Updated May 5 at 3:05pm

Hospitals that cost more don’t provide better care

Guest Column:
Peter R. 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. More

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OP-ED / LETTERS TO THE EDITOR

Hospitals that cost more don’t provide better care

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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?

Jack Wennberg, emeritus professor of the Dartmouth Institute for Health Policy and Clinical Practice, has spent his career suggesting the answer is yes, because costs vary substantially across the U.S. in ways not correlated with quality.

The Wennberg view, reflected in the ongoing work of the Dartmouth Atlas of Health Care, suggests we are on the “flat of the curve” for spending. Even though some level of health care spending is beneficial to improve outcomes, we are already beyond that point in the U.S., so slowing cost growth need not hurt quality of care.

The Wennberg/Dartmouth argument has been challenged over the years – including by research from Joseph Doyle and Jonathan Gruber of the Massachusetts Institute of Technology, John Graves of Vanderbilt University and Samuel Kleiner of Cornell University. The Doyle study was cleverly designed, taking advantage of the reality that patients who live very close to one another but straddle an ambulance-dispatch boundary tend to wind up at different hospitals. Living on one side or the other of a boundary street can be very close to being randomly assigned to a hospital. That allows researchers to compare what happens when similar patients are treated in high-cost and low-cost hospitals.

Doyle and team thus examined Medicare data on emergency patients from New York state and found that patients who were taken to higher-cost hospitals had noticeably lower one-year mortality rates than people taken to lower-cost hospitals.

One problem with the Doyle study, however – as I have previously noted – was that it included only emergency patients, who accounted for only about 5 percent of the admissions (and less than 10 percent of total costs) at the relevant hospitals. So it was not a body blow to the Dartmouth work; it merely showed that for certain types of emergency care, higher-cost hospitals seem to deliver better results – and even then, only up to a point.

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