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

52
Leave a Reply

25 Comment threads
27 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
11 Comment authors
Bill SpringerAurthurlegacyflyerBob HertzBobby Gladd Recent comment authors
newest oldest most voted
Bill Springer
Guest
Bill Springer

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?

legacyflyer
Guest
legacyflyer

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… Read more »

Perry
Guest
Perry

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

Aurthur
Guest
Aurthur

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… Read more »

Peter1
Guest
Peter1

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… Read more »

Perry
Guest
Perry

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”.

Peter1
Guest
Peter1

Only way to avoid life’s shit is stay in bed with the covers over your head.

Perry
Guest
Perry

Or don’t step in it.

Aurthur
Guest
Aurthur

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… Read more »

Barry Carol
Guest
Barry Carol

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… Read more »

Peter1
Guest
Peter1

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.

Aurthur
Guest
Aurthur

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… Read more »

Peter1
Guest
Peter1

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… Read more »

legacyflyer
Guest
legacyflyer

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

Aurthur
Guest
Aurthur

Not until culture returns to loser pays not loser gets paid.

Peter1
Guest
Peter1

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… Read more »

Aurthur
Guest
Aurthur

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.

Peter1
Guest
Peter1

“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… Read more »

Peter1
Guest
Peter1

“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?

Peter1
Guest
Peter1

“(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?

Barry Carol
Guest
Barry Carol

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… Read more »

Peter1
Guest
Peter1

” 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… Read more »

Perry
Guest
Perry

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.

legacyflyer
Guest
legacyflyer

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… Read more »

legacyflyer
Guest
legacyflyer

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 *#+*#@)

Perry
Guest
Perry

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.

Perry
Guest
Perry

The Canadian CT head rule:
http://www.emottawa.ca/assets/documents/research/cdr_cthead_poster.pdf

This would never fly in the US due to the liability issues.

Peter1
Guest
Peter1

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… Read more »

Barry Carol
Guest
Barry Carol

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.

Bob Hertz
Guest
Bob Hertz

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.

legacyflyer
Guest
legacyflyer

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.

Perry
Guest
Perry

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).

Peter1
Guest
Peter1

” 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… Read more »