Economics

Bigger Hospitals Mean Bigger Hospitals with Higher Prices. Not Better Care.

Hospitals are busily merging with other hospitals and buying up groups of doctors. They claim that size brings efficiency and the opportunity to deliver more “value-based” care — and fewer unnecessary services.

They argue that they have to get bigger to cut waste. What’s the evidence that bigger hospitals offer better value? Not a lot.

If you think of value as some combination of needed services delivered for the right price, large hospitals are no better than small hospitals on both counts.

The Dartmouth Atlas of Health Care and other sources have shown time and again that some of the biggest and best-known U.S. hospitals are no less guilty of subjecting patients to useless tests and marginal treatments.

Larger hospitals are also very good at raising prices. In 2010, an analysis for the Massachusetts attorney general found no correlation between price and quality of care.

study published recently in Health Affairs offered similar results for the rest of the country: On average, higher-priced hospitals are bigger, but offer no better quality of care.


The disconnect between price and value has many causes, but the flurry of mergers and acquisitions in the hospital industry is making it worse. Hospitals command higher prices when they corner market share. They gain even more leverage when they gobble up large physician practices.

Courts are beginning to wake up to these facts. Last year, St. Luke’s Health System Ltd., a multihospital chain based in Boise, Idaho, acquired the state’s largest independent multispecialty physician practice group, Saltzer Medical Group, giving the hospital 80 percent of adult primary care physicians in the relevant market.

On Jan. 24, the U.S. District Court in Idaho ruled that the acquisition violated federal antitrust law, and reversed it.

But the courts aren’t moving fast enough. In many communities, deals between hospitals and physician practices, particularly procedure-oriented specialists, amount to a pact to fleece the system.

Hospitals often command higher rates for procedures and tests than do specialists in their private practices. With specialists on a salary, a hospital can charge its higher rates, and the parties split the increased revenue. Everybody wins, except patients and payers.

The phenomenon of buying doctors’ practices is changing health care in ways that go deeper than raising prices. Power is shifting from physicians and other caregivers, whose duty (though they don’t always fulfill it) is to the needs of patients, toward administrators and corporations, whose loyalty lies with the institution or shareholders.

Physicians have long held the “power of the pen.” Their decisions about whether to admit patients, which diagnostic tests to perform and which treatments to pursue ultimately determine if a patient gets the right care, and how much that patient’s care costs. Few nonclinicians understand just how much medical decision-making is discretionary — from the interpretation of a borderline test to the decision to admit to the hospital.

As large hospitals gain financial control of physician practices, the medical profession becomes another cog in the corporate machine, and many physicians have told us they feel they must skew their medical judgment to keep their jobs.

A recent case in point: At Health Management Associates Inc., a chain of hospitals based in Florida, administrators rewarded and punished emergency physicians based on whether they met targets for admitting — regardless of what the patient needed.

If we want better care and less waste, the balance of control over what happens to patients should be in the hands of physicians, not hospitals.

We’re not calling for a return to the days of Marcus Welby, M.D., when doctors worked as solo practitioners, accountable to nobody and able to drive up volume (and their incomes) in a fee-for-service world. But given the proper incentives, physician groups could become one of the best levers for driving change toward a more humane and affordable health-care system.

Some of the highest-performing medical systems in the country are multispecialty group practices whose group culture drove that of their hospital facilities, not the other way around. Most of these high-performers have robust primary-care services at their core. The rest of the country needs primary care teams, including nurses and other midlevel providers, that work together and take responsibility for global budgets and can provide better care than solo doctors, or most specialist-controlled practices.

So, how can we get there? Some have suggested converting hospitals with dominant market positions into common carriers. They would be regulated much like utilities, with transparent pricing and community oversight. Such an approach would be a radical shift in how we think about the health-care market and would require careful regional planning.

The most efficient way to achieve this goal would be through a single-payer system.

But regulating hospitals as common carriers wouldn’t address the fundamental question of who controls the care patients get. We should also tilt the playing field toward primary care. Since our health-care mandarins have committed us to a national experiment with Accountable Care Organizations, how about serious fiscal support for such organizations controlled by primary-care physicians?

