Now we're finding it here in Lubbock: With maxillofacial, we have no call; [with] neurology, we have no call.”

It's a problem hospitals and emergency departments across the country are facing more often.

Many are finding it difficult to find physicians willing to accept emergency calls, forcing emergency departments to find nearby cities where patients can see specialists. “There is a tremendous crisis developing on the surgical side to staff the in-house care that must take place after the emergency department,” Dr. C. William Schwab recently told the U.S. House Committee on Oversight and Government Reform.

Hospitals are already experiencing a shortage of physicians, specifically surgeons, willing to be on call for the emergency department. That is a problem that will become even more profound as the nation's 80 million baby boomers age, said Dr. Schwab, chief of the division of trauma and surgical critical care at the University of Pennsylvania Medical Center in Philadelphia.

Dr. Schwab cited the findings of an Institute of Medicine panel on which he served. That panel warned that the increasing difficulty of finding specialists to take emergency calls is one of the most troubling trends faced by U.S. emergency departments.

“Providing emergency call has become unattractive to many specialists in critical fields such as neurosurgery and orthopedics,” according to the institute's June 2006 report, “Hospital-Based Emergency Care: At the Breaking Point.”

There are several factors involved, such as the difficulty specialists face in trying to collect payment for on-call services, especially from uninsured patients. There are also liability concerns unique to the emergency department.

“Patients are often sicker, and emergency procedures are frequently performed, in the middle of the night or on weekends, when the hospital's staffing and capabilities are not at their peak. A national survey of neurosurgeons found that 36% had been sued by patients seen through the ED,” the report continues.

And the problem is getting worse, Dr. Ramon W. Johnson, an emergency physician at Mission Hospital, Mission Viejo, Calif., and a member of the American College of Emergency Physicians board of directors, said at the House hearing.

Dr. Johnson cited the results of a national survey of emergency department directors conducted in the spring of 2004 and again in the summer of 2005. The ACEP survey found that access to specialists deteriorated over the year. In 2004, 67% of the departments reported having too few specialists on call, while by the next year the number had risen to 73%. More than half said the problem was due to physicians leaving the hospital to practice elsewhere.

The survey found that the top five specialists in short supply were orthopedists, plastic surgeons, neurosurgeons, otolaryngologists, and hand surgeons. Many of those who are still willing to take emergency calls have agreed to fewer on-call coverage hours.

In the past few years, physicians have found they have much more say over whether they accept emergency calls. Although taking emergency calls was once a requirement to maintain hospital privileges, physicians now have a greater ability to perform outpatient procedures in their offices, at ambulatory centers, or elsewhere besides the hospital, explained Dr. Robert Berenson at a recent forum held by the Center for Studying Health System Change.

“This is a big issue. Hospitals are working very hard to try to draw lines as to which physicians they are going to compensate for taking call or for caring for uninsured patients,” said Dr. Berenson, a senior fellow at the Urban Institute, Washington. “It has not yet become standard that all docs are getting paid by the hospital for ER call, but it is increasingly a cost of business.”

Given that choice, specialists may prefer not to take emergency calls, in part because of the impact it has on their lifestyles and in part because being on call all night can cut into their ability to keep regular office hours, said Dr. Fitz. “Unfortunately, it is a problem across the country that has been around for some time, at least for the past 5 years, and it has just gotten worse [over time],” he said.

Recently, the emergency department in Lubbock has found itself with a shortage of on-call neurologists. Within only a couple of months, the number of neurologists willing to take emergency calls dropped from half a dozen to none. “If somebody comes in with a stroke, there's nobody to call,” said Dr. Fitz.

Dr. William Schwab testified before a House committee about the on-call crisis. Sheri Mattes/Elsevier Global Medical News

WASHINGTON — Hospitals are getting smart instead of angry about competition from physicians.

“A lot of care is moving from the hospital to the ambulatory sector, some of which is still under the auspices of the hospital, but increasingly into doctor's offices, into physician-owned ambulatory surgery centers, imaging centers, testing facilities,” Dr. Robert Berenson, a senior fellow at the Washington-based think tank the Urban Institute, said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

Physicians often set up these centers in part out of frustration with hospital bureaucracy, but also in response to economic pressures, said Adam Feinstein, a managing director at Lehman Brothers where he coordinates the health care facilities research team.

