A new article just came out in JAMA this morning. The authors look at the thirty day cost of care for Medicare beneficiaries dependent on whether or not they go to academic medical centers or community hospitals.
In this cross-sectional study of more than 1.2 million hospitalizations, major teaching hospitals had higher initial hospitalization costs than nonteaching hospitals, but the total costs of care at 30 days were lower at major teaching hospitals largely because of lower costs for post–acute care services and readmissions.
By contrast, readmission and post-acute care spending was lower at major teaching hospitals (driven by lower utilization as well as lower spending per episode). (4/7) pic.twitter.com/fXBlbkPVr4
— Laura Burke (@LauraBurke20) June 7, 2019
This is a big finding if it is generalizable to younger populations. Right now, quite a few insurers attempt to control costs by narrowing their networks. Narrowing networks can produce savings in one of two ways. One is the insurer leverages competetive hospital markets to get a price concession. In North Carolina, BCBS North Carolina put their ACA networks out for bid between Duke, UNC and Wake-Med. Those three systems are all high end, comprehensive systems. UNC won the ACA contract to be BCBS-NC’s sole tertiary care hospital system in the Research Triangle. UNC, from what I heard, put in a significantly lower bid than Duke. This lower bid helped BCBS-NC cut their ACA rates substantially in 2019.
The other way premiums can be cut is to screen out sick people from any product offered by a given insurer. Mark Shepard has an excellent paper that showed an incredible amount of adverse selection due to the presence of a single high end hospital in Massachusetts. Other research shows significant adverse selection by the presence of a sole specialty hospital. Excluding a high cost hospital lowers premiums for the people who don’t want access to that high cost hospital but it makes people who want/need access to a high cost and highly specialized care portfolio worse off.
This paper suggests that we need to re-evaluate how we think about attributing costs and benefits of academic medical centers. They may be expensive up front but over a reasonable short time frame, they could be quite cost effective at the value they provide.