One way to do that would be for Medicare to expand its “Advance Payment Model,” a program that provides capital to small or rural physician groups. More experiments with incentives for models like this could accelerate the formation of multispecialty Accountable Care Organizations driven by primary care.

Until we give primary-care groups control over what happens to patients, large hospital systems and specialist-dominated groups — those with greatest access to capital — will be able to keep raising prices, even as they issue press releases about their plans to control costs and improve care.

Shannon Brownlee is a senior vice president at the Lown Institute and a senior fellow at the New America Foundation.

Vikas Saini, MD is president of the Lown Institute, an associate physician at Brigham and Women’s Hospital, and a member of the departments of medicine and nutrition at Harvard University.

This post originally appeared in BloombergView.

Livongo’s Post Ad Banner 728*90
Spread the love

52 replies »

  1. I hate to call people out on this discussion, but how did the topic get hijacked to a discussion of medical malpractice and defensive medicine?

  2. Well said, Legacy.
    “Discussed with patient, patient refuses test.” I’m not even sure that will cover you any more.

  3. An old adage was “Don’t go out of your way to step in it”. I have seen this evolve into make so much money that you can decide to avoid it (paraphrase of Warren Buffet’s definition of success is working and associating only with people he wants to). I suggest this make as much money as fast as you can translates into making short sighted decisions, quarterly numbers, and highest margins before the market or especially the government decides you are making too much money. Then, when the ignorant bemoan your greed, tell them they are right and the tax code should be changed so that you pay as much in taxes as your secretary.

  4. We will never convince people like Peter1 and his ilk. The majority of legislators in Congress and in most State Legislators are lawyers. Their economic interest in clearly in favor of continuing malpractice and other tort cases as usual. Obama and the Democrats are deeply in the pocket of the Trial Lawyers who were the second largest contributor to the Democratic Party in the 2008 election.

    Malpractice/Tort Reform just ain’t gonna happen with a Democratic President and/or majority in either house. There is too much money being made.

    And the good thing for me ( but not for the Country as a whole) is that the fear of malpractice drives a huge amount (up to 50%) of CYA testing, etc. And, at age 60, with a decent pension partially based on CYA testing, I don’t really give a rat’s patootie anymore.

    So Peter1, if you ever think your doctor is ordering an unecessary test – mostly to keep you quiet/happy and cover his rear end – just challenge him on it. If you are persistent, he can just write in the chart: “Discussed with patient, patient refuses test.” His problem is largely solved. Yours may not be.

  5. From your wikipedia link:

    “Most (73%) settled malpractice claims involve medical error. A 2006 study concluded that claims without evidence of error “are not uncommon, but most [72%] are denied compensation. The vast majority of expenditures [54%] go toward litigation over errors and payment of them. The overhead costs of malpractice litigation are exorbitant.” Physicians examined the records of 1452 closed malpractice claims. Ninety-seven percent were associated with injury; of them, 73% got compensation. Three percent of the claims were not associated with injuries; of them, 16% got compensation. 63% were associated with errors; of them, 73% got compensation (average $521,560). Thirty-seven percent were not associated with errors; of them, 28% got compensation (average $313,205). Claims not associated with errors accounted for 13 to 16% percent of the total costs. For every dollar spent on compensation, 54 cents went to administrative expenses (including lawyers, experts, and courts). Claims involving errors accounted for 78 percent of administrative costs.[10][11]”

    You think that uncompensated errors won’t cost us anything – that would be false, they certainly cost patients.

    “I do advocate for financial consequences when the actions are deemed to have no merit.”

    That would be called sanctions which the court can award.

    http://en.wikipedia.org/wiki/Frivolous_litigation

  6. Mr. Peter1. Project much? The points you apparently missed are:
    1) The estimates that the defensive medicine costs were 2 1/2 to 4 1/2 times the awards, and

    2) Of the 60% of the cases that were dropped, withdrawn, or dismissed, it still cost an average of $22,000 each to defend (in 2008).

