Quality Program Fee Increases and IHF Corporate Concentration

This year Independent Health Facilities (IHFs) in Ontario will start paying an annual administrative fee to cover the costs of their quality control program plus a new fee for the direct costs of each quality assessment. Prior to June 2012 the Ministry of Health had paid the College of Physicians and Surgeons out of Ministry funds to run the quality program.

The administrative fee per license is set at 860 dollars for the first year. The amount per license is not large but it is continuous.  Many IHFs also have more than one license, for instance, they may be licensed for diagnostic imaging and pulmonary function testing, so their yearly increase will be thousands of dollars. The administrative costs, plus the new fees for each assessment, are on top of increasing costs for electronic medical records, more reporting, more in-depth accreditation and quality control measures, newer technology and a host of costs.

Moving the quality control costs off the government books is a bit of a shell game. IHFs are primarily funded by OHIP payments, or in other words, public revenues. Having IHF operators directly pay for quality programs means they are going to request more money from OHIP. Either way it comes from the public purse.

The government is hoping that the IHF operators will simply absorb the costs.  Under current rules the extra charges cannot be passed onto patients because of the ban on extra billing.  Operators could ask for increased fees-for-services but in the short-term this seems unlikely given the recent fee cuts imposed by the government. Larger corporations with reserves and the ability to reduce costs through multi-site efficiencies will ride out the increases and recoup losses in future fee negotiations. Many smaller operators will simply feel the most pain.

An article in the October 2012 edition of Health Affairs pointed out an increased quality cost on the clinical side.  The authors make the argument that under the fee-for-service payment structure for surgeries in the United States improving quality outcomes can lead to decreased revenues.  Fewer complications from better quality control lead to fewer billing opportunities per surgery plus extra costs in prevention.  The logic underlying this research finding could easily be applied to other fee-for-service health environments, including most IHFs in Ontario.

In case I sound like a defender of millionaire IHF operators that is certainly not my intention. Nor do I think that quality assessment programs are not needed. They obviously are: though it would probably be better if the College did not run them with its conflict of interest – doctors run the College and are responsible for quality in the clinics – and the College’s history of questionable quality practices, at least in the laboratory sector where they are also in charge of quality.

The point is that the long-term provision of for-profit health services by small physician run facilities is a non-starter. As the costs increase to ensure quality it is more challenging for smaller operators.  Smaller operators also pay a disproportionately larger share of their expenses on the process of licensing and maintaining a separate administration to oversee the private market.  It is telling that in the fact sheet outlining the increased fees the last point discusses how IHF operators can give up their licenses. Licenses usually don’t disappear; they are taken over by other operators, more often than not IHF chains which are, in turn, often part of a larger health care conglomerates.

Small physician-run laboratories have long since moved into corporate giants, individual doctors’ practices are quickly becoming an historical artifact and IHF s are  amalgamating into fewer and larger corporations.  The dynamics of quality control and regulation among for-profit providers lead to long-term, non-competitive, corporate domination of these sectors.

The Health Affairs article can be found at: http://content.healthaffairs.org/content/early/2012/10/12/hlthaff.2011.0605

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Explore posts in the same categories: Funding-Cost For-profit Delivery, Independent Health Facilities, Quality, United States

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