Mass. Health Care Shoppers Still Choosing ‘Nieman Marcus Hospitals’

Nieman Marcus in San Francisco (sjsharktank/Flickr)

Nieman Marcus in San Francisco (sjsharktank/Flickr)

If you buy all your clothes at Nieman Marcus, rather than at Banana Republic, TJ Maxx or Target, you’re spending a lot of money. Are the shirts, jeans or navy blue blazers that much better for four times the cost?

We almost never ask ourselves these questions in health care. We go to the most expensive hospitals in Boston for everything from an X-ray to a complex cancer treatment.

That habit means “the biggest hospitals have the highest price and get all of the payments,” said Aron Boros, director of the Center for Health Information and Analysis (CHIA). The result: We spend more money than we need to on routine care with no apparent benefit. The white shirt (say, a gall bladder removal) is of the same or better quality at Land’s End (your community hospital) as at Bloomingdale’s (a big Boston teaching hospital).

Boros just released the latest figures on the gap between hospitals that get paid very well in Massachusetts and those that are (barely) scraping by.

“This is more evidence that the market isn’t changing as rapidly as one would hope,” he said.

More evidence because this is the second report to show that four out of five health care dollars in Massachusetts go to half the hospitals, the most expensive ones.

Rick Lord, CEO at the state’s largest employer group, Associated Industries of Massachusetts, says the findings are disappointing. He says employers have to do their part by choosing insurance plans that direct employees to lower-cost hospitals for common surgeries, treatments and tests.

But, Lord added, “I think the insurers need to look more closely at how they reimburse hospitals for routine care and take a tougher stand.”

Insurers say they are negotiating hospital contracts with lower rates of increase. There is no talk of actually cutting payments to more expensive hospitals or physician groups.

“Premiums reflect the prices charged for care,” said Eric Linzer, senior vice president at Massachusetts Association of Health Plans. Linzer says it’s time to pay providers based on the quality of their care and how sick or complicated their patients may be. “This report demonstrates,” Linzer said, that “some hospitals and physician groups negotiate much higher prices based on where they are or their size,” not based on quality.

And how about consumers? If you need a new black sweater, do you have to go to Nieman Marcus? If all signs point to a normal delivery, do you have to go to Brigham and Women’s or would you try a community hospital? State Rep. Steven Walsh and his wife recently chose North Shore Medical Center near their home in Lynn.

“We were a mile from our home, our friends and family could visit, we had an extraordinary experience with the highest level of care and we’d make that choice again,” Walsh said. Then he added, “We’re so close to Boston we could get there in a matter of minutes if we needed to.”

Walsh knows the value of a high-priced hospital from experience. He and his wife have a toddler who spent 94 days in his first year of life at Boston Children’s Hospital. But Walsh also knows it can cost at least twice as much to deliver a baby at Brigham and Women’s than at North Shore, even though both hospitals are owned by Partners HealthCare.

“Consumers should be able to use more expensive hospitals when it’s medically necessary and when it’s a life-threatening illness,” Walsh said. “But they want to look at getting high-quality care in lower-cost settings. That’s a choice my wife and I made and we made the right choice.”

The highest paid hospital in Massachusetts, on average, in 2011 was Boston Children’s Hospital, where administrators say their costs are higher because pediatrics is specialized care. “Not only do we specialize in pediatrics,” Children’s said in a statement, “but we also provide the vast majority of complex care to children in the state.”

Children’s suggests that its rating will be lower when the next report on hospital pricing comes out, likely this summer.

“Since 2009, Boston Children’s and its physicians have taken about $185 million out of the health care system and held its cost growth well below inflation by cutting rates and prices, moving care to lower cost settings and improvements to care delivery,” the hospital’s statement said.

The next three highest-paid hospitals are owned by Partners: The Brigham, Mass General and Martha’s Vineyard Hospital.

Partners spokesman Rich Copp says the network has “a deep commitment to making care accessible and affordable, and we’re working with state leaders and other stakeholders to identify solutions that can help bend the cost curve. The health care environment is changing and changing quite dramatically.”

Copp says it’s too early to see the effects of contracts Partners renegotiated with insurers last year at lower rates of increase.