    “The figures were taken from a March 2003 study by the U.S. Department of Health and Human Services that estimated the direct cost of medical malpractice was 2 percent of the nation’s health-care spending and said defensive medical practices accounted for 5 percent to 9 percent of the overall expense.”

    Please note I have not indicated any hatred for lawyers nor an interest in denying “patients” the ability to bringing lawsuits. I do advocate for financial consequences when the actions are deemed to have no merit. I also advocate for the questionable calls to lean toward the productive as opposed to the unproductive takers.

  7. My wife attended a Malpractice Seminar for doctors. One of the attorneys giving the course gave this advice:
    “The best way for doctors not to get sued-don’t treat patients”.

  8. Authur, you’re not making a case for denying patients the ability or right to sue. Even your link does not paint your, “hate lawyers” position.

    “plaintiffs prevailed in 21% of verdicts, while settlement-based resolutions favored the plaintiff in 61% of cases (data from NEJM study discussed above).”

    You can’t say the settlements were lawyer scams, that’s why we have courts.

    “For inpatient incidents, surgery errors accounted for about 34% of medical malpractice claims, checking in as the most common basis for a claim.”

    Tell me which errors were not legitimate? 34% is pretty high for an error rate.

    “According to a 2009 Congressional Budget Office Report, the total direct costs to healthcare providers resulting from medical malpractice liability (including malpractice insurance, settlements, awards, and administrative costs not covered by insurance) was $35 billion in 2009. This figure represented 2% of the total healthcare expenditures across the U.S. for that same year.”

    Yes, just 2%

    Interesting page you get your info from – as last line says: “Contact a Lawyer”

  9. I’d say about 93%. http://www.medicalmalpractice.com/national-medical-malpractice-facts.cfm

    Physician advocacy groups say 60% of liability claims against doctors are dropped, withdrawn, or dismissed without payment. However even those cases have a price, costing an average of more than $22,000 to defend in 2008 ($18,000 in 2007). Physicians are found not negligent in over 90% of cases that go to trial – yet more than $110,000 (2008 estimate, $100,000 in 2007) per case is spent defending those claims.[25]
    Malpractice has both direct and indirect costs, including “defensive medicine.” According to the American Medical Association, defensive medicine increases health systems costs by between $84 and $151 billion each year. Studies place the direct and indirect costs of malpractice between 5% and 10% of total U.S. medical costs, as described below:[27]
    “About 10 percent of the cost of medical services is linked to malpractice lawsuits and more intensive diagnostic testing due to defensive medicine, according to a January 2006 report prepared by PricewaterhouseCoopers LLP for the insurers’ group America’s Health Insurance Plans. The figures were taken from a March 2003 study by the U.S. Department of Health and Human Services that estimated the direct cost of medical malpractice was 2 percent of the nation’s health-care spending and said defensive medical practices accounted for 5 percent to 9 percent of the overall expense.”

    http://en.wikipedia.org/wiki/Medical_malpractice

  10. Barry, lots of anecdotal cases out there for both sides. $15k settlements do not drive health costs – usually those against litigants quote million + settlements as “norm” when they’re rare.

    I wonder what the doc’s malpractice premium was?

    I’m OK with judge trial for small cases, such as small claims.

  11. Peter1,

    A few years ago, a cardiologist told me about a case he was involved in. A patient had some issues that needed close monitoring. Everything was done according to guidelines and the standard of care was considered to be excellent. Yet the patient had a bad outcome, the family wanted to sue and was able to find a lawyer that would take the case on a contingency fee basis.

    The doctor wanted to fight the claim but the malpractice insurer said that it had a chance to settle the case for $15,000 and wanted to do so. If it went to trial, it would in a New York City jurisdiction known to be extremely plaintiff friendly and with a large low income and minority population. The insurance company lawyers explained to the doctor that you will go in there wearing your nice suit, clearly explain what happened, and the jury is likely to discount or ignore everything you say because that’s generally the way it works in this jurisdiction with these types of cases.

