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Hospital Branding – Is the Most Expensive Always the Best?

Posted Nov 16 2008 3:00pm

This very extensive article examines various hospitals in Massachusetts and the cost of the same procedures at different hospitals, and then continues further to discuss how this happens; contracts with the insurers and the ability to use “branding” to command a higher rate, all the big centers do it, Mayo, Cleveland Clinic, Johns Hopkins, etc.  The big folks have even taken branding overseas to create an environment that is similar or pretty much the same as the successful operation here in the US, but do you need to go to a “branded” facility to receive good health care, not really, unless it is a procedure or perhaps even a trial for something that is specific and not available at other facilities, but for the sake of this post, I’m want to refer to procedures that are available and offered at almost any hospital.

There can be thousands of dollars difference between having the same doctor provide the same procedure when comparing hospitals, again, you head this correctly, same doctor who can perform surgery at one or the other hospital.  Just as in real estate, location has a lot to do with assessed charges, so if you are in an area where there are really no competing hospitals, well you get the idea there, supply and demand and thus you can pretty much bet on the price being a bit higher, versus traveling to another metropolitan area for the same procedure.  

Partners Health Care in Massachusetts has really done it’s homework with insurers as far as reimbursement contracts, why because they have 2 of the top 10 hospitals ranked in the US, the Brigham and Mass. General, and a little branding going on here, so on an average these 2 receive around 30% more than most in the area.  That’s a pretty big number and is why they are making money, when others are struggling to keep out of the hands of insolvency.  We have somewhat of a similar story going on in California with Prime Healthcare billing insurance companies for the normal and customary charges the chain of hospitals lists for procedures; however unlike Partners in Boston, he doesn’t have any contracts and cancelled them, so out here we end up with the ugly “balance billing” situation, to where the insurance companies pay, but without a contract, I believe they are paying what they feel should be paid for a procedure, and now the patients are stuck in the middle here, ugly and under scrutiny now from the California Managed Care Department.  Prime states they just want to get paid for the services they offer, and we do have some of the lowest compensation contract in the country here in California.

Back in Massachusetts, Partners has made 1.7 billion in profits since 2004. Over at Beth Israel Deaconess, the rates paid are not as high, but yet they have a lower mortality rate, but they are a “teaching hospital” too, which when it comes to branding this is also a fact that is sold high, you will have a fully credited physician taking care of you, not interns, which lead to this comment from Paul Levy of Beth Israeland a very good question indeed:

"Shouldn't there be some correlation between what you get paid for doing something and the quality of what you do?" asked Beth Israel chief executive Paul Levy last month in remarks at the Massachusetts Medical Society.

It’s gets even more complicated here too though as some teaching hospitals are paid a bit higher as well, so perhaps they are in the middle somewhere, and then that leaves those at the bottom, who earn perhaps half of what those do at the very top of the totem pole here.  What is also interesting is the fact that the high end procedures are not the bread and butter either, it’s the normal day to day incidents of having a baby, pneumonia, etc. that account for a big majority of the care, and the ones at the top get more for those procedures.

To keep the higher compensation rates, the folks at the top have to ensure they are on the “highest” listing, and if not, well there’s the danger of losing some of the clout at the bargaining table. In essence it comes down to something like this, do you want the “Calvin Klein” branded hospital, or will the branded and trusted name of “Levis” work for you?   Both have good names in quality care, but one costs a bit less than the other and may not be as elaborately styled, but both get the job done. 

Should there be standard and customary rates for hospital procedures?  Good question here and one that will probably linger around for quite a while, as you will have equipment and devices used too with the latest and most modern technology also clamoring to make a difference in what is the rate of pay, but too, only those usually at the top of the totem pole can afford a lot of newer technology as well, but who knows with the move of recent with Blue Cross promoting medical tourism, perhaps we might end up soon on a Breakback Jet on our way to some other country for routine and planned procedures.  BD 

As his patient lies waiting in an adjacent exam room, Dr. James D. Alderman watches while an assistant reaches into a white envelope and pulls out a piece of paper that will determine where the man will be treated. Big money is on the line. Alderman, an interventional cardiologist, plans to open the patient's clogged coronary artery by inserting a flexible tube with a tiny balloon at the tip. Usually he does the procedure, called angioplasty, at MetroWest Medical Center in Framingham. But he sometimes operates in Boston as part of a research program. One time of every four, by the luck of the draw, Alderman and his patient go to a big teaching hospital in the city. If the white slip of paper directs him to do the procedure in Framingham, the insurance company will pay the hospital about $17,000, not counting the physician's fee. If Alderman is sent to Brigham and Women's Hospital in Boston, that hospital will get about $24,500 - 44 percent more - even though the patient's care will be the same in both places.

The cost was $5,309.15 for two days in Winchester Hospital to treat the pneumonia she contracted soon after her wedding earlier this year. Had she gone to Brigham and Women's instead, similar care would have cost more than $9,000, according to a Spotlight Team analysis of insurance records.

For instance, while Mass. General is spending $686 million on the single most expensive hospital expansion in state history, the state's second-largest hospital chain, Caritas Christi, had to borrow money this year to pay for basics, like oxygen tanks.

A healthcare system badly out of balance - The Boston Globe

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