The Data Are Wrong. Our Patients Are Sicker!!!

People in health care don’t like it when numbers emerge that are uncomfortable.  Take these, issued today by the Massachusetts Health Policy Commission in its latest report on the drivers of the high cost of care in our state.

Variation, particularly when not correlated to quality of outcome, is particularly troublesome for some incumbents.  Academic medical centers often have their answer, but as the HPC explains, it doesn’t hold water:

One oft-cited theory for the cause of this variation is that certain types of hospitals, such as those that teach physician residents and fellows, must incur additional expenses to support their mission. However, the difference in median expenses per discharge between teaching hospitals and all hospitals ($1,030) was less than the difference between individual teaching hospitals ($3,107 between the 75th percentile and 25th percentile teaching hospitals). Moreover, there were a number of teaching hospitals that incurred fewer expenses per discharge than the statewide all-hospital median of approximately $9,000 per discharge.

So perhaps the high cost ones will now revert to the usual squawking: “This isn’t fair. The data are wrong.  Our patients are sicker.”

Except here, the data are the best that could be available–all the claims for all the hospitals and all the payers in the state–even adjusted for wages.  And the acuity of patients across the spectrum of academic medical centers does not vary widely–but, just in case, the numbers are case-mix adjusted.

This report is a good step forward.  Now, if the HPC were to just put names under each column, instead of leaving them unmarked, it could take a major step forward in two of its own policy recommendations:

-Fostering a value-based market in which payers and providers openly compete to provide services and in which consumers and employers have the appropriate information and incentives to make high-value choices for their care and coverage options; and

-Enhancing transparency and data availability necessary for providers, payers, purchasers, and policymakers to successfully implement reforms and evaluate performance over time.

Paul Levy is the former President and CEO of Beth Israel Deaconess Medical Center in Boston. Previously he blogged about his experiences in an online journal, Running a Hospital. He now writes as an advocate for patient-centered care, eliminating preventable harm, transparency of clinical outcomes, and front-line driven process improvement at Not Running a Hospital.

14 replies »

  1. Nice piece, Paul. We couldn’t agree with you more: it’s time to name names. What is it with all this non-transparent transparency?

    Sunlight is the best disinfectant. We’re proud and happy to be fighting for transparency along with powerful, knowledgeable experts like you.

  2. The problem with this Massachusetts Health Policy Commission report appears to be much more than that the “data is wrong.” After a couple of days of trying, I cannot find any back up at all to the Massachusetts HPC report’s claims about waste. It is the claim of 30% to 40% waste that is getting all the headlines but the report only identifies a few percent and leaves the rest to the imagination. I increasingly suspect the data does not exist.

  3. “Bobby is right — where you have opaque practices, you find the highest margin.”

    Thanks. That thought didn’t originate with me. It’s axiomatic to the capitalist market. “Market Clearing Price” and all that. Transparency is inversely correlated with margin.

    Opacity = Margin, “Edge” = margin

    More nuanced, (Opacity + Barriers to Entry) = Margin (for the entrenched)

    See. e.g.,


    “Every misspent dollar in the health care system is part of someone’s income” – Brent James, MD, M.Stat

  4. Value = Outcomes/Cost

    I think it is rather short-sighted and highly self-serving ( a condition that prevails throughout the numerous stakeholders in healthcare ) to presume that we should not have a system anchored in total transparency so we might actually measure the value we receive for services from EVERYONE. It is particularly true in hospitals where the “consumer” is not in a position to be a good consumer because they are in fact, on their back on a gurney.

    Someone has top play sentinel and judge the value so a system of competition might drive best practices and over time, innovation to improve productivity and lower cost.

    Bobby is right — where you have opaque practices, you find the highest margin. Money is made in the shadows and muddy fringes of healthcare. Completely agree with Vic that tomorrow’s hospital will be reduced to high end acute care and we will develop the equivalent of step therapies to catch, filter and redirect those that might end up at the hospital for services that could be rendered elsewhere. I predict the prevalence of high deductible plans ushered in in 2018 as employers turn to defined contribution approaches as a result of losing a percentage of their deduction for healthcare to the Cadillac tax. This will alter the lens of the consumer. No more “co-pay island”. Once the fact that a simple maternity delivery is not just seen but experienced as three to five times more expensive at Mass General than a MA based community based hospital, we may witness a sea change but only if the consumer economics penalize those who continue to patronize outlier plans.

    I don’t question for a minute that certain institutions drive better outcomes. However, what do we mean by outcome and shouldn’t the duration of care and intensity of services be factored into this equation? Quality is now being quantified with these additional factors and its pissing off the large, high end systems who overcharge in the name of quality. In the end, they must show that paying three times more for a unit of services can reduce the episode of care cost by a comparable amount ( pay more but get better and faster results with fewer complications and readmissions). if this were a restaurant, and the patron has a price fixe cap on their bill and never understood the cost of what he was ordering, there’s a high probability that higher prices would be charged and overconsumption would occur. Then, you’d be arguing my patrons are hungrier. One thing is for sure, they’re going to be fatter. And someone is going to be overpaying for the same sandwich they could get down the road at the diner with the smaller sign. Zagats where are you?