    In the end, the doctor agreed to let the insurer settle the case. There was an indication in a state database that there was a settlement against him but it also included a notation that the settlement was agreed to at the request of the insurance company. With this litigation environment, especially in certain low income urban and economically depressed rural jurisdictions, I would practice defensive medicine too if I were a doctor. This is why we need to get these cases out of the hands of juries. We already have bankruptcy courts and tax courts that don’t involve jurors. Why not health courts?

  12. “do you know how many patient lawsuits are settled mostly at the behest of the malpractice carrier before anyone gets to the point of adjudicating whether it was a bad result much less whether guidelines were followed or not? ”

    Do you?

    “My reference to loser gets paid was connected to the culture that is sliding toward favoring the losers in life over the productive.”

    So injured parties seeking compensation are ‘losers”? Courts decide who is favored and who is worth compensation – would you want your constitutional rights taken away?

    I’ll concede legal expenses make fighting not worth it many times, but that works both against the defendant and the plaintiff.

    You need to sit in court more often to see what really goes on.

  13. Mr. Peter1. People file lawsuits everyday without any bad result. I understand contingent attorneys may screen some of these when they are involved. However, do you know how many patient lawsuits are settled mostly at the behest of the malpractice carrier before anyone gets to the point of adjudicating whether it was a bad result much less whether guidelines were followed or not? My reference to loser gets paid was connected to the culture that is sliding toward favoring the losers in life over the productive.

  14. How does loser gets paid now? Most of these cases are under contingency and the lawyer would eat his legal costs for a loss, hence that acts as a deterent to frivolous cases. Most small to medium cases never make it past the lawyers office because there’s not enough money in it.

    Aurthur, have you ever thought how uneven the legal advantage is for wealthy institutions when people who have been wronged attempt to sue.

    Have you ever considered suing the government for instance but hesitated because deep pockets usually always win and can out last the funds necessary to bring out the truth?

    You’re living in an altered universe.

  15. “The proper question is: “Will following medical guidelines prevent a suit if there is a bad result?”
    Answer: No”

    So, do there not exist medical guidelines now?

  16. Peter1,

    “Legacy, how many suits were filed and won for “following” medical guidelines and scientific practice?”

    Wrong question. Suits are filed and won because of bad outcomes.

    The proper question is: “Will following medical guidelines prevent a suit if there is a bad result?”

    Answer: No

  17. ” I think the medical profession historically has done a poor job of weeding out the relatively small number of doctors who account for a disproportionate share of malpractice. The culture is to protect their own just like the blue wall of silence among the police.”

    I agree Barry, it is about protecting patients before something happens. But the, “I should not be held accountable” is hard to de-entrench. In Texas when they legislated “reforms” they also made the licensing boards more accountable and stringent. However after a while docs even revolted against that as too “Orwellian”.

    Legacy, how many suits were filed and won for “following” medical guidelines and scientific practice? There seems to be an unfounded fear problem not a legitimate lawsuit problem.

  18. Peter1

    ” Never understood why docs think they should be absolved of all wrong doing”

    Not suprisingly you have completely misunderstood or distorted what I was saying.

    I believe that physicians should (in general) follow guidelines. And if a physician was following guidelines that should be a powerful defense against a malpractice suit. It is not.

    How does this play out? I will give you one example that I am very familiar with. CT of the Chest is commonly done in the ER to rule out Pulmonary Embolus or Aortic Dissection. It is a fairly expensive test, uses IV Contrast which can cause reactions, and irradiates the breasts and other body tissues.

    Percent positive in my experience (covering 8 hospital ERs) was less than 5%. In my opinion it is dramatically over ordered. There are guidelines for when to order, but they are not followed. The “over ordering” of this test is largely driven by fear of malpractice. I have talked to ER docs about why they ordered the test and they freely tell me that they are “covering their ass”.

    So when Physicians feel that they have to protect themselves by ordering tests that are “low yield”, the result is lots of tests. If on the other hand, Physicians felt that they would actually be protected if the followed guidelines, guidelines would get followed much more.

