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STAT News: Health systems have much higher prices, only marginally better quality, new study finds

The claims have become almost ubiquitous. Hospital CEO after hospital CEO stands at a podium and promises the merger being announced will improve quality and lower costs.

Once deals close, though, there tends to be little, if any, follow-up to determine whether those things actually happened. A new Journal of the American Medical Association study adds to the growing body of evidence that they don’t. The authors looked across a large swath of the country’s hospitals and physicians found that while quality did improve marginally, the prices paid for services delivered by health system hospitals and doctors was significantly higher than their non-system peers.

“You start to feel really hopeful when you hear about this, ‘Yeah, we can really improve health care,’ and then when you look at it, it’s just not there,” said Nancy Beaulieu, a study author and research associate in Harvard Medical School’s department of health care policy.

Even knowing that, it’s hard to avoid health systems. Most hospitals and 40% of doctors were members of systems in 2018, according to the new report, which drew on 25 different data sources — including an unidentified commercial insurer with 20 million members — and identified 580 health systems in 2018. Among traditional Medicare patients, system-affiliated hospitals and physicians accounted for 89% of hospital admissions and 29% of physician visits that year.The differences in clinical quality the authors found between system and non-system providers was patchy at best. Patients who got care from systems were somewhat more likely to get flu vaccines — 78.8% versus 76.1% — and they fared slightly better on most measures of cardiovascular and diabetes care except for lipid testing, but the differences were small. For example, statin adherence in cardiovascular patients was 66.3% for system patients and 65.6% for non-system patients. Hospitalized health system patients were somewhat more likely to be readmitted — 16.3% versus 15.7% — but less likely to die, 5.5% versus 5.7%.

Measures of patient experience were also slightly better if they got care from systems, but not by much. After receiving services from system-owned providers, 61.5% of patients rated their care a nine or 10, versus 61% at non-system providers, for example. Results were the same across both types when it came to questions about physician communication, timeliness of test results, and reminders to make appointments or get screening tests.

On the cost side, the differences were much more obvious. When care was delivered in systems, the prices paid were 12% to 26% higher for physician services and 31% higher for hospital services compared to non-system care. Average spending on commercial and Medicare patients attributed to system physicians was 4.7% and 5.2% higher, respectively, than spending on non-system patients.

David Cutler, a study author and economics professor at Harvard, said he was struck by how difficult it was to find any evidence in the data his team studied that health system consolidation benefits patients.

“The cost part, you look at it and it jumps off the screen at you,” Cutler said, “and the quality part really just is not doing that.”

The JAMA study also offers a comprehensive look at the makeup of health systems. There’s no authoritative source of information on hospital and physician group ownership, so the authors had to piece together a variety of datasets, including from the American Hospital Association, tax filings, and federal government agencies. Ultimately, they found that compared with non-system hospitals, system hospitals were less likely to be critical access and rural, but more likely to be teaching hospitals and for-profit. System hospitals were also more likely to participate in Medicare accountable care organizations and less likely to participate in the 340B drug discount program.

Similarly, physicians connected with health systems were more likely to be located in metropolitan areas and in ZIP codes with higher Social Deprivation Indexes, a measure that quantifies disadvantage using metrics like poverty rates and single-parent households.

The findings show there’s a lot of cultural change required to improve quality following mergers, said Cheryl Damberg, director of the RAND Center of Excellence on Health System Performance, who was not involved in the JAMA study. It may take more time before improvements are apparent, but this study, like others before it, shows there is a need for more accountability after a merger.

“The promise of all this vertical integration was going to be that it would transform health care delivery, lead to better care coordination, and deliver better value,” Damberg said, “and I think that has not yet been realized.”

Accountability could mean greater antitrust enforcement by federal and state regulators. But since mergers are hard to unwind, that typically needs to happen before a deal is finalized, said Lawrence Casalino, an emeritus professor of public health at Weill Cornell Medicine. Casalino was not involved in the study but wrote an accompanying editorial and has done extensive research on the subject.

The bigger problem is that right now, health system executives have greater incentive to increase their overall prices than to boost quality and keep spending in check, Casalino said. They’re incentivized to both keep their hospitals full and become more competitive by getting bigger.

“The organizations that succeed and manage to outcompete and basically exterminate the other organizations are not necessarily the ones that provide the best mix of quality and value, but the ones that have the most negotiating leverage to get the highest prices,” Casalino said. “The difference in prices between what a big system can be paid and what a small physician practice or a small hospital by itself can be paid is enormous, just absolutely enormous.”

The reason the study’s findings are so important is because prices are the main reason the U.S. spends so much more per capita on health care than any other country, Casalino said.

State attorneys general have pushed back on hospital mergers in recent years based on studies like this that debunk the commonly cited rationale for consolidation, and Cutler said he hopes this newest study builds on that research. The JAMA study does not say mergers are automatically bad, but it hopefully will make bad outcomes less likely, he said.

“Our conclusion is that it’s extremely costly and hard to say it’s worth it,” Cutler said.


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