High cost can be high value

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.

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.

11 replies
  1. 1
    TenguPhule says:

    Speaking of high costs…..

    US homeopaths claim ‘therapies’ prevent measles and ‘cure’ autism

    Thousands of American children are being put on homeopathic alternatives to vaccination by practitioners who claim they can prevent measles and “cure” autism, the Guardian has learned.

    At least 200 homeopaths in the US are practicing a controversial “therapy” known as Cease that falsely asserts that it has the power to treat and even cure autism. The acronym stands for Complete Elimination of Autistic Spectrum Expression.

    The “therapy” relies in part on administering high doses of vitamin C. Advocates falsely say it repairs the harm caused by vaccination – a double untruth as most vaccines are safe and there is no link between vaccines and autism, a condition for which there is no cure.

    In addition 250 homeopaths, some of whom also practice Cease, are promoting “homeoprophylaxis” that advertises itself as an “immunological education program”. More than 2,000 American children have been put on the program which claims to build natural immunity against infectious diseases, though there is no scientific evidence that it works.

    Parents who opt to follow Cease or homeoprophylaxis are potentially exposing their children, as well as others around them, to life-threatening illness. The implicit message behind both therapies is that vaccines are harmful and should be avoided.

    The snake oil folks are going to injure and kill a lot of children with stupid and ignorant parents.

  2. 2
    FlyingToaster (Tablet) says:

    Our HMO plan steers us clear of the Partners and specialty hospitals here in Boston. (Mass General, Brigham & Women’s, Dana Farber, Childrens, etc.) We are fine with it because all of our doctors are at/with Mt. Auburn (part of Harvard Med School). We want to be at a teaching hospital, but we don’t have to be at one in the expensive parts of town.

    And if we need specialty care, we can still end up referred over there, and it’s covered (with pre-approval).

  3. 3
    taumatugo says:

    No matter the healthcare pie is sliced, the middle man will not let go of its share. It is gouging taken to the umpteen degree. A great deal of complexity is how the profit before care miscreant take advantage of the bumper sticker mentality consumers.

  4. 4
    Steve in the ATL says:

    @TenguPhule: homeopathy? What a scam.

    CBD oil is the all-purpose miracle cure!

  5. 5
    john fremont says:

    Just think , 20 years ago people were telling us we needed colloidal silver! We know so much more now! What a time to be alive!

  6. 6
    Raven says:

    @Steve in the ATL: I dropped a bill on it an it ain’t done diddly shit.

  7. 7
    Raven says:

    @john fremont: And DMSO!

  8. 8
    Raven says:

    @Steve in the ATL: Then again I used to spend a lot more than that!

  9. 9
    Raven says:

    @Steve in the ATL: Hey, did you know Jeff Walls from Guadalcanal Diary? He passed away and there is a memorial gig for him tonight.

  10. 10
    Ohio Mom says:

    @Steve in the ATL: Yes, I just got an email telling me that today! And yesterday, and the day before that…which reminds me, time to empty the email Trash file.

    @TenguPhule: Not only could there never be a cure for autism (for many reasons I don’t have time to go into), there could never even be A treatment for autism because there are multiple autisms with different etiologies, presentations, prognoses, etc.

    What autism really needs is a very strong social service safety net, so people with autism can have whatever supports they need to live their best lives. But you knew that.

  11. 11

    @TenguPhule: Oh noes not the homeopaths!

Comments are closed.