Medicare pays many hospitals and their doctors more than the most efficient and effective healthcare institutions to treat chronically ill people yet gets worse results, according to a new report from the Dartmouth Institute for Health Policy and Clinical Practice. If the US healthcare system mirrored the practice patterns of gold-standard healthcare systems such as the Mayo Clinic in Minnesota, Medicare could save tens of billions of dollars annually. Those savings would come just when Medicare needs that money most-as baby boomers prepare to retire in droves, putting unprecedented pressure on the healthcare system.
The new edition of the Dartmouth Atlas of Health Care, "Tracking the Care of Patients With Severe Chronic Illness," shows that institutions that give better care can do it at a lower cost because they do not overtreat patients. However, the Atlas documents that Medicare and most other payers encourage the overuse of acute care hospital services and the proliferation of medical specialists, thanks to misplaced financial incentives, especially for treating chronically ill people. Caring for people with chronic disease currently accounts for more than 75% of all healthcare spending. Overuse and overspending are not just a Medicare problem-the healthcare system as a whole lacks efficient, effective ways of caring for people with severe chronic illnesses.
The study followed up chronically ill patients because a third of Medicare dollars each year are spent on them during the last 2 years of life. Two thirds of the people in the study were diagnosed with cancer, congestive heart failure, and/or chronic lung disease. The cost of each medical service is less of a factor in spending than how many services doctors prescribe. Controlling usage is the most critical factor in controlling costs. The researchers discovered staggering variations in the number of services that patients with severe chronic disease receive at the end of life, depending on the hospital, region, or state and not on how sick they are. For example, an elderly person spent an average of 10.6 days in the hospital during the last 2 years of life in Bend, OR, but 34.9 days in the hospital in Manhattan.
The variation is even more striking in the last 6 months of life, when chronically ill patients visited the doctor an average of 14.5 times in Ogden, UT, compared to 59.2 times in Los Angeles, CA. That creates wild variations in how much Medicare spends on these patients. The US average was $46,412. The highest spending was in New Jersey at $59,379 per patient, or one fourth more than the average. The lowest was in North Dakota at $32,523 per patient, or one fourth less than the average. The Atlas research shows that hospitals, regions, and states that use more services per patient do not necessarily have higher quality care. In fact, it is slightly worse.
The Dartmouth Atlas Project (DAP) studied the records of millions of Medicare enrollees who died from 2001 to 2005 and had at least one of nine severe chronic illnesses. Using those records, researchers benchmarked care nationally to the care provided in the region where Mayo has its flagship clinics and is the dominant healthcare provider. Total spending for the population in this study was $289 billion over the 5 years. If the spending per patient everywhere mirrored that in Mayo's home region of Rochester, MN, Medicare could have saved $50.1 billion, or 17.3% of all spending on these patients alone. A benchmark to a higher costing but efficient region, such as Sacramento, CA, where labor costs are the 26th highest of the 306 regions, shows Medicare would still have saved $28.9 billion. The study paints a picture of a system in disarray over the treatment of these illnesses. There are no good, clear guidelines for when to hospitalize these patients, admit them to intensive care, refer them to medical specialists, or-for most conditions-order diagnostic or imaging tests.
Lacking these guidelines, two factors drive decisions about care: doctors and patients generally believe that more services-that is, using every available resource such as specialists, hospital and ICU beds, diagnostic tests, imaging, and the like-mean healthier patients. Based on this assumption, it is the supply of beds and treatments and specialists-not how sick people are-that determines how much they get used. The supply of services creates its own demand, so regions with more resources have more usage and thus higher costs. The wide variations among academic medical centers clearly show the lack of scientific consensus on how to manage chronically ill patients.
Consider this comparison between the Mayo Clinic's flagship St Mary's Hospital and UCLA Medical Center.
* Spending: UCLA spent more than $93,000 per patient over the last 2 years of life. The Mayo Clinic, by contrast, spent $53,432-a little more than half the amount of UCLA on similar patients over the same period.
* Utilization: Chronically ill patients in their last 6 months of life had more than twice as many physician visits at UCLA compared with Mayo, and they spent almost 50% more days in the hospital.
* Resource use: Compared to the Mayo Clinic, UCLA uses 1.5 times the number of beds, almost twice as many physician full-time equivalents in managing similar patients.
The report stated that academic medical institutions and federal agencies devoted to health research must begin producing studies on when to hospitalize chronically ill people, how often they should visit a doctor, and related information. The report also found that contrary to conventional wisdom, adding alternatives to hospitals is not slowing down costs. Spending on hospitalization actually was higher in regions with more alternatives to hospitals-such as rehabilitation hospitals and skilled nursing facilities. Spending for hospice care was the only exception, and it had only a marginal effect.
The DAP is run by the Institute for Health Policy and Clinical Practice at Dartmouth Medical School. The principal funding for the project comes from the Robert Wood Johnson Foundation. The entire Medicare claims data are available at http://www.dartmouthatlas.org. With the release of this report, the DAP introduced a new Web feature, the Hospital Care Intensity Index, which enables anyone to compare the intensity with which hospitals treat patients at the end of life-how many days they spend in the hospital and how often they see medical specialists. This is increasingly important to people who are in their last days of life and do not want to die in a hospital bed.
The DAP began in 1993 as a study of healthcare markets in the United States, measuring variations in healthcare resources and their utilization by both geographic areas. More recently, the research agenda has expanded to reporting on the resources and utilization among patients at specific hospitals. DAP research uses very large claims databases from the Medicare program and other sources to define where Americans seek care and what kind of care they receive and determine whether increasing investments in healthcare resources and their use result in better health outcomes for Americans.
The study was funded by the Robert Wood Johnson Foundation, in partnership with a funding consortium including the WellPoint Foundation, the Aetna Foundation, the United Health Foundation, and the California HealthCare Foundation. The Robert Wood Johnson Foundation is the nation's largest philanthropy devoted exclusively to improving the health and healthcare of all Americans. For more than 35 years, the Foundation has brought experience, commitment, and a rigorous, balanced approach to the problems that affect the health and healthcare of those it serves.