As patients and employers around the country grapple with the steadily escalating price of health care, a recent study by the New Hampshire Citizens Health Initiative revealed that some of New Hampshire's hospitals charge up to 70 percent more than other hospitals in the state. Costs at Dartmouth-Hitchcock Medical Center, however, were slightly lower than the statewide average.
The report, released last week, compared the total cost paid by patients and their insurance companies for inpatient and outpatient procedures and found average prices varied widely among New Hampshire's 26 hospitals. After correcting for the type of care provided at different hospitals -- those hospitals that take more challenging cases use more resources in the course of treatment -- the study found DHMC's costs to be about four percent lower than the average hospital costs in New Hampshire.
"There are a bunch of factors, but the question is, are there factors that we can identify? Do those account for why there's a 70 percent difference?" Ned Helms, executive director of the NHCHI, said. "Things are never going to cost exactly the same because there are differences between costs and marketplaces, but we're never going to be able to understand the variation unless we know where it exists."
While the results of the report are encouraging, Jason Aldous, spokesman for DHMC, said, cost is only one of the factors that must be considered when analyzing hospital management. Concerns such as case severity and the number of uninsured patients also influence how a hospital must operate.
"About 55 percent of our revenue comes from private payers, typical insurance companies," Aldous said. "Medicare accounts for about 34 percent, and Medicaid is about 11 percent, but that is about where all of our operating loss comes from, the Medicaid reimbursement piece."
Because DHMC, a research and teaching hospital, takes resource-intensive cases and a large number of uninsured patients, those costs in turn impact other patients and insurance companies paying for care under private plans, he said.
"DHMC is a very different animal from other hospitals in the region and state," he said. "We're providing cutting-edge care, and it's being financed by a system that really hasn't been changed in the last fifty years."
The problem, Aldous said, comes when DHMC must provide care for which the hospital is not adequately reimbursed by Medicaid. Although the hospital can streamline its operations to reduce costs, it must also find ways to offset expenses that remain after operational improvements.
"We've actually tried to be constantly looking at the way we deliver care in an effort to make ourselves more efficient," he said. "We are fortunate that, as a larger institution, we're probably able to negotiate better [private sector] rates, so we can pass that on. It can make up what we're losing in uncompensated Medicaid."
Consequently, DHMC's mix of cases affects what it must charge patients to cover its overall expenses, which in turn impacts the costs charged to insurers. The result is a cost structure that is partly influenced by hospital management, but also by the hospital's situation.
The primary aim of the NHCHI study, Helms said, was not to point blame at specific hospitals, but to make information available to the public about hospitals' practices and costs in hopes that the factors contributing to the cost disparities can be further explored.
"We want to create a public dialogue about this sector of our economy, and the only way to create a dialogue is to provide information," he said. "It really lets you see what people are seeking care for, and really allows you to focus not only what is the cost of the service, but what kinds of preventative services would have the most effect."
Helms also said he hopes the study will spur discussion in groups outside of the medical community, such as between businesses and their employees, about how companies could change the way they provide health care and use funding more efficiently.
"Some employers are going to look at the variation and say, 'My gosh, is the variation and the cost of care totally one about quality? If I'm paying 30 percent more in one place, is it a 30 percent better product?'" Helms said. "It may well be that [variations] are explainable. But we've got to have those kinds of conversations."
Aldous said the report is a generally accurate representation of New Hampshire hospitals' costs.
"[NHCHI's] report, by and large, gives a good reflection of the situation in the state," Aldous said. "In terms of offering care across specialties, that's something that other hospitals don't have to do, and that's something that impacts us uniquely in that way."