  5. Rob: I like the “disease transparency” rubric. One thing to look forward to is that hospitals are headed for obsolecence, but like wellness vendors, they just don’t know it yet.

    Within a decade, we will have a hospital model that is the no-bed hospital (except for the very sickest of the sick) and then all these great hospital administrators who’ve made careers off obfuscation and lying will finally, blessedly (for all us) be out of jobs.

  6. It does seem to be a sad comment on the overall state of affairs when hospitals want/need to have sicker patients. Even if the patients are not sicker in reality, if they can be sicker “on paper” they are rewarded. Doesn’t the adage “you get what you pay for” apply here? We reward coding for sicker patients and we get things called “diseases” or treatments that are not appropriate (like the stenting of a 40% lesion).

    I know I am a bit off point, but it seems that “price transparency” is the top layer. The more important thing is to get “disease transparency.” If we treat something that is there on paper but does not give real value in treating (which happens all the time in hospitals), then the price may look right, but the reality is that we’ve been sold something we didn’t need.

  7. “Transparency and pricing rationality are the two worst nightmares of hospital and health system administrators from coast to coast.”

    Opacity = Margin.

    Efficient Markets Hypothesis 101.

  8. It’s unfortunate that the healthcare regulators in Massachusetts seem to be captives of the hospitals and other medical providers. They should identify the hospitals by name and their case mix adjusted costs. They should outlaw insistence on all or nothing contracting with insurers so insurers can contract with some hospitals within a system but not others. Insurers should also be able to contract for sophisticated procedures like organ transplants and complex surgeries within a hospital but not for routine care or for inpatient procedures but not outpatient procedures. We, of course, also need price and quality transparency so both patients and referring primary care doctors can more easily identify the most cost-effective high quality providers in real time and direct their business to them.

    In the meantime, hospitals like those in the Partners Healthcare System will exploit their market power to extract higher than market reimbursement rates from insurers, earn excessive profits and then spend that money on expanding their empire and increasing their cost base. So it goes.

    Meanwhile, it’s also important to note that Boston has 15 teaching hospitals in a city of only 650,000 people. Far more routine care gets performed at those facilities rather than perfectly fine community hospitals as compared to other cities and states which also increases healthcare costs. No wonder healthcare spending per capita is higher in Massachusetts than anywhere else in the country even though almost all of their hospitals and the largest insurers are non-profit entities.

  9. Transparency and pricing rationality are the two worst nightmares of hospital and health system administrators from coast to coast. Yet, they are the two most important tools for exposing our bizarre, bloated, entitled healthcare system for what it is.

    This kind of disclosure is a very tiny baby step. Maryland has had a functional all payer system for years, and their model actually may have some value. You can look up hospitals by name to see their fiscal performance annually (including their uncompensated care provided) and every payer at an institution pays the same price for a particular service.

    It’s not perfect, and plenty of mental midgets still staff MD hospitals, but it at least helps to create if not a level playing field then one with rolling hills instead mountains of b.s. intended to obscure the fact that the hospital industry is run by a gang of usurious philistines.

  10. “So perhaps the high cost ones will now revert to the usual squawking: “This isn’t fair. The data are wrong. Our patients are sicker.”

    Predict your opponent’s argument and you diminish its impact! Ahh that timeless arguing technique!

    On a serious, and plausibly educational note (educational for me), how good are statistical techniques of risk adjusting?

    I ask also because on another thread on Medicaid’s patients outcomes versus uninsured many stated that such comparisons cannot be made because risk-adjusted apples are still apples and can’t be compared to risk-adjusted oranges which are still oranges.

    COI: no skin in this game.

  11. Wait a sec, you mean “Our patients are sicker” isn’t part of the Hippocratic Oath?

    One time — just once in 30 years — I did hear a hospital CEO (Lake Forest Hospital in Illinois) tell me while giving me a hospital tour that his patients were nowhere near as sick as other people’s patients, and just after he said this we turned the corner onto a different unit, where we almost got run over by a patient in his hospital gown dribbling a basketball down the corridor.

    Massachusetts has some of the country’s best data and it sounds like they put it to good use in this analysis, albeit blinded. Call me a conspiracy theorist but I suspect differences in cost are due to Partners’ antitrust-worthy market share.

  12. You might be interested in how Kaiser today has sold their quantitative research subsidiary to a private equity firm as the discussion is about models and their use in healthcare and I think folks should understand the growing number of Quants being used in healthcare and the error factors that are in every model before we jump a cliff on analytics and “sniff some data”..you start looking at this with more conversations with quants and mathematicians…sometimes are we expecting too much from the data, especially when jumping out from linear to nonlinear?

    It is interesting to see a non profit unload such a subsidiary over to a PE as there’s where money gets made. Always good to sniff the data and Charlie Siefe told me on Twitter the other day, his next book will include a chapter about the journobots and their arrival and what we get fed when journalists interview a data base, and you have have probably read where Forbes is trying to sell their media division which includes a a jounobot they have used for a couple of years now.