Monday, October 15, 2012

We were surprised

I'm trying to know how to react to a point made by Atul Gawande in a recent talk he gave.  As reported by Maggie Mahar on Health Beat:

In the past, doctors rarely focused on the cost of medical treatments. Their mandate was to do the best they could for the patient in front of them. How much that might cost society was not their concern. They were not economists. They were not politicians. They were physicians.

So when Massachusetts’ Attorney General released reports in 2010 and again in 2011, revealing enormous disparities in how much the state’s hospitals charge even for simple procedures “we were surprised,” Gawande told his breakfast audience. Gawande and his colleagues knew little about hospital pricing. They had no idea that insurers were paying their hospital far more than other, less well known hospitals, simply because Brigham had a brand name, and thus, enjoyed market clout.

Wow.  Atul is as honest as anyone I know, but could it be that the sophisticated MDs at the Brigham were unaware of what everyone else in town knew? 

The Boston Globe published a Spotlight series on this topic in the fall of 2008.  Here are the opening paragraphs of one story:

As his patient lies waiting in an adjacent exam room, Dr. James D. Alderman watches while an assistant reaches into a white envelope and pulls out a piece of paper that will determine where the man will be treated. Big money is on the line.

If the white slip of paper directs him to do the procedure in Framingham, the insurance company will pay the hospital about $17,000, not counting the physician's fee. If Alderman is sent to Brigham and Women's Hospital in Boston, that hospital will get about $24,500 - 44 percent more - even though the patient's care will be the same in both places.

"It's the exact same doctor doing the procedure," said Andrei Soran, MetroWest's chief executive. "But the cost? It's unjustifiably higher."

Call it the best-kept secret in Massachusetts medicine: Health insurance companies pay a handful of hospitals far more for the same work even when there is no evidence that the higher-priced care produces healthier patients. 

Today, the Brigham and Mass. General are paid an average of 30 percent more than similar nonpediatric hospitals statewide for each procedure, based on payment rates of Blue Cross obtained by the Spotlight Team. 

Altogether, those higher rates add up to at least $800 million more for Partners hospitals and doctors than if they were paid at rates similar to competitors, based on Partners' insurance income.

Partners' favorable insurance contracts have helped the company to reap $1.7 billion in profits since 2004, reflecting a profit rate that is average compared with the nationally known hospitals the company considers its peers. But it's high by Massachusetts standards: Partners collected 35 percent of statewide hospital profits last year, even though it owns only 16 percent of the beds.

Another question:  Did the Brigham doctors also not know that they, as physicians, were getting paid substantially more than physicians at the non-Partners academic medical centers in Boston?  (This was in addition to the hospital payments.)  Every other doctor in Massachusetts knew it.


Anonymous said...

Disingenuous in the extreme, even if he may have been taking poetic license to make a point about how disengaged from cost doctors are. The rest of his talk as blogged by Maggie makes some good points, even if none of them will be new to anyone here. However, it is beginning to be noticed externally that his own hospital often does not practice what he preaches. If it's just now noticing an issue, that's several years late, no doubt due to its comfortable financial cushion.


Bruce Ramshaw said...

From Facebook:

Until I became Chief of General Surgery at the University of Missouri, I just looked at my own individual P&L- that is how it is presented by the department managers. The message is to just continue to hit higher and higher RVU targets each year and the management/medical center would take care of the business of getting reimbursed (I was at Emory before Missouri). But, when I became Chief of the division, I felt obligated to actually look into the business side of things- what an awakening. I was shocked by what I have learned and how almost ten years later, we still have such a dysfunctional system. Thank goodness for the emerging transparency, with patients and other stakeholders, including you, Paul, demanding it, sharing the knowledge and commenting on it.

Anonymous said...

I was equally surprised when In his recent "Big Med" New Yorker article Dr Gawande referenced the thousands of dollars "saved" by optimizing knee replacement surgeries. Who recouped this value? Not consumers or employers. Data now publicly available through DHCFP shows that knee replacement surgery at BWH is significantly more expensive than all other major teaching hospitals in Boston despite the efforts Dr Gawande outlines. It sems that the "savings" he highlights accrue straight to the Partners bottom line-- much the way profits captured at the Cheesecake Factory do. His thesis that Big Med might result in greater efficiency ignored the market power "Big Med" consolidates as it gets larger and larger. That "too big to exclude" market size n enables them to keep their prices and their profits at their current (self-reported) lofty levels. Partners has reported 40% margins on their commercial business. No other adult teaching competitor in the city comes close to Partners prices and margins.

As far as physicians being unaware that their hospital and professional fees are far higher than most? The vast majority of doctors know that quite well. Dr. Gawande's successful journalism career may have kept him out of the mainstream of the contracting and rate negotiation activities that the BWH Physician Organization has devoted considerable time and leadership to; but rank and file doctors are very much aware-- even if from the newspaper as you point out-- of their superior relative rate position.

DanUK said...

More reasons to love the (yes, imperfect) NHS. I'm sure the same happens in private hospitals all over the world.

drbob said...

Most physicians I've polled have NO idea what things cost, especially with hospitals.

Our local hospital gets paid over $3000 for a non emergent CT of the brain (I sent you the EOB a few weeks ago.) Most doctors think the hospital charges $1,500 and gets paid $300 for a head CT. They're only wrong by a factor of 10.

The problem is there is no transparency of fees (in fact, it is almost impossible to get any information on what a hospital charges or gets paid.)

Recently, one of the hospital's contractors offered to buy our sleep lab. We get $650 global and they can get $2,400 as they bill through the hospital.

How can we save health care costs when hospitals get paid so much by Medicare (and many insurers too.)

drbob said...

A nearby hospital recently contacted me about DaTscan, a new diagnostic compound sometimes helpful in the diagnosis of Parkinson's Disease.

With repeated attempts, I have not been able to get anyone to provide information about the cost of the procedure.

So while I get reams of literature about DaTscan and even a free lunch (cold cut subs from Acme), I'm still in the dark about cost.