    So if you want to understand why tests are over ordered – look in the mirror

  19. Yeah, docs go to work everyday saying “who can I maim today?”. Doctors are human, and yes, some have mighty egos, and mistakes are made everyday. If you don’t think many of us question ourselves constantly, you are wrong.

  20. Peter1,

    While the malpractice insurer is there to pay judgments, you still have the issues of time and stress related to giving depositions, the uncertainty during the often years long period before the case is resolved one way or the other, and the potential hit to the doctor’s reputation just for being named in a suit even if it is ultimately resolved in his favor.

    The idea that following evidence based guidelines is not sufficient to protect doctors from claims if it results in a failure to diagnose a disease or condition or a harmful delay in a diagnosis strikes me as outrageous. There should be absolute safe harbor protection from failure to diagnose lawsuits when evidence based guidelines and protocols were followed where they exist. Failure to diagnose a disease or condition account for only about 20% of malpractice suits but probably drive 80% of defensive medicine. I think the combination of our litigious society and unreasonable patient expectations in this area account for why defensive medicine is a much greater medical cost driver in the U.S. than anywhere else.

    At the same time, I don’t think anyone is suggesting that doctors and hospitals shouldn’t be held accountable for egregious negligence like wrong site surgeries. I think the medical profession historically has done a poor job of weeding out the relatively small number of doctors who account for a disproportionate share of malpractice. The culture is to protect their own just like the blue wall of silence among the police.

    As for nurses and NP’s, when retail clinics started to appear on the scene, one of the large drug retailers commented that in its first one million patient encounters, it was sued exactly ZERO times. I think it’s highly likely that patient expectations are much more modest and reasonable with respect to care delivered by NP’s and nurses.

    Legacyflyer may want to weigh in with his real world perspective on this.

  21. “(You’re On Your Own Mother *#+*#@)”

    No, your malpractice insurance provider is also there. Never understood why docs think they should be absolved of all wrong doing – but hey, they’ve always had a god complex – only better supported by not being held responsible for their actions.

    Should nurses have absolution as well?

  22. Having reviewed many malpractice cases in the US, I can guarantee you that following guidelines will NOT protect a physician from lawsuit.

    Understand the disconnect:

    – It is important to practice “cost effective” medicine for the benefit of: society, cost containment, “the community”, etc.

    – However, if in the course of practicing “cost effective” medicine, a physician misses something – YOYOMF (You’re On Your Own Mother *#+*#@)

  23. I don’t know, but my hope would be that if a physician in Canada followed these guidelines (and documented appropriately of course), and a patient happened to have a bad outcome, he or she would be protected from a lawsuit.

  24. A little more information:

    “Summary: The Canadian CT Head Rule head rule will permit physicians to standardize care of patients with head injuries and to be much more selective in the use of computed tomography without jeopardizing patient care.”

    Note the, “without jeopardizing patient care”.

    http://www.ohri.ca/emerg/cdr/cthead.html

    There is also the, “Comparison of the Canadian CT Head Rule and the New Orleans Criteria in Patients With Minor Head Injury” for which I can’t link as I’d be sanctioned by administrator for two links.

    “Results: Among 1822 patients with GCS score of 15, 8 (0.4%) required neurosurgical intervention and 97 (5.3%) had clinically important brain injury. The NOC and the CCHR both had 100% sensitivity but the CCHR was more specific (76.3% vs 12.1%, P<.001) for predicting need for neurosurgical intervention. For clinically important brain injury, the CCHR and the NOC had similar sensitivity (100% vs 100%; 95% confidence interval [CI], 96%-100%) but the CCHR was more specific (50.6% vs 12.7%, P<.001), and would result in lower CT rates (52.1% vs 88.0%, P<.001). The κ values for physician interpretation of the rules, CCHR vs NOC, were 0.85 vs 0.47. Physicians misinterpreted the rules as not requiring imaging for 4.0% of patients according to CCHR and 5.5% according to NOC (P = .04). Among all 2707 patients with a GCS score of 13 to 15, the CCHR had sensitivities of 100% (95% CI, 91%-100%) for 41 patients requiring neurosurgical intervention and 100% (95% CI, 98%-100%) for 231 patients with clinically important brain injury."

