Paying for What We Don’t Want
Perhaps you believe the proverb “You get what you pay for.” Recent reports suggest when it comes to health care, we may not want what we pay for.
In January a news article reported on the New Hanover Co., N. C., commission’s decision to sell the Wilmington Regional Health Center to a chain despite its financial solidity, lower prices, and decent clinical quality. The article notes the number of hospitals in the US dropped 4% between 2008 and 2018, but the number owned by state and local governments dropped 14%. While proponents of mergers tout greater efficiency, the data suggest what happens is higher prices for commercial business, with the estimates ranging from 7% to 12%. Part of the motivation in Wilmington seems to have been the fact that 74% of general hospitals in North Carolina are part of large, regional chains, so they feared not being able to compete for contracts, such as teachers, with these chains.
Mercy Hospital, a safety net hospital in Chicago, had been for sale before the pandemic, with no takers. Recently, it was reportedly acquired for $1 by Insight Chicago. Another recent article focuses on what used to be known as LA County General Hospital, now the LAC+USC Medical Center, and other safety net hospitals, who found expenses and uncompensated care going up without offsetting benefits from the Federal relief funds, while many private hospitals were more than adequately compensated, to the point where profitability went up. HCA Healthcare reported $3.8 billion in profit for 2020, higher than in 2019. Tenet Healthcare reported $400 million in profit, and the Mayo Clinic “also posted hundred of millions in profits.”
“A decade and a half ago, private insurance paid about $1.50 for every dollar Medicare paid—for the same hospital services, according to a study by the medical journal Health Affairs. Medicaid paid even less. By 2018, studies showed private insurance was paying almost $2.50 for every dollar Medicare paid for services. And researchers say that every time the government does shell out a dollar, it’s underpaying for what the services actually cost…It’s a disparity that has been growing for the past two decades, as medical costs have gone up and the political will to pay for health care for the poor has not kept pace.”
A related PBS Frontline report included a discussion of the problems faced by Erlanger Hospital in Chattanooga, TN, also a safety net hospital. Recognizing the problem of payer mix, as it is known in the trade, Erlanger invested heavily in “specialty centers” to compete in profitable areas like obstetrics and orthopedics with the two local chains. Unfortunately, they were not successful in “moving up the food chain,” and entered the pandemic saddle with heavy debt, and an uncertain future.
Cook and associates analyzed the United Healthcare Medicare Advantage database comparing actual 2020 utilization of medical services compared to projections based on three prior years’ experience for six conditions: congestive heart failure, chronic obstructive lung disease, type 2 diabetes, hypertension, and end-stage kidney disease. In the period from March to June 2020, they found reductions across the board, concurrent with stay-at-home orders being widely issued. By the end of June, though, in-person physician visits were 70-85% of predicted, but breast cancer screening was down 90%. The authors plan further analysis to look for outcomes suggesting both missed high-value care, and missed low or negative value care.
“The suitability of the care model—in-person, telemedicine, or asynchronous—is a function of the type of problem to be solved, the decision required, the data required for a decision, the relative urgency of decision-making, and the predictability of the response to a decision or treatment. While these are important questions, as suggested by diabetes care, the first question is, “What care adds value?”
If the goal is to maximize profit, I doubt CHF, COPD, and ESKD, are going to be profitable lines of business, while diabetes and hypertension care may be at least break-even, and lead to more cardiovascular or orthopedic procedures, which is where the money currently is for hospitals. The question is do we want hospitals competing for the profitable lines of business and avoiding the expensive, but losing ones? Or do we want sustain some with a focus on caring for the economically and socially disadvantaged?
Numerof notes Insight Chicago, to be successful with Mercy Hospital, must ruthlessly prioritize scarce resources to meet the pressing needs of the community served.
“This is clearly a time for thinking differently about the business model of healthcare. If the new entity attempts to re-establish itself on a dying fee-for-service model, it will fail once again. However, if it embraces a different approach—one that isn’t hospital or provider centric—but rather focuses on the real healthcare needs of the population it chooses to serve, it might actually become a model of what’s possible in serving the needs of a vulnerable population—and make enough money in the process to remain viable.”
As with much else in our society, healthcare financing is a “wicked problem.” There are no easy, “sound-bite” answers, and all are inherently political. While Yogi Berra reportedly said “when you come to a fork in the road, take it,” we seem more inclined to argue, dither, and call each other names. So we will likely continue to pay for what we don’t want.
28 May 2021
 Rau J. If This Self-Sufficient Hospital Cannot Stand Alone, Can Any Public Hospital Survive? 29 January 2021. https://khn.org/news/article/if-this-self-sufficient-hospital-cannot-stand-alone-can-any-public-hospital-survive/. Accessed 29 January 2021.
 Numerof R. What Mercy Hospital’s $1 Sale Says About Safety Nets’ Future. Forbes.com, 9 April 2021. Accessed at https://www.forbes.com/sites/ritanumerof/2021/04/09/what-mercy-hospitals-1-sale-says-about-safety-nets-future/ 28 May 2021.
 Sullivan L, Jingnan H. Hospitals Serving the Poor Struggled During COVID. Wealthy Hospitals Made Millions. 18 May 2021. https://www.npr.org/2021/05/18/996207511/hospitals-serving-the-poor-struggled-during-covid-wealthy-hospitals-made-million. Accessed 19 May 2021.
 Cook DJ, Altman RB, Westman J, Ventura ME. Can the Covid Natural Experiment Teach Us About Care Values and System Preferences. 21 May 2021. https://catalyst.nejm.org/doi/full/10.1056/CAT.21.0063.
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