Bacon's Rebellion

“The days of the hospital, as we know it,” may be numbered,” declares Laura Landro in a Wall Street Journal article today.

In a shift away from their traditional inpatient facilities, health-care providers are investing in outpatient clinics, same-day surgery centers, free-standing emergency rooms and microhospitals, which offer as few as eight beds for overnight stays. They are setting up programs that monitor people 24/7 in their own homes. And they are turning to digital technology to treat and keep tabs on patients remotely from a high-tech hub.

For the most part, the investments in outside treatment are driven by simple economics: Traditional hospital care is too costly and inefficient for many medical issues. Inpatient pneumonia treatment, for example, can cost 15 to 25 times more, yet many low-risk patients who could be safely treated as outpatients are hospitalized, studies have shown.

That’s what’s happening nationally. But I don’t see many signs of it happening here in Virginia. Indeed, when a rural hospital in Patrick County goes out of business, everyone’s instinct is to think about how to revive it so someone else can take it over rather than rethink how health care in a rural county might delivered more effectively and efficiently.

I’m old enough to remember when the Virginia legislature back in the 1980s moved too slowly to deregulate the banking industry. North Carolina got the jump on us, allowing its banks to merge with one another and then acquire out-of-state banks before our banks had a chance to merge, grow and acquire. The Carolina banks ate up the Virginia banks, and the top banking jobs and financial clout shifted from Richmond and Norfolk to Charlotte and Atlanta.

I’m worried that something similar is happening today with the health care sector. The problem is not that Virginia hospitals haven’t merged — to the contrary, huge health care systems have swallowed up competitors in every metropolitan area in the state. The problem is that the General Assembly hews to an outmoded model of the health care industry. By clinging to that model, more appropriate to the 1960s than the 2010s, we run the risk that Virginia healthcare providers will stifle innovation, thwart productivity, and burden the population with an obsolete health care system.

The underlying assumption is that health care should be organized around something called “hospitals,” which are medical complexes in which scores, even hundreds, of medical services are bundled under one roof under common ownership. State policy buttresses this arrangement by requiring providers to obtain a Certificate of Public Necessity (COPN) in order to build a new facility, thus protecting hospitals from competition by free-standing entities. State policy also perpetuates the status quo by allowing nonprofit hospitals to go untaxed, giving them a huge competitive advantage over for-profit competitors organized by physicians or entrepreneurs.

I have long railed against this arrangement without benefit of knowledge of what’s happening in other states. The Wall Street Journal, however, makes it vividly clear how healthcare enterprises in other states are innovating.

Perhaps the biggest drawback to hospitals is that they are germ factories. With the rise in antibiotic-resistant bacteria, any patient entering a hospital runs the risk of infection. Indeed, at any time, reports the WSJ, one in 25 patients in the U.S. is battling a hospital-acquired infection.

It’s also becoming apparent that health care providers often can deliver care at lower cost and better outcomes in independent facilities or at home. Studies, says the WSJ, show that “hospital-level care at home for certain conditions can be provided for 30% to 50% less than inpatient care with fewer complications, lower mortality rates, and higher patient satisfaction.”

Acute care hospitals will always be necessary to deal with medical conditions requiring highly specialized, highly technical, or highly intensive care. But hospitals are clearly not the best setting for chronic or non-intensive conditions.

New York’s Mount Sinai Hospital has developed a hospital-at-home program, HaH-plus, for patents who show up at the emergency room or are referred by primary care physicians. A mobile acute-care team provides staffing, medical equipment, medications and lab tests at home, and is on call around the clock if a condition worsens, says the WSJ. Mount Sinai estimates that nationally, 575,000 cases yearly could qualify for the program. Treating just 20% of them could save Medicare $45 million annually.

Another new concept — potentially well adapted to rural counties — is the microhospital, sometimes referred to as the neighborhood hospital. Typically, says the Journal, 92% of microhospital patients are treated and sent home in an average of 90 minutes, and 8% are admitted overnight for care such as intravenous-medication administration. Says the CEO of Lousiana-based Ochsner Health Systems, 80% of its capital expenditures are going to outpatient clinics. “I don’t see us building new hospitals.”

The primary justification for maintaining COPN in Virginia is that preserving hospitals’ monopoly status enabled them to generate the profits they need to cover charity care, bad debts and money-losing Medicaid. If the General Assembly enacts Medicaid expansion, thus relieving hospitals of a significant charity care/bad debt burden, it will kick the props from under COPN.

