Massachusetts Hospital Services Price Variations

[walkitout]

Late last month, there was a little blip of local coverage of a state report on the prices various hospitals around the state were charging for a sample menu of services.

http://www.boston.com/news/local/massachusetts/articles/2011/05/26/study_wide_price_differences_at_mass_hospitals/

You can read the report here:

http://www.mass.gov/?pageID=eohhs2terminal&L=4&L0=Home&L1=Government&L2=Departments+and+Divisions&L3=Division+of+Health+Care+Finance+%26+Policy&sid=Eeohhs2&b=terminalcontent&f=dhcfp_researcher_cost_trends_2011_cost_trends_02&csid=Eeohhs2

Sorry -- that's a really ugly URL.

The list of "Key Findings" is a beautiful representation of just how thoroughly health care doesn't behave like a market:

"Data on the selected 14 routine inpatient services indicates that service volume tends to be
concentrated in higher paid hospitals"

"There is little measurable variation among Massachusetts hospitals based on the available
quality metrics related specifically to the 14 selected inpatient services. In contrast, the price
variation for those services is significant, and lower priced hospitals are often associated with
slightly higher quality scores and vice versa."

"There was no correlation between a hospital’s share of Medicaid patients and the prices they
received from private payers, with some of the lowest paid hospitals having the highest
proportion of Medicaid discharges. ... This finding is inconsistent with providers’ and private payers’ assertions that higher private payer prices are needed to compensate for losses incurred by serving Medicaid patients."

"Hospitals that receive higher payments from Medicare are not necessarily the same hospitals that receive higher payments from commercial carriers, suggesting that factors other than what Medicare
considers are influencing private payer prices."

Getting into the nitty gritty:

"Prices paid for an appendectomy (DRG 225) varied by more than 11-fold for a severity-115 stay and
16-fold for a severity-2 stay. Prices paid for each of the other selected DRGs varied less significantly, but in no instance did they vary by less than 300 percent statewide."

R. and I are not surprised. He had an appendectomy (in New Hampshire, IIRC, but presumably he'll say in a comment later on) over a decade before I had mine, and the price difference was kind of incredible (even allowing for the rate of health care inflation -- and we had comparable severity). Also, given the sheer volume of bills that showed up over time, I'm wondering how the state managed to wrap it all up into one number.

I would also add that I am not surprised by this, either:

"While only 28 percent of hospitals providing cesarean deliveries and 24 percent of hospitals
providing vaginal deliveries had a median severity-adjusted price that was higher than the
statewide median price, services delivered by those providers accounted for 50 and 47 percent
of discharges"

Massachusetts readmission rates for pneumonia and heart failure are noted as higher than the national average ("Among Massachusetts hospitals, the 30-day readmission rate after discharge from the hospital is 20.4 percent for heart attack, 25.2 percent for heart failure, and 19.1 percent for pneumonia compared to 20.0 percent, 24.7 percent, and 18.3 percent, respectively, for hospitals across the nation during the same reporting period."), representing an opportunity for cost savings -- of course, it seems like _everyone_ is aggressively pursuing readmissions rates as an opportunity for cost savings.

It's really tough for someone as far outside the health care field as I am to know what to do with this report as a whole. It feels like an undigested mass of tables and charts and while I can poke at bits of it, it doesn't mean much to me. Certain things stick out (Medicaid pays the least, then Medicare, then everyone else; the cheapest rates are available at the places that see the most Medicaid patients because they _have_ to keep their costs down. When The Herd decides to have their babies some place, that place will surely be unreasonably expensive as a result.), but I suspect the most important lesson is that cost control in medicine is an excruciating exercise in detail. No simple rule is going to produce reliable cost savings -- but if we're willing to pay enough attention consistently, we can probably get better results for less money.

Comments

[rolandgo.livejournal.com]

I saw one bill from St. Joseph's Hospital. It was for a few dollars more than a thousand. I now wonder if it was for only a fraction of the total (given the way we've seen separate billing from hospital, attending, surgeon, anesthesia, lab, pharmacy, and such). But even so, that bill was for way less than the hospital part of your visit. And beyond an HMO white blood cell count test and some prodding by my internist & later a surgeon (Doctor Block), I had no fancy testing. Your ultra sound test (when they were nearly positive of your diagnosis) wasn't free, but is now part of the standard of care.