FOCUS OF THE WEEK
Expensive and Large Hospitals Do Not Equate to Value
January 30, 2014, 12:46:26 PM
Katie Sullivan
While expensive hospitals might earn a better reputation, there is little evidence that they provide better care.

In a study that examined the actual costs of 25,000 insurance claims from hospitals in 10 metropolitan markets, researchers discovered that expensive hospitals were much more likely to win a national ranking for high quality from US News & World Report. However, there was no evidence that they provided better care. In fact, most expensive hospitals actually performed worse than their lower-cost counterparts in areas like meeting performance goals, which include reducing readmissions and avoiding death in surgical patients.

“We found that high-price hospitals within markets were more likely to be engaged in medical education; offer specialized, expensive services typically associated with tertiary-care hospitals; and serve a higher percentage of low-income (and poorly reimbursed) patients,” the study authors wrote “But high-price hospitals also clearly enjoyed dominant market positions. Both their large size and their membership in even larger hospital systems made it difficult for health plans to negotiate lower prices with them.”

While the study authors acknowledged that some of the high costs may be due to specialized treatment offered at these larger hospitals, the study mainly focused on the costs of routine care. Larger hospitals may also treat a larger population of the sickly and poor.

“Given the intense and growing pressure to rein in the growth in private health insurance premiums, the continuation of current trends appears to be unsustainable. It remains to be seen whether or not health plans will somehow regain the upper hand,” the authors said.” If they do not, more radical approaches—such as state-based rate setting or restrictions on contracting arrangements between hospitals and health plans—may gain traction.”

The 10 metropolitan markets examined in study included: Buffalo, Cleveland; Detroit; Flint, Michigan; Indianapolis; Kansas City; St. Louis; Toledo, Ohio; Warren, Michigan; and Youngstown, Ohio.

Around the Web

Expensive Hospitals: Strong Reputations But Little Evidence Of Better Care, Study Finds [Kaiser Health News]

Understanding Differences Between High- And Low-Price Hospitals: Implications For Efforts To Rein In Costs [Health Affairs]