Monday, November 24, 2008

The ad I would buy

I was joking with a friend the other day that the Boston Globe Spotlight team (their investigative group) has managed to become a profit center for the newspaper, rather than a cost center. How so? Well, the main subject of two recent articles, Partners HealthCare, has been buying a series of editorial page ads in anticipation of the articles and today published a full page ad in response to them.

Relying on the placement of MGH and Brigham and Women's Hospital in the top ten of U.S News & World Report the ad notes that:

[T]here are real differences in quality between hospitals. Year after year Partners HealthCare hospitals rise to the top of this list because of investments in teaching, research, safety, and technology. Our patients continue to choose us time and again, especially for complex treatment. And the ultimate measure of quality is that physicians and other hospitals in the area frequently send their most challenging cases to our teaching hospitals.

We realize that there are costs associated with excellence. teaching hospitals, including MGH and Brigham and Women's, care for the sickest patients, the most complex diseases. We subsidize a broad range of service, some of which lose money, such as psychiatry and community health centers.


I can't afford these kind of ads, so I'll offer some thoughts here.

Can we please start by agreeing that these are two very impressive hospitals, staffed by superb physicians, nurses, and others, and deserving of substantial praise in many, many respects? We can also agree that they are destinations for very sick patients and that they subsidize many important services that receive insufficient reimbursement from private and public payers.

But, can we also agree that the differential in rates received by these two hospitals and the doctors working in them is not related to documented, quantifiable differences in quality between them and, say, BIDMC and Tufts Medical Center, two academic medical centers that are also acknowledged for their excellence and that are also destinations for very sick patients and that also subsidize many important services that receive insufficient reimbursement from private and public payers?

Can we also agree that, likewise, there is no documented, quantifiable difference in quality between Partners' community hospitals (like North Shore Hospital) and other community hospitals (like Beverly Hospital)? And yet, the rates received by those community hospitals and the doctors working therein are generally higher than the non-Partners community hospitals.

And finally, can we agree that the higher rates received by community primary care doctors and specialists in the Partners system are not related to documented, quantifiable differences in quality between them and non-Partners community doctors?

When you cut through it all, that is what the Globe stories were about. Everybody knows that Partners is able to achieve higher rates from private insurers because it has more market power than others in the Boston area. The Globe simply documented the figures that we have all heard about for years. Who can quarrel with this business model, envisioned at the creation of Partners years ago and executed superbly?

The issue for today, it seems to me, is whether in a region characterized essentially by nonprofit hospitals and nonprofit insurance companies, the government agencies that supervise those charitable institutions should care that this imbalance exists. This is more a question to be asked of the insurers than of the providers.

Now, here's the heart of the question. Is this a zero sum game? Is there some fixed pot of insurance premiums to be allocated, so that if rates for other hospitals were to rise, those for Partners hospitals would have to fall?

Regular readers of this blog know that my answer to this will be, "Wrong question." The correct question is how much money could be saved in the health care delivery system if we were all to invest in quality and safety and other process improvements. The answer is, "A lot." The first step, though, is to move towards basing rates on the quality of care delivered -- to give the proper incentives to make progress in this direction. Sorry, not quality as portrayed by a magazine, but as documented from actual clinical records, the kinds of records maintained by all of us, in real time, every day of the year.

Let's measure improvement in avoiding central line infections, ventilator associated pneumonia, "codes" on medical floors, and other preventable harm. I'm not saying that reimbursement rates should be mainly based on a comparison of hospital A's to hospital B's infection rate. Perhaps it would actually be more effective to emphasize the rate of safety and quality improvement within each hospital as an entity. And, please, let's get away from pay-for-performance reimbursement systems that use process measurements of the type collected (and two years late) by the government. (By the way, some of these have uncertain validity or perhaps harmful clinical results, e.g., 4-6 hour timing of the first dose of antibiotic for patients with pneumonia in the face of an uncertain diagnosis.)

In summary, I don't think Partners needs to defend itself for executing a thoughtful business plan. I think it is the public officials who supervise the nonprofits in the health care sector who should feel some time pressure. They need to figure out, and quickly, how to fix the disconnect between reimbursement rates and the degree to which hospitals achieve quality and safety improvements. It is the pursuit of those improvements that offers us the first and best hope to control the rise in health care spending in Massachusetts.

13 comments:

Anonymous said...

I found it interesting that I (the public) have no way of comparing prices and then deciding what is worth it or not. For instance, if I need a cardiac cath done and I do not have insurance, can I decide that I will "take a chance" at Hospital A since it is $2,000 less expensive than Hospital B?

Right now it is virtually impossible to figure that out especially if you are having chest pains!

I wonder if knowing prices would have an impact on Hospital costs...

How naive of me....

Anonymous said...

Paul - Anytime you write about this subject make sure to include Children's Hospital and their associated physicians along with Partners. Children's has also pressured the local non-profit insurers (especially Blue Cross and Blue Shield of MA) for rates FAR above anyone else for largely community level of care. Sure they do some stuff no one else does but a vast majority of their care is for asthma, dehydration and croup. Children's uses these higher fees and rates to actively recruit more community PCPs into their Physician Organization, driving up costs even further without any demonstration of better quality outcomes. Partners and Children's both need to be put under the spotlight as "non profits" that are making millions of dollars more than anyone else for largely the same level of care with largely the same level of quality.