    "Conclusion: For patients with minor head injury and GCS score of 15, the CCHR and the NOC have equivalent high sensitivities for need for neurosurgical intervention and clinically important brain injury, but the CCHR has higher specificity for important clinical outcomes than does the NOC, and its use may result in reduced imaging rates."

    So, is Canada really so stingy on CTs. Of course in U.S. cost does not matter.

  25. I’m not sure if the problem in the Richardson case was the lack of CT equipment close by, the patient’s initial refusal of medical attention or overly conservative practice patterns related to imaging in Canada.

    I certainly agree, of course, about the need to get U.S. hospital costs under control and to make it much easier for patients to learn what costs are before services are rendered at least for care that can be scheduled well in advance.

  26. LegacyFlyer seems to back my point, which is this:

    Having more hospitals, and more advanced equipment in each hospital, does save some lives.

    You see this in the care of injuries, in the care of premature infants, and the survival of the frailest elderly.

    The hard question is where and how to get the costs of this perfectionism under control.

  27. Peter 1,

    It is highly likely that if she had had a head injury in the US she would have had a CT when she presented to the ER. Epidural hematomas are fairly easily diagnosed on CT and prompt treatment should have resulted in a good outcome for a 45 YO healthy patient.

    The allegations I have heard are that her diagnosis was delayed due to a delay in getting the CT and resultant delay in surgery. Again, whether this it true or not, I don’t know.

  28. Bob,

    Actually, the actress was Natasha Richardson – Liam Neeson’s wife. She died after a skiing accident in Quebec. She was not sent to the US.

    The allegation was that if she had been skiing in the US, she would have had the CT and appropriate treatment and would be alive today.

    Whether or not that is true, I don’t know.

  29. That’s how epidural hematomas kill. The bleeding is sometimes slow, so the patient and family feel reassured. Then at a critical point, it is often too late, even with outstanding medical care. This is why ER docs in the states do CT scans on almost anyone with head trauma (aside from avoiding a lawsuit).

  30. ” Whereas in Canada, where hospitals are on a budget, a brain injury actress (I forget her name) had to be flown to Denver for traumatic care, and the Canadian government essentially shrugged its shoulders.”

    Comment not up to your usual standards Bob. It seems the hospital in New York killed her – after all she was alive when she left the Canadian medical system.

    “On 16 March 2009, Richardson sustained a head injury when she fell while taking a beginner skiing lesson at the Mont Tremblant Resort in Quebec, Canada about 80 miles (130 km) from Montreal. The injury was followed by a lucid interval, when Richardson seemed to be fine and was able to talk and act normally. Paramedics and an ambulance which initially responded to the accident were told they were not needed and left. Refusing medical attention twice, she returned to her hotel room and about three hours later was taken to a local hospital in Sainte-Agathe-des-Monts after complaining of a headache.”

    “She was transferred from there by ambulance to Hôpital du Sacré-Cœur, Montreal, in critical condition and was admitted about seven hours after the fall. The following day she was flown to Lenox Hill Hospital in New York City, where she died on 18 March at the age of 45.”

    “An autopsy conducted by the New York City Medical Examiners Office on 19 March revealed the cause of death was an “epidural hematoma due to blunt impact to the head”, and her death was ruled an accident.”

    Wikipedia.

  31. Bob,

    Though approximately 5 million people work in U.S. hospitals today, I wouldn’t worry too much about the potential unemployment issue as we make the medical sector more efficient and cost-effective. First, any downsizing and closing of hospitals typically happens quite gradually. It’s important to note that in 1945, the U.S. had 10 inpatient hospital beds per 1,000 people. Now the number is just over three and the long term trend is down. On the other hand, outpatient services will continue to grow and they are quite profitable but much cheaper than inpatient care.

