Study finds wide variability in hospital Medicare charges, cost-efficiency at Indiana hospitals

Nothing is more valuable than your health, the old saying goes.

But that alone does not necessarily justify the billions of dollars Americans spend on health care, especially given that the country's average life expectancy is far from the highest in the world.

Now, a Boston-based health economics think tank has taken a stab at quantifying just how many health care dollars are wasted, drilling down at distinctions between health care institutions and comparing those to mortality data.

The Lown Institute asks the question do hospitals with higher bills for Medicare patients see improved outcomes in terms of mortality. The answer: It depends. While in some cases increased dollars spent translated into lower mortality rates, in many cases more money did not mean fewer deaths.

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One discrepancy the Lown Institute rankings cite came in Indianapolis, where Indiana University Health and Franciscan Health had average mortality percentages of 9.0 and 8.9, respectively. But a 30-day hospital stay at the former cost Medicare more than $2,000 more than at the latter.

While IU Health officials declined to comment on the findings of this study, the hospital released a statement saying it is committed to making care more affordable for patients and employers.

"We recently implemented a multi-year pricing plan that will essentially hold year-over-year pricing flat," the statement read. "In the first year of that plan, we have drastically reduced prices for some of our most common services that have the biggest impact on patients."

Franciscan did not respond to a request for comment.

Although the difference between the $14,073 average 30-day cost per patient that Franciscan charged and the $16,870 average 30-day cost per patient that IU Health charged may not seem like much, over the course of a year that translates into a difference of $24.7 million charged to Medicare.

And overall, Medicare costs for a 30-day stay at hospitals with average mortality rates ranged from $9,000 to $27,000 per patient. If all hospitals could save as much as the most cost efficient, the study found, that would save the Medicare program $8 billion a year.

While that sounds like chump change for a program that runs nearly $800 billion a year, such distinctions have an impact, said Dr. Vikas Saini, Lown Institute president.

"We're talking about large volumes of hospitals where this is on a per patient basis whereas if you look at the number of patients and look at that difference it really starts to add up," he said. "Each person's care is individualized but as citizens, as members of a community and thinking about how we pay for health care and how can we make health care affordable for ourselves...it is important for all of us to recognize there's work to be done."

The wasted dollars do wind up having a negative impact on society by straining Medicare resources, Saini said. In addition, the government money that goes to pay for that pot then becomes unavailable for spending in other areas such as housing and education.

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This latest report comes as part of the Lown Institute's larger project analyzing a variety of metrics, such as mortality, readmissions, pay equity, and patient safety, for about 3,000 hospitals. This analysis looked at Medicare claims records for hospitalized patients from 2016 to 2018, including the bills for in-patient hospitalizations as well as those for post-discharge expenses.

Indiana ranked 40th in the nation for cost-efficient hospitals, the Lown Institute found.

Despite the state's subpar ranking, the most cost-efficient hospital in the nation is one in northern Indiana, Pinnacle Hospital in Crown Point, the study found. The other nine hospitals on the list range in size, location and type of hospital, although major teaching hospitals had a tendency to do better on cost efficiency, Saini said.

Pinnacle Hospital officials did not respond to a request for comment. According to the hospital website, the hospital is physician-owned and has 18 beds and five operating suites. The rankings do not include specific costs for most of the hospitals included.

The study did not have the ability to dissect individual's hospital's success and no one characteristic differentiated these top performers from the others, Saini said.

"I think that actually gave us some hope to say, this wasn't something that only a small number of hospitals could achieve, but that all hospitals could make some improvements," he said. "It would get us to a health care system that I think everyone wants and that our patients deserve."

Some simple fixes for high prices exist, said a handful of experts who spoke in a Lown Institute press conference about the report held earlier this week.

Out-patient procedures such as blood draws or colonoscopies may vary widely in cost, depending on where the procedure is done. Simply educating primary care doctors on the distinctions so they know where to send patients could go a long way, said Dr. Bob Rauner, chief medical officer of OneHealth Nebraska, an accountable care organization based in Lincoln.

Unnecessary procedures and placing patients on higher acuity units than their conditions may warrant also drives up costs of care, the experts say. Lack of coordination of care may also lead to duplicate tests being run and or people being hospitalized when they could have received the necessary care while remaining at home.

Medication errors, that could be prevented can also contribute, Rauner said. He recalled a patient who fell due to the prescription drugs he was on, cracking his head open and requiring care for an injury that would not have happened had he not been too heavily medicated.

Raising awareness of the need to conserve resources among physicians could also make a difference, Saini said. He shared an anecdote from one hospital where an outdated system of telling staff which items to prep for surgeries led them to throw away $3 million in unused supplies.

Contact IndyStar reporter Shari Rudavsky at shari.rudavsky@indystar.com. Follow her on Facebook and on Twitter: @srudavsky.

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