The current issue of Health Affairs has an important paper by O’Neill and Hartz. It is behind a paywall (I subscribe so have access to the whole thing), but the following is from the abstract.
Physician-owned cardiac specialty hospitals advertise that they have outstanding physicians and results. To test this assertion, we examined who gets referred to these hospitals, as well as whether different results occur when specialty physicians split their caseloads among specialty and general hospitals in the same markets. Using data on 210,135 patients who underwent percutaneous coronary interventions in Texas during 2004–07, we found that the risk-adjusted in-hospital mortality rate for patients treated at specialty hospitals was significantly below the rate for all hospitals in the state (0.68 percent versus 1.50 percent). However, the rate was significantly higher when physicians who owned cardiac specialty hospitals treated patients in general hospitals (2.27 percent versus 1.50 percent). In addition, several patient characteristics were associated with a lower likelihood of being admitted to a cardiac hospital for cardiac care, such as being African American or Hispanic and having Medicaid or no health insurance. After adjustment for patient severity and number of procedures performed, the overall outcomes for cardiologists who owned specialty hospitals were not significantly different from the “average outcomes” obtained at noncardiac hospitals. In contrast to previous studies, patient outcomes were found to be highly dependent on the type of hospital where the procedure was performed. To remove a potential source of bias and achieve a more balanced comparison, the quality statistics reported by physician-owned cardiac hospitals should be adjusted to incorporate the high rates of poor outcomes for the many procedures done by their cardiologists at nearby noncardiac hospitals.
Private specialty hospitals advertise better outcomes. They also offer amenities such as “private rooms, valet parking, flat screen TVs and gourmet meals”. Our local Orthopedic specialty hospital has a chef on call 24 hours a day and you can order almost anything. How do they do all of this, and offer better care. Mostly they don’t. This study demonstrates what we in the field already knew. These hospitals cherry pick out the healthier patients with better paying insurance. When these same physicians work at nearby hospitals, their outcomes are worse. This is largely because they are working on sicker patients.
This is medicine behaving like a business. Entrepreneurial physicians have figured out how to skim off the best paying cases. They attract those patients with facilities that look like first class hotels, and offer many of the same amenities. The downside here, is that community hospitals are left trying to run their facilities with the best payers no longer available to them. Worse, if the private hospital has a patient with a very poor outcome, or a patient who needs prolonged care, they are transferred to a university hospital or, sometimes, the nearby community hospital. These other facilities maintain the specialists needed to treat complications, rather than hiring chefs to standby 24 hours a day. True, specialty hospitals do have good outcomes, but since their patients started out healthier, they were going to have better outcomes anyway.
This study demonstrates that physician owned specialty hospitals are offering care that is probably the same in quality as non-specialty hospitals, but the cost more due to the level of amenities offered. This is a model advocated by some to reduce costs. It clearly does not do so. Should we allow such hospitals to continue to exist so that people have the option of better amenities when they can afford them? I think this is reasonable, but we need to price in the externalities. We can do this by allowing insurance companies to pay less when patients go to one of these facilities, or we can charge more when their patients need care at another institution. I am fairly agnostic as to how we do this. What I think we need to remember, is that these facilities are not cheaper, and at present, they are probably adding costs on to the community, non-profit hospitals.