Consumers Union (C.U.) has released figures that suggest that big, famous and expensive hospitals are not necessarily the best for many surgical-patient outcomes.
The nonprofit publisher of Consumer Reports magazine released ratings of 2,463 U.S. hospitals in all 50 states to rank the quality of surgical care using two measures: the percentage of Medicare patients who died in the hospital during or after their surgery, and the percentage who stayed in the hospital longer than expected based on the usual standards of care for their conditions. Both are indicators of complications and overall quality of care, said John Santa, M.D., medical director of Consumer Reports Health.
Many nationally renowned hospitals earned only mediocre ratings. Consider that The Cleveland Clinic, some Mayo Clinic hospitals in Minnesota, and Johns Hopkins Hospital, in Baltimore, for instance, rated no better than midway between “better” and “worse” on the CU scale, worse than many small hospitals.
The ratings don’t explicitly incorporate such complications as infections, heart attacks, strokes or other post-surgical problems. However, Dr. Santa told Reuters that the length-of-stay data captures those problems.
Many teaching hospitals usually found at the top of rankings like those of U.S. News & World Report, fell in the middle.
“This isn’t the first time we’ve seen this sort of surprise,” Marty Makary, M.D., a surgeon at Johns Hopkins Hospital and author of the 2012 book, Unaccountable: What Hospitals Won’t Tell You and How Transparency Can Revolutionize Health Care.
“For a complex procedure you’re probably better off at a well-known academic hospital, but for many common operations less-known, smaller hospitals have mastered the procedures and may do even better” with post-surgical care.
When it comes to hospitals, which benefit most from high healthcare prices? It may sound counter-intuitive, but a group of not-for-profit hospitals appear to be among those doing the best business.
At least, that’s the idea in a study published Monday in Health Affairs. It analyzes how hospitals make money and ranks the nation’s 10 most profitable ones — those making hundreds of millions of dollars through their inpatient and outpatient care. Seven were nonprofits, including the top four.
The findings are based on Medicare cost reports from fiscal year 2013, analyzing almost 3,000 acute-care hospitals. About 60 percent were nonprofit, while one in four were for-profit. The rest were public, or government-owned.
The top three were nonprofits. Gundersen Lutheran Medical Center, part of the large Wisconsin-based health system, made the most money: $302.5 million just on its patients. California-based Sutter Medical Center, also part of a large system, came in second. Stanford Hospital, also in California, was third.
Those hospitals share a key attribute, the authors argued. Whether because of their size, their prestige or their influence in the community, they have more power to negotiate prices, meaning that they can charge insurers more for the care they give.
“They are the only provider — or they are clearly the dominant provider — and the insurers in that community are relatively weaker, and there are a lot of them,” said Gerard Anderson, director of the Johns Hopkins University Center for Hospital Finance and Management, and one of the study’s authors. “[The hospitals] can take advantage of their market position. And they do.”
The researchers looked only at profits made from actual medical care, meaning they didn’t factor in the often substantial amount of money hospitals make from sources like investments, grants, donations, parking fees and property rentals. The idea was to focus on what hospitals make from patients alone, said Ge Bai, the study’s primary author. Bai is currently an assistant professor of accounting at Washington and Lee University, though she’s joining the faculty at Johns Hopkins’s Carey Business School in the fall.
Most hospitals — particularly nonprofits — don’t actually earn money from patient care. Rather, a large market share or inclusion in a big health system — like Gundersen — better predicted how well hospitals would do.
“Many of the hospitals best-positioned to earn profits are non-profits — they’re the ones often that have the most prestige, they’re the largest hospitals,” said Paul Ginsburg, the director of the Center for Health Policy at the Brookings Institution and director of public policy at the University of Southern California’s Schaeffer Center for Health Policy and Economics.
Ginsburg, an expert in health economics, wasn’t affiliated with the study.
Market muscle matters in bargaining with insurers. That may be driving the hospital industry trend toward consolidation.
In recent years, many hospitals have merged to form larger health networks. They argue that doing so leads to better service to patients — for instance, care can be coordinated across more locations. In addition, they say they can then better negotiate with insurance companies. The study notes that in markets dominated by insurance companies, hospitals were less likely to profit from patient services.
But mergers have also been shown to increase the cost of healthcare. That’s because they often give hospitals leverage to set higher prices or charge insurance companies more. Likewise, brand-name hospitals, such as those affiliated with prestigious universities, can exert a similar pressure, Bai said. For instance, she explained, if she were shopping for health insurance in Baltimore she wouldn’t buy a plan that didn’t include Johns Hopkins Hospital.
Increased health care costs, the study authors said, are felt by consumers — either in the form of higher health plan premiums, or, in higher hospital bills for patients who don’t have insurance or who receive care out of network. The latter situation happens more often than people expect, Bai said, especially in emergencies, when people don’t have time to pick who’ll treat them.
The study also adds to the debate about whether the tax status of nonprofit hospitals needs more thorough scrutiny, Ginsburg said. They typically don’t have to pay taxes because, the idea goes, they provide a public service. But the paper’s findings “very clearly raise the issue about … whether these hospitals need or deserve the tax exemption.”
That’s an issue federal policy has tried to address, too. The 2010 health law, for instance, included a provision intended to make nonprofit hospitals prove that they deserve their tax-exemption — increasing the standards for the “community benefit” those hospitals are supposed to provide.
Often, the local hospital is the largest economic engine in a community, and not taxing it means the local governments forgo a significant amount of revenue. The benefit a not-for-profit hospital provides hardly differs from that provided by one that’s for-profit, especially when both types of hospitals have rosy financial outlooks, based on the patient care, Ginsburg said.
Meanwhile, Bai said, the findings also support the notion that hospital mergers need to be better regulated. Setting federal limits on what hospitals can charge for a particular service might also help, she added. Maryland and West Virginia have experimented with that idea. Despite outcry from some executives, the study notes, hospitals in those states are still profiting.
Without that kind of oversight, Bai said, consumers will get shortchanged.
“We’re absolutely paying a higher price,” she said.
A quaint part of the Johns Hopkins Hospital complex.
The Baltimore Sun reports that “Baltimore residents living in struggling neighborhoods hard hit by riots last April will be able to apply for 375 new jobs at area hospitals thanks to an initiative approved by state hospital rate regulators.”
Hospitals will pay “a share of the cost of the program and the rest {will} come from hospital rate increases. The plan calls for as much as $10 million in annual rate increases and $5 million a year from the hospital budgets.”
“Administrators at Johns Hopkins Hospital had called for 1,000 new jobs in an effort to counter the despair they witnessed in the unrest last spring over Freddie Gray‘s death a week after he suffered a severe spinal injury while in police custody.”
But “the plan drew praise from supporters who view the positions as essential to lifting up communities with few opportunities.”
