In Healthcare, You Don't Always Get What You Pay For

HealthLeaders Media Staff, May 22, 2009

A recent study analyzed spending and quality measures at the individual hospital level, and found that there's no link between high-cost care and high-quality care.

The results, published in the journal Health Affairs by Laura Yasaitis, Elliott Fisher, and Jonathan Skinner of Dartmouth and Amitabh Chandra of Harvard, are not particularly surprising, because previous studies have shown no link between spending and quality at the regional level. What is somewhat surprising is that the study confirmed that in some cases, patients at the household-name hospitals received worse care than they might have at their local community hospital.

Anyone who's recently bought a BMW or Land Rover lately can relate.

Despite the fact that those brand names carry a lot of cachet, initial quality rankings from J.D. Power & Associates show that you'd have been much better off in initial quality by purchasing a much cheaper Toyota, Honda, or even a Mercury. You just wouldn't have as much brag factor doing it. Similarly, the fact that you were treated with the latest technological gee-gaws at the hospital where you received your coronary artery bypass or that you received the most expensive ceramic hip doesn't mean your outcome will be any better.

To make sure their results were not skewed by the severity of patients' illnesses, the authors examined end-of-life spending among the 2,172 U.S. hospitals with complete data on utilization, spending, and quality. Adjusted for the age, race, sex, and disease mix of each hospital's patients, average EOL spending was $16,059 for the lowest-spending fifth of hospitals. Average spending for hospitals in the highest-spending fifth was $34,742.

According to the study, hospitals that spent more actually performed worse on overall quality measures than lower-spending hospitals. That doesn't look good in the era of frugality that we're living in now. It also doesn't look good to a government that seems intent on cutting unsustainable healthcare costs somehow, some way.

It also doesn't look good to the consumer. Ask BMW or Land Rover. When your high-priced model isn't as reliable as the pedestrian competition, look out market share.

So what's a hospital leader to do with this information? Well, like the J.D. Power rankings for vehicles, it's another tool in the box to determine how well your hospital is doing on quality. You might be making money hand over fist now, but is it fool's gold? What will happen when cost and quality are more closely analyzed, as they are in this study? What happens when that analysis means lower reimbursement?

This study could also be considered a referendum on complexity. The best tests and the highest-cost diagnostic devices don't work as well when basic procedures like giving aspirin on admission for chest pain aren't followed. The same way the most sophisticated GPS system can't make up for the failings of a defective car battery, for example.

This latest study should be welcomed as a reminder to senior leaders that in a new, dynamic healthcare marketplace, if you're going to cost more, you'd better have the quality outcomes data to justify that extra cost.

Living on past glories or reputational excellence embedded in a fancy brand name just won't cut it anymore.

Note: You can sign up to receive HealthLeaders Media Corner Office, a free weekly e-newsletter that reports on key management trends and strategies that affect healthcare CEOs and senior leaders.
Facebook icon
LinkedIn icon
Twitter icon