    Any savings from lower hospital costs don’t just sit in a bank somewhere or disappear altogether. They get recycled into other beneficial uses from modernizing infrastructure to home remodeling, new cars, personal services of various types, more research and development and maybe with a bit left over to reduce the federal debt. This all happens because people will spend less for health insurance premiums and employers will have more ability to raise wages as rising healthcare costs become less of a cost burden. The more we can do to mitigate healthcare cost growth, the better, especially as it relates to hospitals.

  32. Nope. Never owned any hospital stocks and likely never will. The long term secular trend is against them despite the aging population and that’s a good thing, I think.

  33. Barry is on track with his comments about the difficulty in cutting hospital costs.

    I have never run a hospital, but the profusion of new cars in hospital employee parking lots has always made me suspicious that wages and benefits could be reduced for some categories of staff.

    It is hard to escape the feeling that America has more good hospitals than it needs. We have a natural desire to see a fully equipped emergency room every 25 or 50 miles, so that no heart attack or stroke victim suffers extra long-term damage or death. Whereas in Canada, where hospitals are on a budget, a brain injury actress (I forget her name) had to be flown to Denver for traumatic care, and the Canadian government essentially shrugged its shoulders.

    The trouble is that if we downsized the hospital sector, the resulting unemployment would hurt our economy even more than high medical costs. The cure might be worse than the disease.

  34. “Hospital costs are not so easy to cut in the short term.”

    Apparently Barry, they’re not easy to cut in the long term either. You must hold hospital stock.

    Would love my wife to be able to get “significant” savings if she had anything to do with running the budget. My wife, as a non-degreed head nurse at another hospital did a far better job than the degreed empire building PHDs.

    Here’s an example: fired head nurse ordered $35k beds when the $23K beds worked better but had less tech appeal. The $35K beds were also a nightmare to service. Her hospital also has 17 VPs. On and on.

  35. Peter1,

    Hospital costs are not so easy to cut in the short term. Putting aside uncompensated care for the moment, roughly 60% of most hospitals’ revenue goes for employee pay and benefits. Many hospitals already participate in purchasing cooperatives to buy supplies to get the best possible prices. Then you have malpractice insurance, energy and other utilities and debt service none of which can be reduced quickly to any significant degree.

    There is nothing magic about Medicare rates. It overpays for some procedures and underpays for others. They’re more generous in some regions than others due to a combination of quirks in the regional medical input cost formula plus politics. The main way for hospitals to cut costs in the intermediate term is to stop offering certain services such as trauma, mental health, labor and delivery, etc. Then if they can’t replace the freed up space with more lucrative services, their occupancy rate will be well below an efficient operating rate. The most profitable services for most hospitals are surgeries, especially cardiac and orthopedic procedures, and cancer treatment. Outpatient services are also quite profitable but the average bill is much lower.

    Maybe you could ask your wife where she thinks significant savings could be found at her hospital without impacting patient care.

  36. Grandpappy,

    I agree totally. The “accountability” should be to the patient, period. And by the way, if the patient is somewhat financially accountable, then unscrupulous docs will have a hard time fleecing them. Why can’t patients become informed consumers? Isn’t that the goal of all this supposed “transparency”?

  37. “Now if private hospitals or federal hospitals cant get it right and drive down costs, what hope is there in driving down costs in the healthcare system?”

    Imposed budgets. If hospitals could be forced to accept Medicare rates for all care then they’d have to find efficiencies.

  38. I used to think integrated delivery systems (IDSs) were good for healthcare in driving down prices and making them work more efficiently. You bring up many good points about how these doctors get swallowed up into the big hospital system, and how profit agendas are so prevalent. I work at a large federal hospital that doesn’t necessarily swallow up these small time docs, or have profit agenda, but it does manage to waste a lot of money in other ways, such as spending on new and/or unnecessary equipment, or by not terminating unproductive employees. Now if private hospitals or federal hospitals cant get it right and drive down costs, what hope is there in driving down costs in the healthcare system?

