GUEST COLUMN | Angelo DeRosalia
Patients are feeling the strain of rising healthcare costs. Why? The same medical service can carry vastly different price tags depending on where it is performed.
For years, Medicare and many private insurers have paid significantly higher rates for care delivered in hospital-owned facilities than for identical services provided in independent physician practices. Addressing this imbalance would represent a meaningful step toward making healthcare more affordable.
There is no clinical justification for this discrepancy. But there are financial consequences. And they are reshaping the healthcare landscape.
Hospitals benefit from these higher payments. That advantage has empowered them to acquire independent physician practices in increasing numbers.
Many doctors, facing mounting financial pressure, are finding it difficult to remain independent. Over the past two decades, Medicare payments to physicians have failed to keep pace with rising practice costs. After adjusting for inflation, physician reimbursement has declined by roughly one-third since the early 2000s, even as expenses have steadily climbed.
This imbalance makes it harder for independent practices to stay afloat. When hospitals acquire these practices, they often convert them into hospital outpatient departments and begin billing at higher rates for the same services.
The result is a gradual shift toward a more consolidated system with fewer independent providers. As competition declines, large health systems gain greater leverage over pricing, and patients ultimately pay more.
Federal data reflect this trend. In 2012, fewer than one-third of physicians were affiliated with hospitals. By 2024, the share had climbed to nearly half, according to the Government Accountability Office.
Policymakers have a clear opportunity to address this problem by ensuring that care is provided in the most appropriate and cost-effective setting.
This approach -– often referred to as siteof- care optimization – simply means that patients should receive treatment in locations that can safely deliver high-quality care at the lowest cost.
In practice, that means paying the same rate for the same service regardless of where it is performed. When payment differences across sites disappear, physicians and patients can make decisions based on clinical needs rather than financial distortions.
The potential impact is significant. Analysts estimate that aligning payments across care settings could reduce Medicare spending by more than $200 billion over the next decade. Patients would also benefit from lower out-of-pocket costs. Patients’ out-of-pocket costs could decline by more than $150 billion.
Reforms that promote site-of-care optimization would help level the playing field for independent physicians, preserve patient choice, and reduce unnecessary spending.
At a time when affordability is a growing concern nationwide, this is a practical step policymakers should not overlook.
DeRosalia is a board-certified urologist.