We’ll know sometime this summer, when the next state report is out, if any of the changes mentioned here are closing the wide gap between high and low cost hospitals. And by the way, in 2011, Cambridge Hospital, where most of the patients are poor and on Medicaid, was the lowest paid hospital, on average, in the state.

Readers, thoughts?

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  • Shawn

    Keep in mind that if someone has HMO plan they need prior authorization from their primary care to see a specialist outside of their “network”. that request can be denied by the PCP because allowing a patient to see an out-of-network specialist/physician/surgeon means a larger out-of-pocketbook cost to the PCP. If a patient decides to see the specialist/physician/surgeon without prior authorization they most likely will be stuck with the entire bill or a deductible amount. So often it literally doesn’t pay to shop around.
    I work in healthcare, the billing and insurance side, and let me just say that Eric Linzer is absolutely correct, “Premiums reflect the prices charged for care”. Facilities need to be held accountable for their prices charged. Two facilities can bill for the exact same procedure, but contractual agreements between the facility and the insurance company determine the rate that will be charged to the patient. And with so many people opting for lower premiums/higher deductible plans-it’s the patient that winds up with an enormous bill.
    I highly recommend reading an article by Atul Gawande, “Big Med”. An eye opening read.

  • Disqus

    If the US is ever to get a grip on its hospital costs, plans like Kaiser will have to be part of the solution. The doctors, hospitals and insurance experts need to be on the same team not squabbling with each other. Kaiser was one of the main insurance options at work before I retired. I have continued with it through Medicare. The doctors correctly diagnosed my celiac disease when I got sick several years ago and set up a consultation for me with a dietician. Today, I have more energy than many other people I know in my age group. I also do my part, being very careful to avoid gluten and going to the gym for exercise religiously.

    Undoubtedly, Christopher Hitchens had access to some of the country’s best cancer doctors before he died at age 62. But he would have been better off just staying away from booze and cigarettes.

  • ymc

    Cambridge Hospital is no Walmart of hospitals — for my relatively straightforward cancer treatment I “shopped around” and consulted with doctors from CH to Dana-Farber, and chose to be treated at Cambridge Hospital in the end. For me, it came down to having more personalized care closer to home — the doctors I spoke with at Dana-Farber were brilliant but the ones at CH were no less so, and at CH the staff in charge of my care all knew me by name. For the staff at Dana-Farber, I was just one of (too) many routine cases.

    Even so, the “shopping around” was truly difficult: it’s so easy to default to “the best” when you’re a patient in need of care, and not all patients have the resources, time, and ability to do more than choose the easiest route.

    Costs did not factor into my decision at all.

    • Martha Bebinger

      YMC and Sparknut – thanks for the comments.

      I want to be clear – the report on which this story is based looked at costs, not quality. Mass. and most of the country are in the very early stages of being able to put the two (cost and quality) together.

      I’m not in any way suggesting that the quality of care is low at Cambridge Hospital or at any of the lower paid hospitals. In fact, the opposite is often true.

  • sparknut

    So are the poor and the working poor supposed to get their healthcare at Walmart, while the wealthy get the best doctors, best hospitals and presumably the best outcomes?

  • Virginia

    I choose my medical care where I have found great physicians who are smart, honest, and non-patronizing educators. The hospitals they work at may cost more because the insurers pay them more. My analogy would be buying a shirt fom Beans for extra bucks instead of from Sears because of Great Customer Service. The consistent effort Bean’s makes keeps their reputation what it is. Serving the consumer first, but also making a profit.

  • ThirdWayForward

    Currently there are very few incentives for reducing the costs of one’s own health care. The copays all seem to be the same. To put it in terms of shopping Nieman Marcus vs. Marshall’s, if the price you pay for a black sweater is the same, then many people who would otherwise shop at Marshall’s will elect to shop at Nieman Marcus. In this analogy, there are no price tags on any of the items in the stores, just a copay to enter the store and another to buy an item. Going to the hospital is like going to a car dealership where there are no price stickers on the windshields (and if you yourself have to pay for care, you can’t negotiate either).