“Physician incomes have been going down. They have been looking to make up for the lost income, and they're competing more aggressively with the hospitals,” he said.

Over the past 10 years, the number of ambulatory surgery centers has doubled to approximately 5,000.

There are now almost as many surgery centers as there are hospitals in the country. By comparison, there are only about 100 specialty hospitals in the United States, despite all the political attention they get.

Jeff Schaub, who rates acute care hospitals for the international credit rating firm Fitch Ratings, pointed out that when hospital leadership does not focus on “what their physicians are doing and want to do, we have seen dozens of places have their outpatient surgery volumes cut in half because docs have gone out and put up buildings.”

To counteract such trends, “what we have seen over the last 5–8 years is tremendous interest on the part of hospitals and systems to do joint ventures with physicians, figuring that they would rather lose half the business than all of it,” he said.

Alternatively, some hospitals have tried to integrate physicians into more of the business decisions, hoping to create a more comfortable environment for them to work and minimizing their desire to go off on their own, Mr. Schaub said.

“It is really interesting how things come full circle,” said Mr. Feinstein. “Hospitals were letting doctors partner with them back in the mid-1990s, there was a lot of scrutiny over this so everyone stopped doing it, and now here we are again and everyone is doing it.”

There are similarities, but some important differences this time around, Mr. Schaub said.

“In the 1990s, everybody was buying practices just because everybody else was buying practices. Now what I see is a much more strategic focus, whether it's service-line related or to head off entrepreneurs splitting off or to focus on a particular geography, hospitals in a lot of markets are being more selective than they were 10 years ago,” he said.

WASHINGTON — Hospitals are getting smart instead of angry about competition from physicians.

“A lot of care is moving from the hospital to the ambulatory sector, some of which is still under the auspices of the hospital, but increasingly into doctor's offices, into physician-owned ambulatory surgery centers, imaging centers, testing facilities,” Dr. Robert Berenson, a senior fellow at the Washington-based think tank the Urban Institute, said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

Physicians often set up these centers in part out of frustration with hospital bureaucracy, but also in response to economic pressures, said Adam Feinstein, a managing director at Lehman Brothers where he coordinates the health care facilities research team.

“Physician incomes have been going down. They have been looking to make up for the lost income, and they're competing more aggressively with the hospitals,” he said.

Over the past 10 years, the number of ambulatory surgery centers has doubled to approximately 5,000.

There are now almost as many surgery centers as there are hospitals in the country. By comparison, there are only about 100 specialty hospitals in the United States, despite all the political attention they get.

Jeff Schaub, who rates acute care hospitals for the international credit rating firm Fitch Ratings, pointed out that when hospital leadership does not focus on “what their physicians are doing and want to do, we have seen dozens of places have their outpatient surgery volumes cut in half because docs have gone out and put up buildings.”

To counteract such trends, “what we have seen over the last 5–8 years is tremendous interest on the part of hospitals and systems to do joint ventures with physicians, figuring that they would rather lose half the business than all of it,” he said.

Alternatively, some hospitals have tried to integrate physicians into more of the business decisions, hoping to create a more comfortable environment for them to work and minimizing their desire to go off on their own, Mr. Schaub said.

“It is really interesting how things come full circle,” said Mr. Feinstein. “Hospitals were letting doctors partner with them back in the mid-1990s, there was a lot of scrutiny over this so everyone stopped doing it, and now here we are again and everyone is doing it.”

There are similarities, but some important differences this time around, Mr. Schaub said.

“In the 1990s, everybody was buying practices just because everybody else was buying practices. Now what I see is a much more strategic focus, whether it's service-line related or to head off entrepreneurs splitting off or to focus on a particular geography, hospitals in a lot of markets are being more selective than they were 10 years ago,” he said.

WASHINGTON — Hospitals are getting smart instead of angry about competition from physicians.

“A lot of care is moving from the hospital to the ambulatory sector, some of which is still under the auspices of the hospital, but increasingly into doctor's offices, into physician-owned ambulatory surgery centers, imaging centers, testing facilities,” Dr. Robert Berenson, a senior fellow at the Washington-based think tank the Urban Institute, said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

Physicians often set up these centers in part out of frustration with hospital bureaucracy, but also in response to economic pressures, said Adam Feinstein, a managing director at Lehman Brothers where he coordinates the health care facilities research team.

