You don't always get what you pay for

The burning in his chest and aching in his arm told Charles, a resident of Kernersville, N.C., that he had to go to the hospital.

But which hospital? Rather than check published data comparing hospital quality and costs, the computer analyst did what many Americans do. He said he chose a hospital based on a recommendation from someone he knew—in this case, his daughter, who previously had received good care at Forsyth Medical Center in nearby Winston-Salem.

After he arrived at the emergency room, a cardiologist performed an emergency cardiac catheterization, known as a percutaneous coronary intervention, or PCI. He snaked a thin tube from Charles' groin through his blood vessels to his heart, broke up a blood clot, and left behind a metal stent to keep the artery open. Charles, who didn't want his last name used for this article, spent four days in the hospital and later returned for routine follow-up care.

Charles, now 60, didn't know it at the time, but the hospital he chose, Forsyth, has a lower risk-adjusted readmission rate following PCIs than the other major local hospital that performs PCI procedures, Wake Forest Baptist Medical Center, according to data published by the CMS this past summer. He also didn't know that Forsyth—now called Novant Health Forsyth Medical Center—also has a lower average cost for performing the procedure, according to data compiled by the American Hospital Directory.

The data show that it cost Novant Health Forsyth about $12,000 on average to deliver 195 inpatient PCIs in 2011, compared with about $18,000 apiece for 350 PCI procedures at Wake Forest Baptist. At the same time, Novant Health Forsyth had a lower 30-day readmission rate for PCI patients in 2011 than Wake Forest Baptist—10.3% vs. 13.2%. The national average was 11.9%. The CMS and many experts consider readmission rates a valid indicator of quality of care, arguing that patients are less likely to need a hospital stay within 30 days if they received high-quality care.

Similarly, in Lincoln, Neb., the Nebraska Heart Institute and Heart Hospital reported an average cost of about $7,900 to perform inpatient PCIs in 2011 compared with about $17,000 at BryanLGH Medical Center. Meanwhile, Nebraska Heart had one of the lowest risk-adjusted readmission rates in the country for PCI patients in 2011, at 9.1%, compared with 11.7% at BryanLGH. Nebraska Heart was acquired by Catholic Health Initiatives in late 2011.

Similar disconnects between lower costs and better outcomes are not unusual. A Modern Healthcare analysis found that in seven of 12 cities examined, the hospital with the lower average cost for inpatient and outpatient PCI procedures also had a lower readmission rate for PCI patients. In the other five cities, hospitals with a higher average cost had lower readmission rates.

“Just because your insurance company paid a whole lot for your hospitalization doesn't mean it was good quality to you,” said Dr. Gregg Fonarow, co-director of the UCLA Preventative Cardiology Program in Los Angeles. He hopes more findings such as those on the costs and quality for PCI procedures will focus healthcare providers and insurers on delivering value to patients. “The hope is, with continued reporting of outcomes metrics and the beginning of reporting of cost and charge data, we can get there,” he said.

Chapin White, a senior health researcher at the Center for Studying Health System Change, said, “The raw material is there for a good conversation about which hospitals are expensive, which hospitals are cheap, and are we getting our money's worth from the expensive hospitals.”

For its analysis, Modern Healthcare selected 12 cities where PCI readmissions data were available on two or more competing hospitals with a sizable PCI volume, and then compared cost and readmission rates. While limited in scope, the analysis suggests there is no consistent relationship between hospitals spending more to perform a procedure and their achieving better patient outcomes. A hospital's internal costs for delivering a service matter because those costs typically are reflected in what the hospital charges private insurers and patients.

There is a growing movement to make cost and quality data on hospitals and other healthcare providers publicly available and accessible to insurers, employers and consumers. Insurers including Cigna Corp. are offering price quotes and quality-of-care information to their beneficiaries on websites and mobile phone apps.

Government sites such as Hospital Compare regularly add new dimensions of patient-safety data. Consumer Reports publishes hospital ratings, which the Leapfrog Group and U.S. News and World Report previously started doing. Many states have their own hospital-ratings sites. North Carolina requires providers to post prices for the most common services and procedures. And businesses and not-for-profit groups have sprung up around the country offering consumers and employers easier access to comparative information on provider cost and quality.

The disconnect Modern Healthcare found between cost and quality for this one procedure in 12 markets suggests that the transparency movement, if it gains critical mass across the country, could put pressure on hospitals to become more cost-efficient and improve their outcomes. That pressure could be especially great on higher-cost facilities that can't demonstrate better quality. Otherwise, payers and patients may take their business elsewhere.

Leah Binder, president and CEO of hospital-ratings firm Leapfrog Group, said the lack of a consistent link between what hospitals spend to provide care and how they perform on quality measures holds true for every procedure and every hospital in the country.

“There are no legitimate reasons for the illogical variation in health costs across the country,” she said.

Wake Forest Baptist, an 853-bed teaching hospital affiliated with Wake Forest University, declined requests for comment for this article.

But a family physician on staff there—Dr. Richard Lord, medical director of the Southside United Health and Wellness Center, a community health center in Winston-Salem—said Wake Forest Baptist's higher costs were probably related to its mission as a teaching hospital. He questioned whether the readmission rate is a valid measure of quality. Readmission rates, he said, are related to factors beyond a hospital's control, including patients' educational and socio-economic status, health literacy and family support.

