The New Health Dialogue

Jordan Rau of Kaiser Health News has penned a must-read on rapidly rising hospital prices in California that lays out in compelling detail some of the factors that drive sharp differences particularly within local communities. If you are concerned about provider costs continuing to rise in the wake of reform (as you must be if you care about health policy) you should go over and read the whole thing.  

One of the things that jumped out for me was further documentation of the connection between market share and payment rates. We hear a lot about this issue as it relates to differences across regions but this dynamic plays out within local communities as well:

Consider John Muir Health, a two-hospital nonprofit system in the East Bay. With campuses in Concord and Walnut Creek, John Muir has the biggest footprint in the local hospital market, accounting for 54 percent of all the acute care inpatient stays in 2009, more than any other hospital group, according to state data.  At the other end is San Ramon Medical Center, a Tenet-owned, for-profit hospital, with 10 percent of the acute care inpatients.

The lowest amount the insurer Aetna paid John Muir for an outpatient colonoscopy was $3,185, according to Aetna’s website. Aetna paid $1,483 to San Ramon Regional Medical Center for the same service. The least Aetna paid John Muir for an uncomplicated birth was $7,722, while the lowest price for a birth at San Ramon was $5,278.

A spokesperson for John Muir provided a series of caveats that purport to account for their higher prices such as a greater proportion of public patients and some specialty services they provide. These are valid points, but the disparities among hospitals are massive rather than marginal: 115% higher for a standard colonoscopy in the example above.  These differences become even more mind-boggling when you factor in the lack of a systematic connection between cost and quality reemphasized by Rau in his article and widely-reported on during the healthcare debate.

Federal health reform aims to bring more transparency and rationality to our health care system; how successful it is with regard to hospital pricing remains to be seen. Some of the elements of reform aimed at bringing costs under control, such as the Independent Payment Advisory Board, are those most directly in the sights of those looking to repeal or scale back elements of the law. But reform opponents should be careful. Having made this very expensive hospital bed, they’re going to have to sleep in it, perhaps at twice or three times the cost of another bed just a few miles down the road.