Lower-Cost May Mean Better Health Outcomes

[funologist.org]

Proponents of health care price and quality transparency believe that by providing cost and quality information about physicians and hospitals, individuals will choose those providers with high quality scores and lowest costs. The argument is that providing this information to patients, the demand for high-quality health care at the lowest cost will reinvigorate competition in the health care market, thereby driving down the overall cost of care.

Because higher costs are not always indicative of the best quality, the goal is to showcase the connection between quality scores and price so that patients can more easily make informed decisions about their health care.

This disconnect between lower costs and better care is not unusual. An analysis by Modern Healthcare reported this weekend indicated that in seven of 12 cities examined, the hospital with the lower average cost for inpatient and outpatient percutaneous coronary intervention ("PCI") also had the lower readmission rate for PCI patients.

This analysis emphasizes the importance of providing side-by-side cost and quality data. In order for the U.S. healthcare market to start behaving like other markets, consumers (or patients) must have access to the same kinds of information for their health care insurers and providers as they do for cell phones and cars. Then, hospitals will no longer be able to add a large markup over their actual costs of delivering the services because the value-add simply won't be justifiable.

Medicare Readmission Penalties - No Joke

The Medicare readmission penalty program, part of Obamacare, is finally showing its teeth.  Media outlets across the country are reporting this week on the $227 million in fines imposed on 2,225 hospitals -- 2/3 of the Medicare-qualified hospitals in the U.S.

The program allows the government to assess penalties in the form of reductions to per-patient payments that hospitals would receive under Medicare if a hospital readmits patients covered by Medicare within 30 days of being discharged.

The theory is that many hospital readmissions are avoidable and reducing the rate of readmission would create a more efficient healthcare system and, therefore, reduce overall healthcare costs.  Before Obamacare was passed, hospitals often cashed in on these readmissions, according to a Medicare Payment Advisory Board report submitted to Congress in 2011. The report concluded that reducing readmissions by only 10% would save Medicare at least $1 billion.

However much criticism surrounds this penalty provision of the new health care reform law.  For instance, Kaiser Health news reported that most of the hard-hit hospitals are those that serve the greatest number of low-income patients who struggle most with post-hospital instructions and self-care. These patients also tend to be the most difficult to contact for follow-up appointments and check-ups, resulting in more frequent hospital admissions.

Currently the law only penalizes readmissions for heart attack, heart failure, and pneumonia.  Beginning next year, the law will also track hip and knee surgeries and chronic obstructive pulmonary disease. Hospitals can lose up to 2% of Medicare payments per patients -- and for hospitals that operate on a 1-2% profit margin, this can be a very scary prospect.

Search for your hospital on this chart provided by Kaiser Health News.