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Analysis

To Slow Costs, Slow Revenue, Says Healthcare Economist

By Tinker Ready  
   September 22, 2016

HLM: The Health Policy Commission just published a report on community hospitals. Can you talk about the issues smaller, independent facilities face?

ALTMAN: It is extremely difficult in this era for community hospitals to stay independent. [They] are facing a whole set of problems. They do not have the bargaining power, vis-à-vis the insurance companies, that the big systems do.

They face the perception that they are lower quality because they don't have the fancy new equipment and they don't have the high priced doctors.

They are perceived as lower quality and they get less money.

If you have an insurance policy that will pay you whether you go to a [less expensive hospital or a] hospital that costs 50% more, and you perceive that the [one that charges] 50% more means higher quality, and it doesn't cost you anything, why go to the lower costs facility?

So, these community hospitals are facing declining patient loads, reduced occupancy, and [the perception of] lower quality.

I say perceived—in many case the quality of the institutions is good, if not better for certain types of illness. You go into these big academic institutions, while they may be great for very exotic things, for basic things, they often don't do as good a job. The quality measure back that up.

Bigness does have some advantages. That's the argument being made by these big systems. They are the only ones that can really put together these needed organizations that can make ACOs work and so on.

Tinker Ready is a contributing writer at HealthLeaders Media.

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