Dr. Robert Preli, medical director of the cardiac catheterization lab at 681-bed Novant Health Forsyth, said Novant gives him and his fellow cardiologists regular reports on the cost of each case they treat. He said the data have been helpful in narrowing variations in costs and practice styles. “No one likes to be an outlier, so at a minimum, the awareness is incredibly powerful,” Preli said.

BryanLGH Medical Center President John Woodrich said his hospital has higher costs than the Nebraska Heart Institute because it's a safety net facility and has a sicker patient population. He noted that the heart hospital does not have an emergency department.

Officials at Nebraska Heart Institute disputed that, saying their patients are just as complex as those at BryanLGH.

Still, Woodrich agreed that increasing transparency in hospital costs would affect hospital negotiations with insurers. He predicted that the shift to transparent costs and prices eventually will lead hospitals and insurers to jettison the byzantine pricing system that has resulted from hospitals each having dozens of contracts with different insurers paying different rates.

“I believe that the whole industry needs to rebase their charges and negotiate based on costs,” he said.

Indeed, North Carolina's largest insurer, Blue Cross and Blue Shield of North Carolina, said it's been able to convince some hospitals to bring rates closer to their actual costs by allowing them to join tiered networks that rate hospitals and doctors on value. Higher-value providers with better quality and lower prices can be included in the Blue Distinction Center Plus program, which rates the hospitals based on publicly available data and then offers members discounts to go to the better-rated hospitals. “Quality is an important component of that, but you can't leave cost off the table any longer,” said Dr. Patti Forest, senior medical director for quality and network performance at the North Carolina Blues. “Transparency is pushing this forward much more quickly than has happened in the past.”

Percutaneous coronary intervention is one of the most common procedures in American medicine. Some PCIs are performed in situations where patients are at risk of suffering an immediate heart attack, which doesn't leave much opportunity for patients to engage in price and quality shopping among hospitals. But a significant percentage of PCIs are nonacute, outpatient cases.

For its analysis, Modern Healthcare used hospital PCI readmissions data that are voluntarily submitted by hundreds of U.S. hospitals. The information was analyzed and adjusted to account for differences in patients' severity of illness and age by the American College of Cardiology's National Cardiovascular Data Registry and then published last July on the CMS' Hospital Compare website.

Modern Healthcare also obtained data on hospitals' average facility cost for inpatient and outpatient PCIs. Data-analysis firm American Hospital Directory, which provided the cost information, used each hospital's sticker price and multiplied that by the hospital's unique cost-to-charge ratio reported by hospitals to Medicare. The cost-to-charge ratio is an estimate of true cost for all patients, not only those on Medicare.

With as many as 600,000 acute and nonemergency PCIs performed each year, experts say there should be some uniformity in what it costs, what devices are used and how well patients will recover. But that's not the case. Modern Healthcare's analysis found wide variation in costs and readmission rates.

Many quality experts say readmission rates are a key measure of quality of care, though not everyone agrees. “Some people take issue with whether readmission is a safety indicator, but I think most people accept it as a quality indicator,” said Dr. John Santa, director of Consumer Reports' Health Ratings Center.

In a statement on the Hospital Compare website, the CMS states: “Unplanned readmissions after a PCI may reflect the quality of care that hospitals provide to patients before, during and after the procedure. For example, patients may need to be readmitted to the hospital for complications of the care they received during their hospital stay, insufficient discharge planning at the end of their hospital stay, or a worsening of their condition after they leave the hospital.”

Insurance industry officials say increased transparency in costs and quality of care already is making a difference in rate negotiations with hospitals.

Dr. Dick Salmon, Cigna's national medical director for performance measurement and improvement, said the information is transforming discussions about fee schedules with more “real facts” than were available in previous years.

The recent growth of high-deductible insurance plans also has helped fuel the movement. Such plans expose consumers to more healthcare costs and make them more sensitive to what providers charge. About 1 in 5 Americans now has a high-deductible plan, a dramatic increase since 2006, according to the Kaiser Family Foundation.

Consumers are confronting the question of whether high-priced providers are worth the money even if they provide relatively high-quality care.

“You can have a facility that has very high quality and almost zero complications, but if the price premium they're extracting from the market is 50% higher than the average, it doesn't matter how much they improve the quality,” said Francois de Brantes, executive director of the Health Care Incentives Improvement Institute, an advocacy group based in Newtown, Conn. “They will never have better value no matter what they do.”

When U.S. healthcare starts behaving like other markets where price and quality information are accessible, hospitals no longer will be able to add a large markup over their actual costs of delivering the services, de Brantes said. “You can't justify anything beyond maybe a 20% differential,” he said. “You can justify it to yourself, but from a market-value perspective, no one can justify it.”

Lord, the Wake Forest Baptist family physician, agreed that when the public has easy access to valid cost and quality information, that will help both patients and physicians make decisions about what hospitals to use. “If there were strongly compelling evidence to prove that Forsyth was markedly better than Wake Forest,” he said, “then I would want to refer my patients there because we all want the best quality.”

Follow Joe Carlson on Twitter: @MHJCarlson