“Physician incomes have been going down. They have been looking to make up for the lost income, and they're competing more aggressively with the hospitals,” he said.

Over the past 10 years, the number of ambulatory surgery centers has doubled to approximately 5,000.

There are now almost as many surgery centers as there are hospitals in the country. By comparison, there are only about 100 specialty hospitals in the United States, despite all the political attention they get.

Jeff Schaub, who rates acute care hospitals for the international credit rating firm Fitch Ratings, pointed out that when hospital leadership does not focus on “what their physicians are doing and want to do, we have seen dozens of places have their outpatient surgery volumes cut in half because docs have gone out and put up buildings.”

To counteract such trends, “what we have seen over the last 5–8 years is tremendous interest on the part of hospitals and systems to do joint ventures with physicians, figuring that they would rather lose half the business than all of it,” he said.

Alternatively, some hospitals have tried to integrate physicians into more of the business decisions, hoping to create a more comfortable environment for them to work and minimizing their desire to go off on their own, Mr. Schaub said.

“It is really interesting how things come full circle,” said Mr. Feinstein. “Hospitals were letting doctors partner with them back in the mid-1990s, there was a lot of scrutiny over this so everyone stopped doing it, and now here we are again and everyone is doing it.”

There are similarities, but some important differences this time around, Mr. Schaub said.

“In the 1990s, everybody was buying practices just because everybody else was buying practices. Now what I see is a much more strategic focus, whether it's service-line related or to head off entrepreneurs splitting off or to focus on a particular geography, hospitals in a lot of markets are being more selective than they were 10 years ago,” he said.

WASHINGTON — If competition drives prices down, then why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary? This is the question on the minds of a growing number of people, said panelists at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

“In 2003, we passed the Medicare Modernization Act…. It was about how [we are] going to solve the baby boomer problem … [and] bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending on which type of plan they offer, managed care companies receive 10%–20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

But Christine Arnold, a managing director at Morgan Stanley, where she covers the managed care industry, said it may be too early to pull the plug on using private insurers to control costs. “The companies I speak to say they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2–4 years.”

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade body, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, the number of people in the plans grew by less than a third last year.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co. “We're incentivizing them with the benefit structure, but we're not giving them the tools to make better decisions. It's like giving somebody $100 for dinner, then not putting the prices on the menu.”

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums were growing by double digits, resulting in a political backlash in the form of Hillary Clinton's universal care plan further popularizing health maintenance organizations, he said. Costs in the mid-1990s to slipped to the low single digits, then the economy picked up again and so did medical cost trends. Now, the discussion is back to focusing on more government intervention.

WASHINGTON — If competition drives prices down, then why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary? This is the question on the minds of a growing number of people, said panelists at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

“In 2003, we passed the Medicare Modernization Act…. It was about how [we are] going to solve the baby boomer problem … [and] bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending on which type of plan they offer, managed care companies receive 10%–20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

But Christine Arnold, a managing director at Morgan Stanley, where she covers the managed care industry, said it may be too early to pull the plug on using private insurers to control costs. “The companies I speak to say they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2–4 years.”

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade body, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, the number of people in the plans grew by less than a third last year.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co. “We're incentivizing them with the benefit structure, but we're not giving them the tools to make better decisions. It's like giving somebody $100 for dinner, then not putting the prices on the menu.”

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums were growing by double digits, resulting in a political backlash in the form of Hillary Clinton's universal care plan further popularizing health maintenance organizations, he said. Costs in the mid-1990s to slipped to the low single digits, then the economy picked up again and so did medical cost trends. Now, the discussion is back to focusing on more government intervention.

WASHINGTON — If competition drives prices down, then why does the government pay private insurers more per patient than the Medicare program spends on the average beneficiary? This is the question on the minds of a growing number of people, said panelists at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

“In 2003, we passed the Medicare Modernization Act…. It was about how [we are] going to solve the baby boomer problem … [and] bring Medicare costs under control,” said Robert Laszewski, president of a health policy and marketplace consulting firm in Alexandria, Va.