Anonymous said...

For the majority of the readers on this blog, I would bet that they have health insurance. They will not care that much if one hospital costs that much more or less than another. We all realize that our premiums are skyrocketing, but when someone is having chest pains, they do not generally start calling around for the best price.

This is a consumer issue where the consumer has zero power to affect the problem or solution. Maybe the state insurance commissioner needs to step in and look into the issue along with the help of the local hospital administrator.

Steven said...

Paul, every time I read your blog I get so excited. I love what you're doing. Keep it up.

Paul Levy said...

1) Sorry, I don't do pediatrics!

2) Please read what I wrote again, as I think you missed my point. The point was not to put Partners (or Children's) under the spotlight for their successful implementation of a business plan.

Anonymous said...

Partners will probably throw out the prospect of "job cuts" in a tough economy if they feel any state regulators breathing down their backs over their inflated rates and enormous profits.... despite, of course, being a "non profit" that does not pay any taxes.

MC5 said...

An interesting article from a prestigious economics journal, the Journal of Economic Perspectives, frames the discussion from a national perspective. The last sentence in the abstract is particularly apt:

Is American Health Care Uniquely Inefficient?
Authors: Garber, Alan M.; Skinner, Jonathan

The U.S. health system has been described as the most competitive, heterogeneous, inefficient, fragmented, and advanced system of care in the world. In this paper, we consider two questions: First, is the U.S. healthcare system productively efficient relative to other wealthy countries, in the sense of producing better health for a given bundle of hospital beds, physicians, nurses, and other factor inputs? Second, is the United States allocatively efficient relative to other countries, in the sense of providing highly valued care to consumers?

For both questions, the answer is most likely no. Although no country can claim to have eliminated inefficiency, the United States has high administrative costs, fragmented care, and stands out with regard to heterogeneity in treatment because of race, income, and geography. The U.S. healthcare system is also more likely to pay for diagnostic tests, treatments, and other forms of care before effectiveness is established and with little consideration of the value they provide.

Anonymous said...

Paul-
You are spot on. I wonder what our MA Secretary of Health and Human Services (and former BWH internist) Judy Ann Bigby thinks. Somebody send this to her!

Anonymous said...

The way in which the insurance companies have framed this debate in front of a credulous amazes me. Basically what they are saying is that typically insurers can slash reimbursements however much they want and hospitals have to eat it. But there's one hospital where the hospital has leverage instead of the insurer. And this is an atrocity that must be corrected, while in all other cases it's the proper order of things?

Criticism should be focused at the way reimbursement contracts are "negotiated", not the fact that Partners has successfully turned the insurers game against them and they're unhappy about it.

Anonymous said...

Yes, Partners did a great job of executing an business plan.

Unfortunately it is one of the many reasons hospitals throughout Massachusetts are in such poor financial condition.

Some hospitals are better than others, but this does not explain the reimbursment discrepancy between Partners and hospitals like yours along with Tufts.

A.P. said...

I am a physician who works at a non-Partners tertiary care teaching hospital in the city, but and I heard a lot of complaining about this issue at work.

But it seems to me that the only crime Partners has committed is being better negotiators and better businesspeople than everyone else. And yes, they did this by executing the only well-conceived hospital 'merger' in this city (at least in recent memory) and amassing marketshare. Businesses do this all the time to get better pricing power. And their marketshare is only meaningful because it is associated with a strong brand.

Similarly, Children's has built such an impressive brand for its services that it can leverage its brand for higher prices. Again, a good way to build a successful business.

I understand all the ethical/moral overtones of medical care (universal coverage, quality, etc), but instead of burying Partners, we should praise them and try to emulate them. Remember, the insurance companies are businesses too, and they try to gather as many subscribers as possible to get better prices from providers.

Anonymous said...

Why lay policing of such behavior solely at the feet of the state or federal government? What responsibility does the board and senior management of these "not for profit" hospitals (including yours) have in executing such a business plan. I think they have quite a bit. Just because it is legal does not mean it is right. Blaming it solely on the government seem to be a bit of a cop out. Most boards and senior management of any large not for profit hospital or health system that I know of lost site of its mission and reason for tax emempt status a long time ago.

MC5 said...

Interesting point regarding the role of boards and senior management in adoption of business plans. Most hospitals have embedded in their mission statements "the alleviating of human suffering." What do striving toward monopolistic tendencies, ruthlessly crushing "competitors", and negotiating for bulk premiums from insurance companies have to do with alleviating human suffering? The answer, I believe resides in the DNA of Boards, which are dominated by Type A hypercapitalists who believe that success can only be measured by P&L's, balance sheets, and throughput of their production systems, eg, OR's, ER's, ACC's etc.
Perhaps if we began to populate some of these BOD's with a more diverse range of interests, we would see a change in corporate behavior.