Health Affairs published a new study that examines the value proposition of Academic Medical Centers (AMCs)***. AMC’s tend to be high cost providers for both the very unusual and rare care that they are the unique providers of in a region and common care. I’ve been skeptical about the value proposition of AMCs for routine care for a long while in the context of ACA network designs:
Ideally, the insurance companies that want to mimize their claims pay-outs want to have Seattle Children’s or any other high cost specialty hospital in network for a la carte services such as organ transplant and regional trauma centers of excellence, but out of network for pneumonia or routine elective surgery or setting broken ankles….
I was wrong. I am surprised by these results and I now need to significantly move my priors.
We examined more than 11.8 million hospitalizations in the period 2012–14 for Medicare beneficiaries ages sixty-five and older and found that, after adjustment for patient and hospital characteristics, high-severity patients had 7 percent lower odds, medium-severity patients had 13 percent lower odds, and low-severity patients had 17 percent lower odds of thirty-day mortality when treated at an academic medical center for common medical conditions, compared to similar patients treated at a nonteaching hospital. For surgical procedures, high-severity patients had 17 percent lower odds of mortality, medium-severity patients had 10 percent lower odds, and there was no difference for low-severity patients…
When all of these results are taken together, we found that the better outcomes at AMCs appear to apply to all patients, not only the sickest ones with the most complicated conditions.
Those are all very meaningful differences in mortality for the Medicare population.
Now onto the policy question — we have been moving towards narrow networks as a means of cost control. This is quite common in the ACA Exchange markets. AMCs are expensive in both the per unit cost and as a magnet for people with significant medical histories that require high cost care. Insurers that can maintain network adequacy from both a regulatory and marketing perspectives without including an AMC will be able to maintain a pricing advantage over insurers that include an AMC in their network (all else being equal) and thus they will be able to cherry pick the healthiest and cheapest portion of the population with attendant risk adjustment outflows.
The current risk adjustment formula is based on the average state wide premium so if an insurer with no AMCs in network can claim most of the healthy, low morbidity enrollees while driving down the state wide average premium, the risk adjustment transfers to the high cost, AMC containing network insurer would be insufficient to pay for the high cost care that is best or only done at an AMC. This is not an uncommon play in the ACA market. It either drives out the broad networks, or raises rates significantly on the sickest people.
Yet, this study, and others indicate that AMCs provide significant value over the alternatives. We should want to pay more for more health which includes low mortality odds.
I am not sure what this means for policy, but it is a study that should make us re-examine risk adjustment and narrow networks at the very least.
*** Burke, L., Khullar, D., Orav, E. J., Zheng, J., Frakt, A., & Jha, A. K. (2018). Do Academic Medical Centers Disproportionately Benefit The Sickest Patients? Health Affairs, 37(6), 864-872. doi:10.1377/hlthaff.2017.1250