Hospitals in the U.S. have been abandoning inner cities for years. By 2010, the number of urban hospitals still operating in 52 big cities had fallen to 426, down from 781 in 1970. Meanwhile, hundreds of medical centers built with cathedral-like grandeur have opened for business in affluent suburbs. A hard-hitting series produced by the Pittsburgh Post-Gazette and Milwaukee Journal Sentinel explains the consequences of this trend for people in neighborhoods where hospitals closed.
The series shows how most of the defunct hospitals were small to mid-size community hospitals and public hospitals that had served poor urban neighborhoods. The closures left many low-income neighborhoods without an effective safety net, undermined efforts to recruit doctors, and did away with high-wage jobs for local residents. An incredibly detailed interactive map allows readers to track where old hospitals have closed and new ones have opened in cities across the U.S. since 1991.
The economics of medical care in the United States “has made poor patients the ones no one wants to treat,” writes Lillian Thomas of the Post-Gazette:
They often are uninsured or on Medicaid, which doesn’t reimburse the hospital or doctor as well as private insurers or Medicare. They are less likely to have a primary care provider and more likely to turn to emergency rooms for basic care. Or they delay treatment until they are very sick, requiring longer stays and more costly care. Then they are more likely to be readmitted because their follow-up care is not adequate.
In short, poor people are expensive to treat.
“Mainly the game is to keep the poor out,” said Dr. Cooper, senior fellow in the Leonard Davis Institute of Health Economics at the University of Pennsylvania. “It’s a hot potato — you try to make them go somewhere else. Eventually they get in somewhere. So they get inefficient access, outpatient and inpatient both. Access improves when they’re sicker, so as they go up the sickness ladder they do get access, but when everything else has failed.” [from Exploring the link between health care and poverty]
The fee-for-service payment system is a major contributor to the perverse incentives highlighted in the series by Thomas and colleagues. Fee-for-service payment rewards providers for doing more procedures, whether or not they are needed and mostly without regard to results, such as keeping populations healthy, preventing unnecessary hospitalizations, and addressing the social conditions the make people vulnerable to illness and early death.
The so-called “accountable care organizations” piloted by Medicare and some state Medicaid programs are developing alternative payment models that are supposed to reward quality and health outcomes, rather than the quantity of procedures cranked out. But because fee-for-service still dominates, these pilots are on shaky ground, as I’ve noted before:
If a health system adopts more efficient processes that, for instance, prevent unnecessary hospital admissions, it could end up losing money if it applies those processes to fee-for-service patients. In the fee-for service world, each unnecessary hospital admission, specialty procedure or imaging test that is avoided counts as lost revenue for the hospital and doctors.
One of the top performing health systems in Medicare’s Pioneer accountable care pilot program highlights the problem. Bellin ThedaCare Health Partners in Wisconsin made efficiency gains that resulted in a financial penalty because 82% of its patients remain covered by fee-for-service insurance. The health system saw its revenues fall from a projected 3% increase for 2013 to an actual 0.7% decrease during the first 6 months of the year, according to a report this week in the Journal of the American Medical Association. The authors conclude:
“Unless all payers quickly move to value-based payment systems or give insurers incentives to preferentially use health care organizations that provide greater value to patients, more organizations (especially those unable to shift costs to other payers) will discontinue participation in both of Medicare’s ACO programs and other related arrangements. That is why (in most markets) commercial insurers, self-funded employers, and state administrators of Medicaid must join with Medicare to discuss health system incentives that are based on value for patients, not just shared savings.”
One of the most important questions for health care reform is whether state and federal policies can wean hospitals, physicians and other providers from the fee-for-service payment system that has made business so profitable for those focused on delivering expensive, high-technology “sick care.”
