Hospital Type and Cost of Care and Quality

By January 27, 2017Commentary

An interesting piece of research in Health Services Research examines whether hospital system affiliation and/or involvement in managed care plan ownership are related to cost of care or quality measures.   (HSR Article)   The authors looked at about 100 million discharges from 3957 acute care hospitals in 44 states during the period 2010 to 2012.  The cost outcomes were a measure of the hospital’s actual cost of providing care and length of stay.  The quality ones were mortality rates for common conditions and uncomplicated Caesarean rate.  Hospitals were divided into three types:  independent; part of a larger health system that was run in a centralized manner; and part of a larger system that was not centralized.  A centralized system was one in which there was a unitary management and staff for major functions.  A hospital’s involvement in managed care through ownership of a health plan was also examined.

58% of the hospitals were part of a system; with 457 being in centralized ones and 1821 in non-centralized systems.  The patient mix was similar across all three hospital types.  Independent hospitals were more likely to be public, small and non-urban.  Centralized system facilities saw wealthier patients, were more likely to be private non-profits, more likely to be teaching facilities and used more technology.  About half of these centralized institutions had an ownership stake in managed care plans, versus only 14% of non-centralized system hospitals and 12% of independent facilities.  The overall results of the analysis suggest that really there is little difference in cost or quality outcomes.  System hospitals had slightly higher cost per discharge but no length of stay difference, compared to independents.  They had slightly better mortality performance.  And among centralized system hospitals there was a similar slightly higher cost and length of stay, while mortality comparisons were mixed–some a little better, some a little worse.  The relationship to managed care ownership again showed that these hospitals had slightly higher cost, very slightly higher length of stay and mixed mortality comparisons.

While larger hospital systems should have some scale and financial advantages, they also have been shown in prior research to have greater market power, which leads to higher prices, which perversely seems to lead to higher operational costs within these hospitals.  So any scale advantages are used to generate more revenue, not to lower costs of care.

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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