I would argue that eliminating COPN would be worth the price of expanding the entitlement state. Competition in Virginia would lead to more innovative healthcare delivery systems. If the health care systems didn’t introduce the innovations, local physicians or out-of-state enterprises would. Potential savings for Virginia patients would run into the billions of dollars.

It’s time for an innovation-driven healthcare system. Let’s do it.

In theory, Americans could control runaway healthcare costs if they shopped around for the best deal on big-ticket medical procedures. But in practice, there are limits to a patient’s willingness to compare doctors and hospitals when he’s clutching his chest while medical technicians slap an oxygen mask to his face and trundle him into an ambulance. Likewise, there may be limits if the treatment options are so complex and require such specialized knowledge that a layman cannot make an informed judgment.

Still, some procedures should lend themselves to comparison shopping. Take hip transplants, for instance. The procedure is easily explained by doctors, and the risks are readily grasped by patients. Rarely do patients require emergency surgery. They have ample time to check around to find the optimal balance of price and quality. 

In 2010, according to the Centers for Disease Control, surgeons performed more than 310,000 hip transplants. At an average cost of $40,000 per procedure, hip surgeries account for more than $12 billion a year in health care expenditures. Americans could literally save billions of dollars if they were empowered to spend as much time looking for the best deal on hip surgeries as they do, say, buying a car.

I had the opportunity last year to put that theory to the test. I had been suffering from an arthritic right hip for several years. While the discomfort usually was tolerable, the infirmity was limiting my mobility. I had trouble getting in and out of the car. I found it difficult to straighten my body when I stood up from a chair. I couldn’t walk more than a mile or so without my hip giving out. If I wanted to live an active life as I approached retirement age, I knew I had to do something.

My primary care physician referred me to an orthopedic surgeon in the Richmond area, Dr. Jason Hull. He took an x-ray of my hip and found that most of the cartilage had worn away — the hip and socket were scraping bone on bone. I was an obvious candidate for surgery.

Although he performed 450 to 500 hip and knee replacements a year, Hull confessed that he couldn’t tell me how much the procedure would cost — or even what he would charge. I’d have to ask the business office of his practice, Tuckahoe Orthopedics. As for what Bon Secours St. Mary’s Hospital would charge, I’d have to ask them.

While I liked Hull’s forthright demeanor and had full faith in his competence, I also felt a responsibility as a health care consumer to check out my options. Over and above what the surgery would cost me personally, I felt a moral obligation to see if I could save “society” some money. As it turned out, being a good health care consumer was all but impossible.

One idea particularly appealed to me. My friend Bill Moscowitz, a Virginia Commonwealth University pediatric surgeon, highly recommended Health City, a state-of-the-art hospital on Grand Cayman founded by renowned Indian heart surgeon Dr. Devi Prasad Shetty. Its value proposition: By focusing on a narrow range of high-volume procedures, it could provide treatment at comparable outcomes to the best U.S. hospitals but at much lower cost. Indeed, the hospital was known to put up the patient and a family member in a resort hotel on Grand Cayman’s famed Seven Mile Beach for post-operative recuperation. That sounded like a great way to recover from surgery! When the website confirmed that the hospital performed hip replacements, I had fantasies of my wife and me sipping margaritas and lounging under umbrellas on soft sandy beaches.

I submitted an email inquiry to Health City but, alas, the hospital never responded. Then I thought to inquire if my health insurance company, UnitedHealthcare, even covered procedures conducted at Health City. When I checked, the answer was no. That was a deal killer. It didn’t matter if Health City could under-price an American hospital by 50%, without insurance, I’d personally pay more. So, I restricted my search to hospitals in the Richmond area.

The Virginia Health Information website provides average cost data for various high-volume procedures performed in Virginia hospitals. Based on 2015 data, the website reveals that the average price of a hip replacement in Central Virginia — $18,810 — was lower than in any other region of the state. (The statewide average was $20,697.) As I recall, when I searched the website last year, it provided average cost figures for individual institutions. I can’t find that data any longer. Here’s all the database offers now:

Given the fact that a dozen Central Virginia hospitals conduct orthopedic surgeries, this table isn’t remotely helpful. As I recall, VFI data indicated last year that Bon Secours St. Mary’s Hospital had the lowest, or almost the lowest, charges among the high-volume hospitals in the region. The hospital performs more than 2,000 procedures a year, and 10% of its total business consisted of orthopedic surgeries. Dr. Hull also conducted his surgeries there, so I felt certain that, whatever the price, at least I was assured of a positive outcome.

From a medical point of view, sticking with Hull and St. Mary’s turned out to be a good decision. (more…)