Q&A: How Can My Hospital Cost More But Help Me Less? Four Answers

Money can’t buy you love — and it can’t necessarily buy you better health care, either. On Monday, we posted about a new report — With Sepsis, Higher Cost May Not Mean Living Longer. Still feeling baffled, I spoke today with the paper’s lead author. Dr. Tara Lagu is a research scientist at the Center for Quality of Care Research at Baystate Medical Center, and an assistant professor of medicine at Tufts. I’ve lightly distilled her answers.

Q: This is going to be one of those “Talk to me like I’m stupid” interviews. How can this be, that higher cost doesn't mean better results? I can’t help but think about paying for health care as being something like buying a car. In rough terms, if you pay $200,000 for a Ferrari you get a better car than if you pay $10,000 for a cheapo sedan. How is it different?

A: I think it’s a great question. It turns out hospital spending is much more complex than it would appear. There’s a difference between costs and charges. Charges are the numbers on a patient’s bill; cost is what it costs the hospital to provide those services. So because we have access to all these hospitals’ accounting systems we actually had what it cost the hospitals to provide the care. That is unique.

It turns out hospital costs are not just what you do to a patient. What you do to a patient is the smallest percentage of hospital costs. One study found that fixed costs represent up to 70 or 80 percent of hospitalization: the cost of the building, heating, the physical structure of the hospital, and the cost of labor, the wages. You can imagine those fixed costs vary by a few things, including the region of the country you’re in. The cost of labor is much higher in New York than in Arkansas. It also depends on whether you just built a new hospital building — that’s an expensive endeavor and gets factored into the costs of care.

Then you have variable costs that include the cost of providing the care: things like doing the MRI, giving the necessary antibiotics and putting a patient on a ventilator. Bundled up in there is how much it costs hospitals to acquire the services or products they’re giving; for example, belonging to a purchasing group can bring prices down.

So hospital costs are extremely complex, but all that said, you also have the fact that some hospitals will then take a different approach to the way they treat patients with sepsis. This is what we were really trying to get at. Some aggressively pursue the source of infection. Other hospitals may do the basic bundle of treatment and then watch and wait to see what the cultures grow and how the patient presents. Some hospitals may provide high quality care and get patients more quickly in and out; other hospitals may provide lower quality care and the patients may have complications.

This is how you get into the question of how it can be that higher cost doesn’t equal better care. There are these possibilities:

1 - There’s some artifact in the spending that we can’t account for, one of the fixed costs or variable costs.
2 - Some hospitals are very aggressive about how many tests they do in attempting to diagnose the source of the problem. There’s no evidence to show that doing more tests is necessary, but it’s a style issue. You can’t say it’s not the right thing to do but you can’t say it is the right thing to do. We need more research on the right approach.
3 - Some hospitals provide lower quality care and their patients get more complications and their care thus gets more expensive. .
4 - Some hospitals may be more aggressive about pursuing end-of-life options than others; they may identify patients with poor prognoses and be aggressive about talking to them and their families about not being aggressive with care.

Those are four possible mechanisms that could lead to higher costs without showing better outcomes.

Q: So what do I do as a patient, if my stereotype of higher costs meaning better care is so wrong?

A: There are methods for picking a hospital that the vast majority of patientts don’t know about. The government's “Hospital Compare Website” offers quality metrics — they’re for limited conditions, including pneumonia, but can give you a sense of a hospital’s commitment to quality. But only 6% of patients are aware Hospital Compare exists. Coming soon — it’s not in the US yet but in England already — there will be online patient feedback about hospital care.

Q: Can you drop a dime on the hospitals that were high cost with poor outcomes?
A: We don’t even know who our hospitals are. This is a totally blinded data set. In any case, if we just identified the so-called good hospitals and poor-value hospitals, we’d miss out on the opportunity to help hospitals improve. The goal is to figure out the optimal strategy and apply it across the board.