Unbiased Analysis of Today's Healthcare Issues

Measuring Hospital Efficiency

Written By: Jason Shafrin - May• 20•12

Medicare recently released the Medicare Spending per Beneficiary (MSPB) measure on Hospital Compare. This measure includes all payments to doctors, hospitals or other facilities for services provided to a patient during the three days before the hospital stay, during the stay, and during the 30 days after discharge from the hospital. Kaiser Health news provides an analysis of this measure and also provides an interactive graph of state level efficiency and a list of hospital MSPB scores.

The Kaiser Health News article notes that:

“Patients treated at most or all hospitals in Las Vegas, Fort Lauderdale, Newark, Miami, Los Angeles and Orange County, Calif., tended to cost more than the national median, which is $17,988. Patients treated at most or all hospitals in Anchorage, Des Moines, Honolulu, Minneapolis and Portland, Ore., tended to cost Medicare less.”

The article also recaps the opinions of a number of industry and policy thought leaders.

Jennifer Faerberg, director of health care affairs at the Association of American Medical Colleges stated that differences in the MSPB measure across hospitals is primary due to how well hospitals  can control post-acute costs.  This is generally true. The MSPB measure controls for the type of admission (i.e., MS-DRG) of the index admission.  Thus, differences in the MSPB measure are due principally to differences in post-acute spending and the frequency with which the patient is readmitted to the hospital within the 30 days after the initial hospitalization.

Some policy experts were critical of the MSPB measure:

Nancy Foster, a vice president at the American Hospital Association, said the data do not answer key questions: Did the patients that got more services fare better than others? Could the patients that cost Medicare less actually have benefitted from more care? “What we don’t know is if those additional investments yield differences in outcomes,” Foster said.

Foster makes a good point; the MSPB measure should not be analyzed in isolation.  CMS does not only measures hospital efficiency, but also includes a number of hospital quality measures.

Elliott Fisher, one of the main researchers from the Dartmouth Atlas, questioned the practical usefulness of the new information.  “As a hospital administrator I would go, how does this help me?” he said. “We just don’t know whether a lot of specialists are running through the hospital doing everything they can to every patient who is horizontal, or whether they’re discharging every patient to a rehab facility. Those are two very different causes of high costs.”

However, CMS did distribute a “hospital specific report” that detailed where the average spending went (e.g., inpatient, skilled nursing facility, home health physician) in the periods before, during and after the index hospital admission.  Each of these quantities is compared to the state and national average spending levels for each type of service.

Disclaimer: The Healthcare Economist worked with CMS and a team at Acumen to develop the MSPB measure.


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