    We think that just making the cost of the procedures apparent to patients would go a long way towards controlling costs. The sticker shock of a $4000 procedure takes us aback, even if we are not paying for it out of pocket. There are some countries in which all procedures and costs are posted and the patient has to pay the bill and be reimbursed (but quickly). Maybe there could be monetary incentives for delaying expensive treatments, such as joint replacements. It’s a tricky problem, because we don’t want to deny care to those who need it, but at the same time, everyone needs to have some skin in the game to police price gouging by the medical-industrial complex.

  • David Jackson

    The decision to choose a health care provider or hospital is a complicated one. This article simplifies the complicated decision process that we have to make when looking at our health.

    I do not look at health services the same way that I look at car repair. If I have my car repaired at a lower cost establishment, and something goes wrong with it, I just bring it back in for service, potentially choosing a different garage.

    If I choose to have a surgery at a lower-cost hospital, perhaps the level of care will be just as good in 99% of cases. However, what happens if my surgery ends up being one of the 1% that has complications. It is now too late to choose to move to another hospital with surgeons that have more experience dealing with complications!

    This is the primary reason that I typically choose a Mass General over my local hospital (Jordan Hospital in Plymouth) for anything somewhat complicated.

    I do look at my local health care providers and choose them for some services. However, I appreciate having a world-class hospital that is only 45 minutes away.

  • Ellie

    Although patients would save out-of-pocket costs by switching hospitals, they would incur the cost of the aggravation and complexity in switching doctors, especially specialists. When a successful doctor-patient relationship has been established, people are less likely to switch clinicians, especially if the relationship began after a patient was referred out to Boston teaching hospital from a community hospital or local primary care doctor.

  • Jane Morrisson

    These articles make me so mad. It is almost impossible to find out the cost of procedures at a given hospital, and most patients go where their doctors direct them. But the bigger question is, why is it so much more expensive at one hospital than the other for the same thing? Going to the hospital is like going to a car dealership, only you can’t negotiate. Why don’t we have cost controls? It’s about time.

  • Reasonable?

    I think the consumers (employees) have make the first move get greater competiion on price. Employers are likely scared to offer a non name brand insurance option for fear of being seen as ‘cheap”.

  • Josh Archambault

    Another eye opening report from CHIA. But there are two other angles here:

    1) With greater market consolidation comes the very real possibility that expensive hospitals will increase the prices of the hospitals they “partner with,” purchase, affiliated, or form an ACO with. You can already see on page 8 of the report that PHS hospitals outside of Boston command higher relative prices compared to others in similar settings. This includes Rep Walsh’s North Shore Medical Center, close to the 75th percentile.

    2) Steward Health Care hospitals are routinely cheaper than the other two big systems, all the while paying tens of millions in taxes every year.

    • Martha Bebinger

      Yes – important angles – will keep an eye on these – thanks!

  • CircusMcGurkus

    Seriously, they are supposed to be non-profits. They are supposed to be medical professionals and not in competition. They are supposed to care about their patients and not their wallets. FORCE them to open their books and charge identically for identical care. Given that doctors in MA love to be affiliated with bells and whistles operations (they get paid more), they tell their patients where to go. That is NOT a choice made by a “consumer” (and, newsflash: sick people are not consumers – they are people who need help and compassion; they are often overwhelmed by a diagnosis or concern that they cannot make a rational choice).

    Want choice? SOCIALIZE MEDICINE. If care is a right, make it real. Have all data public, provide guaranteed second opinions and cut out the insurance companies and hospital administrators who sap all the money from the system.

    • Anna

      costs per capita in the United
      States are the highest in the world. These high costs are due in large
      part to the use of a fragmented multi-payer (multiple insurance plans)
      model with associated high administrative costs.

      One-third of our healthcare dollars are used for administration rather than direct patient care.

      costs include developing and marketing plans, determining eligibility
      for the various plans and then processing the claims for the various
      plans which each have different rules.

      Contrast this with the relatively streamlined administrative cost of Medicare which is less than 3 percent.

