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  • Expensive Hospitals Aren't Any Better

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    Peter Orszag
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    The good news about health-care spending continues. In the first nine months of this fiscal year, Medicare spending increased only 1.2 percent in nominal terms, and for 2014, it's now projected to be $1,000 lower per beneficiary than the Congressional Budget Office said it would be as recently as 2010. Even the Medicare trustees are starting to recognize that something big may be happening. In evaluating the recent deceleration, however, a crucial question remains: Can slower cost growth continue without harming the quality of outcomes?

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    The good news about health-care spending continues. In the first nine months of this fiscal year, Medicare spending increased only 1.2 percent in nominal terms, and for 2014, it's now projected to be $1,000 lower per beneficiary than the Congressional Budget Office said it would be as recently as 2010. Even the Medicare trustees are starting to recognize that something big may be happening. In evaluating the recent deceleration, however, a crucial question remains: Can slower cost growth continue without harming the quality of outcomes?

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    16 views3 pages

    Expensive Hospitals Aren't Any Better

    Uploaded by

    Peter Orszag
    The good news about health-care spending continues. In the first nine months of this fiscal year, Medicare spending increased only 1.2 percent in nominal terms, and for 2014, it's now projected to be $1,000 lower per beneficiary than the Congressional Budget Office said it would be as recently as 2010. Even the Medicare trustees are starting to recognize that something big may be happening. In evaluating the recent deceleration, however, a crucial question remains: Can slower cost growth continue without harming the quality of outcomes?

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    of 3

    6/16/2015

    Expensive Hospitals Aren't Any Better - Bloomberg View

    H E A LTH C A RE R EF OR M

    ExpensiveHospitalsAren'tAny
    Better

    AUG5,20148:03AMEDT

    ByPeterR.Orszag

    aA

    Thegoodnewsabouthealthcarespendingcontinues.Inthefirstninemonthsofthisfiscalyear,
    Medicarespendingincreasedonly1.2percentinnominalterms,andfor2014,it'snowprojectedto
    be$1,000lowerperbeneficiarythantheCongressionalBudgetOfficesaiditwouldbeasrecently
    as2010.EventheMedicaretrusteesarestartingtorecognizethatsomethingbigmaybe
    happening.
    Inevaluatingtherecentdeceleration,however,acrucialquestionremains:Canslowercostgrowth
    continuewithoutharmingthequalityofoutcomes?
    JackWennberg,emeritusprofessoroftheDartmouthInstituteforHealthPolicyandClinical
    Practice,hasspenthiscareersuggestingtheanswerisyes,becausecostsvarysubstantiallyacross
    theU.S.inwaysnotcorrelatedwithquality.TheWennbergview,reflectedintheongoingworkof
    theDartmouthAtlasofHealthCare,suggestsweareontheflatofthecurveforspending.Even
    thoughsomelevelofhealthcarespendingisbeneficialtoimproveoutcomes,wearealready
    beyondthatpointintheU.S.,soslowingcostgrowthneednothurtqualityofcare.
    TheWennberg/Dartmouthargumenthasbeenchallengedovertheyearsincludingbyresearch
    fromJosephDoyleandJonathanGruberoftheMassachusettsInstituteofTechnology,John
    GravesofVanderbiltUniversityandSamuelKleinerofCornellUniversity.TheDoylestudywas
    cleverlydesigned,takingadvantageoftherealitythatpatientswholiveveryclosetooneanother
    butstraddleanambulancedispatchboundarytendtowindupatdifferenthospitals.Livingonone
    sideortheotherofaboundarystreetcanbeveryclosetobeingrandomlyassignedtoahospital.
    http://www.bloombergview.com/articles/2014-08-05/expensive-hospitals-aren-t-any-better

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    6/16/2015

    Expensive Hospitals Aren't Any Better - Bloomberg View

    Thatallowsresearcherstocomparewhathappenswhensimilarpatientsaretreatedinhighcost
    andlowcosthospitals.
    DoyleandteamthusexaminedMedicaredataonemergencypatientsfromNewYorkstateand
    foundthatpatientswhoweretakentohighercosthospitalshadnoticeablyloweroneyear
    mortalityratesthanpeopletakentolowercosthospitals.
    OneproblemwiththeDoylestudy,howeverasIhavepreviouslynotedwasthatitincluded
    onlyemergencypatients,whoaccountedforonlyabout5percentoftheadmissions(andlessthan
    10percentoftotalcosts)attherelevanthospitals.SoitwasnotabodyblowtotheDartmouth
    workitmerelyshowedthatforcertaintypesofemergencycare,highercosthospitalsseemto
    deliverbetterresultsandeventhen,onlyuptoapoint.
    Now,Doyleandcolleagueshavecompletedanewstudy.Againusingthepatternofambulance
    companyassignmentstocompareoutcomes,Doyle2foundastrongcorrelationbetweenspending
    oninpatientstaysandpatientsurvival.Thistime,though,theresearchersexpandedtheiranalysis
    toothertypesofspending,andtheyfoundanegativerelationshipbetweenspendingafterhospital
    dischargeandsurvivalratesgreatenoughtocanceloutthepositiverelationshipbetweenhospital
    spendingandsurvival.Ultimately,Doyle2found"noassociationbetweentotaloneyearspending
    andpatientoutcomes.
    ThenewDoyleviewisconsistentwiththeWennbergthesisandwithresearchfromtheInstituteof
    MedicineindicatingthatthesubstantialvariationinMedicarecostsacrosstheU.S.cannotreliably
    belinkedtovariationinquality.Theinstitute'sreportalsosuggestedtheprincipaldriverofsuch
    variationwasnothospitalsbutratherpostacutecareservicessuchasskillednursingfacilities,
    rehabilitationfacilities,homehealthservicesandhospices.Wereitnotforthisregionalvariation
    inpostacutecare,theoverallMedicarespendingvariationwouldbe73percentless.Itwas
    preciselytheseserviceswhereDoyleandteamfoundanegativeassociationbetweenspendingand
    outcomes.
    Doyle2andtheInstituteofMedicinereportunderscorethepotentialtoachievesubstantialsavings
    inMedicarewithoutharmingbeneficiariesevenifmostofthoseopportunitiesexistinpostacute
    settings.Andthatviewseemsconservativetome,giventhatmosthospitalmanagersIspeakwith
    saytheycanachievemeaningfulsavingswithintheirownwallswithoutharmingquality.
    What'sneededisapaymentsystemthatprovidesstrongerfinancialincentivestopursuebetter
    valueandsqueezescostswherepossiblewithoutworseningcare.Toreapthebenefitsofthe
    ongoingdecelerationinhealthcosts,theU.S.healthcaresystemneedsaclearerpathawayfrom
    http://www.bloombergview.com/articles/2014-08-05/expensive-hospitals-aren-t-any-better

    2/3

    6/16/2015

    Expensive Hospitals Aren't Any Better - Bloomberg View

    feeforservicepaymentandtowardfeeforvalue.
    Tocontacttheauthoronthisstory:
    PeterROrszagatporszag3@bloomberg.net
    Tocontacttheeditoronthisstory:
    MaryDuenwaldatmduenwald@bloomberg.net

    http://www.bloombergview.com/articles/2014-08-05/expensive-hospitals-aren-t-any-better

    3/3

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