At the time, the Republican-led Congress decided the best way to bring costs under control was to encourage more Medicare beneficiaries to join private plans. So, depending on which type of plan they offer, managed care companies receive 10%–20% above what Medicare spends on the average beneficiary in the government-run, fee-for-service system.

It's 4 years later, Democrats are in power in Congress, and some are beginning to wonder what they are buying with the millions of extra dollars flowing to private insurers. Physician thought leaders, including those on the government's Medicare Physician Advisory Commission (MedPAC), have called for Congress to redirect those funds toward other priorities, such as fixing the sustainable growth rate formula.

But Christine Arnold, a managing director at Morgan Stanley, where she covers the managed care industry, said it may be too early to pull the plug on using private insurers to control costs. “The companies I speak to say they can reduce medical costs 10% for a managed product versus an unmanaged product, but it takes 2–4 years.”

It is not just in the Medicare program that the cost-saving techniques of managed care companies are being questioned.

Health savings accounts and other consumer-driven approaches are beginning to lose favor with the public. The number of U.S. workers who enrolled in consumer-directed plans grew by a meager 300,000 between 2005 and 2006, according to the Kaiser Family Foundation's annual survey of employer benefits.

A survey by America's Health Insurance Plans, a trade body, seems to confirm that trend. After a couple of years in which enrollment in health savings account-affiliated, high-deductible plans doubled and then tripled, the number of people in the plans grew by less than a third last year.

Consumer-directed plans may be a good idea, but they're based on a false assumption that patients have the resources to make the right choices, said Douglas Simpson, the senior managed care analyst at Merrill Lynch & Co. “We're incentivizing them with the benefit structure, but we're not giving them the tools to make better decisions. It's like giving somebody $100 for dinner, then not putting the prices on the menu.”

The cyclical nature of health care reform also is becoming more apparent, said Joshua Raskin, who covers the managed care industry as a senior vice president at Lehman Brothers Inc.

During the late 1980s and early 1990s, health care premiums were growing by double digits, resulting in a political backlash in the form of Hillary Clinton's universal care plan further popularizing health maintenance organizations, he said. Costs in the mid-1990s to slipped to the low single digits, then the economy picked up again and so did medical cost trends. Now, the discussion is back to focusing on more government intervention.

WASHINGTON — Hospitals are getting smart instead of angry about competition from physicians.

“A lot of care is moving from the hospital to the ambulatory sector, some of which is still under the auspices of the hospital, but increasingly into doctor's offices, into physician-owned ambulatory surgery centers, imaging centers, testing facilities,” Dr. Robert Berenson, a senior fellow at the Washington-based think tank the Urban Institute, said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

Physicians often set up these centers in part out of frustration with hospital bureaucracy, but also in response to economic pressures, said Adam Feinstein, a managing director at Lehman Brothers where he coordinates the health care facilities research team.

“Physician incomes have been going down. They have been looking to make up for the lost income, and they're competing more aggressively with the hospitals,” he said.

Over the past 10 years, the number of ambulatory surgery centers has doubled to approximately 5,000. There are now almost as many surgery centers as there are hospitals in the country. By comparison, there are only about 100 specialty hospitals in the United States, despite all the political attention they get.

Jeff Schaub, who rates acute care hospitals for the international credit rating firm Fitch Ratings, noted that when hospital leadership does not focus on “what their physicians are doing and want to do, we have seen dozens of places have their outpatient surgery volumes cut in half because docs have gone out and put up buildings.”

To counteract such trends, “what we have seen over the last 5–8 years is tremendous interest on the part of hospitals and systems to do joint ventures with physicians, figuring that they would rather lose half the business than all of it,” he said.

Alternatively, some hospitals have tried to integrate physicians into more of the business decisions, hoping to create a more comfortable environment for them to work, Mr. Schaub said.

“It is really interesting how things come full circle,” said Mr. Feinstein. “Hospitals were letting doctors partner with them back in the mid-1990s, there was a lot of scrutiny over this so everyone stopped doing it, and now here we are again and everyone is doing it.”

There are similarities, but some important differences this time around, Mr. Schaub said.

“In the 1990s, everybody was buying practices just because everybody else was buying practices. Now what I see is a much more strategic focus, whether it's service line-related or to head off entrepreneurs splitting off or to focus on a particular geography,” he said.