      The way to control
      healthcare costs, and guarantee healthcare to seniors, people with
      disabilities, veterans, and everyone in the US, is through expanded and
      improved Medicare for All. This will ensure healthcare for
      everyone, and allow us to create a sustainable healthcare system
      that controls costs. It’s time to pass improved Medicare-for-all (HR 676), a truly universal
      healthcare system that will also reduce the deficit and save Americans $500 billion a year on healthcare costs.

      Medicare is the solution – not the problem.

      • Virginia

        I agree with you Anna, one thousand percent. Let’s make it happen. Join the legislative efforts in MA for single payer system.

  • Paul

    I found myself sitting in my car in the parking lot outside work this morning because of this great story on NPR today. I work in healthcare transparency and we are on the front lines everyday trying to educate people about cost & quality in healthcare.

    My one note is this article notes “biggest hospitals get all the
    payments”, which implies (even if just a little) that the hospitals that
    cost more are higher quality. The data we looked has found no correlation
    between cost and quality. That’s right, you can often get lower cost
    healthcare without losing any quality, not to mention the huge factor a
    physician plays and he/she may have admit privileges anywhere in the network.

    Lastly often patients have no incentive to find efficient
    healthcare providers, they will hit their out of pocket max anywhere they go so
    if someone else is paying for it, why not? And let’s face it, at every turn in
    healthcare (patients/hospitals/doctors/health plans) the incentives are not pointed
    in the right direction. We have offered financial and other incentives to
    realign healthcare in the right direction and proof is in the large medical cost
    reduction we have achieved with our clients.

    I urge all employers (and health plans) out there to
    get smart on healthcare and stop throwing money away!

    • Lizziebeth

      I disagree. I have used two different and smaller “community hospitals” I had the worst experiences in both. Following the birth of my son in 2010, I have vowed that from here on out, if I need to be in a hospital, I’ll be in a major one. My son was transferred to Childrens, and quite frankly, thats the best hospital I’ve ever been in. EVERYONE at that hospital that my husband and I interacted with and continued to interact with, from the parking garage attendants all the way through to the head of neurology was friendly, caring, sympathetic, and lovely, unlike the community hospital he was born in where the staff was sour, cruel, didn’t want to listen, and lax.

      • Paul

        I appreciate your comment. Everyone brings their personal experience to things and any data trend will always have examples of instances when the rule doesn’t hold true. 2 comments to add:

        1) Even the large hospitals have a high variance in charges so you could still save money by going to lower cost hospital, In Chicago Rush, one of the largest hospitals costs half what the 2 other largest (and most recognized) do for ACL surgery. Rush happens to be a world renowned orthopedic facility where Derek Rose had his ACL surgery as they are the team physicians for the Chicago Bulls and White Sox. It seems odd that so many people pay more than professional athletes for lower quality. In addition “community hospitals” are not always cheaper to commercial business, but that’s whole other topic.

        2) You have provided 3 data points on a patient review, this isn’t exactly what we call statistically significant, we analyze 100′s thousands of data points nationally including reviews, CMS data, & hospital safety scores.

        Just because the trend in the data shows a negative correlation between cost in quality in healthcare doesn’t mean every single low cost facility is high quality, nor does it mean every high cost facility is low quality. It simply means on average that Americans do have the information available to make good decisions.

        We are trying to change that!

    • Tanya

      I completely agree on your last point. We get our health insurance though a private fund. We were recently told that MRI’s are much more expensive at a hospital rather then a stand alone clinic and we could choose to have one in a hospital but we will have to pick up the difference out of pocket. Who new? It is hundreds of dollars more. It makes sense, they wouldn’t want to keep picking up the tab. What I do find is people go to these hospitals because they can. There is no incentive not to. I also have a $500 co pay to go to the emergency room. This discourages unnecessary visits. I think if more people had copays for hospital visits (including the poor albeit maybe not $500) then some of these issues would work themselves out.

      • Paul

        We see MRI’s are usually 2,000-3,000 in a hospital and 500-1000 in a free standing center. We did some research locally and found they used the same machine and guess what… They sent the scan to the same physician group for reading. Literally exact same product and a $2k price different!

        And in the end my benefits today give me no reason to go to the free standing location.