  39. “when doctors worked as solo practitioners, accountable to nobody”

    Silly me, I thought we were accountable to our patients. By “accountable,” I guess you mean taking orders from a federal bureaucrat or insurance fat cat. Got it.

  40. “We’re not calling for a return to the days of Marcus Welby, M.D., when doctors worked as solo practitioners, accountable to nobody and able to drive up volume (and their incomes) in a fee-for-service world.”

    Why not? History shows physicians seem to put the money they make back into their practices to make them better and more efficient, not just suck up profit for nameless and unaccountable bureaucracy that does nothing with the monies to help the system.

    As long as there is a pure, unadulterated profit agenda in the health care industry, or service better termed, the antisocial crowd to abuse, misuse, and disrupt will thrive. And their cronies and defenders/apologists will spew their garbage retorts endlessly to just confuse and misdirect.

    One reason why this blog exists, in my opinion. At least the authors do allow some dissent at these threads, at times. thank you for that!

  41. My question is why are the insurers so eager to kill off small physician practices and small hospitals by paying them so poorly. When they’re gone, there will be no controls on the greed of the big boys.

  42. I think we need robust price and quality transparency tools for both patients and referring primary care doctors so more patients can be directed to the most cost-effective high quality providers. We also need to move away from the fee for service payment model in favor of bundled payments for surgical procedures and capitation where appropriate and feasible. We should also abolish facility fees for outpatient services, tests and procedures. Finally, anti-trust regulators need to do their job and prevent the excessive concentration of market power in the medical sector.

    I don’t think a single payer system is the answer and neither do experts including Ezekiel Emanuel and George Halvorson among others. Medicare rates, according to most hospitals, don’t cover their costs and would probably have to be raised if there were no longer a private sector to shift costs to. In NJ, when the legislature tried to make hospitals charge no more than Medicare rates to the uninsured with income up to 500% of the FPL, the hospitals pushed back and claimed that Medicare only covered 91% of their costs on average. The compromise was to limit charges to 115% of Medicare.

    The current Medicare (and Medicaid) program is widely believed to be riddled with fraud. It’s basically a payer but not an innovator. Medicare was around for 40 years before it even offered a prescription drug program which private insurers offered for decades. It pays bills quickly and then tries to chase fraudsters later. Private insurers are much better at mitigating fraud, in part, because they invest in data analytics. All single payer advocates focus on is minimizing administrative costs while ignoring fraud which is difficult to quantify precisely.

    Even Maryland’s all payer system for hospital care, which has been in place since 1977, has not been all that effective in controlling healthcare cost growth. The only thing it has done a reasonably good job at is ensuring that the uninsured are not completely ripped off. With tiered and narrow network insurance products gaining traction in the market, we’re finally starting to create some countervailing power on the payer side. That’s a good thing and overdue.

  43. Hospitals also buy/open outlier clinics and specialties that charge hospital rates or feed services to their hospital, like blood work. UNC-NC bought a local image clinic and cash pay prices for x-ray went from $40 to $250. That’s by our state non-profit.

  44. “Until we give primary-care groups control over what happens to patients, large hospital systems and specialist-dominated groups — those with greatest access to capital — will be able to keep raising prices, even as they issue press releases about their plans to control costs and improve care.”

    This ain’t going to happen. Primary care practices are being bought out. Primary care docs tired of being exploited and unable to continue in practice because of the outlandish mandates and lousy reimbursements are going to join hospital practices to survive (or get out entirely if able).
    Hospitals, like they do now are going to pressure these docs to use their facilities for labs and procedures. Accountable Care Organizations? Accountable to whom? Most docs are too overwhelmed with all the regulations and changes to do what they are supposed to be doing-taking care of patients.

    What has the ACA done to curb the costs of health care? People don’t go bankrupt from visiting their doctor. It’s the outrageous costs of hospital care for catastrophic diseases like cancer and heart disease. Until we can get a handle on reasonable costs for catastrophic or chronic care, nothing will change.

Leave a Reply

Your email address will not be published. Required fields are marked *