WASHINGTON — Hospitals are getting smart instead of angry about competition from physicians.

“A lot of care is moving from the hospital to the ambulatory sector, some of which is still under the auspices of the hospital, but increasingly into doctor's offices, into physician-owned ambulatory surgery centers, imaging centers, testing facilities,” Dr. Robert Berenson, a senior fellow at the Washington-based think tank the Urban Institute, said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

Physicians often set up these centers in part out of frustration with hospital bureaucracy, but also in response to economic pressures, said Adam Feinstein, a managing director at Lehman Brothers where he coordinates the health care facilities research team.

“Physician incomes have been going down. They have been looking to make up for the lost income, and they're competing more aggressively with the hospitals,” he said.

Over the past 10 years, the number of ambulatory surgery centers has doubled to approximately 5,000. There are now almost as many surgery centers as there are hospitals in the country. By comparison, there are only about 100 specialty hospitals in the United States, despite all the political attention they get.

Jeff Schaub, who rates acute care hospitals for the international credit rating firm Fitch Ratings, noted that when hospital leadership does not focus on “what their physicians are doing and want to do, we have seen dozens of places have their outpatient surgery volumes cut in half because docs have gone out and put up buildings.”

To counteract such trends, “what we have seen over the last 5–8 years is tremendous interest on the part of hospitals and systems to do joint ventures with physicians, figuring that they would rather lose half the business than all of it,” he said.

Alternatively, some hospitals have tried to integrate physicians into more of the business decisions, hoping to create a more comfortable environment for them to work, Mr. Schaub said.

“It is really interesting how things come full circle,” said Mr. Feinstein. “Hospitals were letting doctors partner with them back in the mid-1990s, there was a lot of scrutiny over this so everyone stopped doing it, and now here we are again and everyone is doing it.”

There are similarities, but some important differences this time around, Mr. Schaub said.

“In the 1990s, everybody was buying practices just because everybody else was buying practices. Now what I see is a much more strategic focus, whether it's service line-related or to head off entrepreneurs splitting off or to focus on a particular geography,” he said.

WASHINGTON — Hospitals are getting smart instead of angry about competition from physicians.

“A lot of care is moving from the hospital to the ambulatory sector, some of which is still under the auspices of the hospital, but increasingly into doctor's offices, into physician-owned ambulatory surgery centers, imaging centers, testing facilities,” Dr. Robert Berenson, a senior fellow at the Washington-based think tank the Urban Institute, said at a press briefing on health care costs sponsored by the Center for Studying Health System Change.

Physicians often set up these centers in part out of frustration with hospital bureaucracy, but also in response to economic pressures, said Adam Feinstein, a managing director at Lehman Brothers where he coordinates the health care facilities research team.

“Physician incomes have been going down. They have been looking to make up for the lost income, and they're competing more aggressively with the hospitals,” he said.

Over the past 10 years, the number of ambulatory surgery centers has doubled to approximately 5,000. There are now almost as many surgery centers as there are hospitals in the country. By comparison, there are only about 100 specialty hospitals in the United States, despite all the political attention they get.

Jeff Schaub, who rates acute care hospitals for the international credit rating firm Fitch Ratings, noted that when hospital leadership does not focus on “what their physicians are doing and want to do, we have seen dozens of places have their outpatient surgery volumes cut in half because docs have gone out and put up buildings.”

To counteract such trends, “what we have seen over the last 5–8 years is tremendous interest on the part of hospitals and systems to do joint ventures with physicians, figuring that they would rather lose half the business than all of it,” he said.

Alternatively, some hospitals have tried to integrate physicians into more of the business decisions, hoping to create a more comfortable environment for them to work, Mr. Schaub said.

“It is really interesting how things come full circle,” said Mr. Feinstein. “Hospitals were letting doctors partner with them back in the mid-1990s, there was a lot of scrutiny over this so everyone stopped doing it, and now here we are again and everyone is doing it.”

There are similarities, but some important differences this time around, Mr. Schaub said.

“In the 1990s, everybody was buying practices just because everybody else was buying practices. Now what I see is a much more strategic focus, whether it's service line-related or to head off entrepreneurs splitting off or to focus on a particular geography,” he said.