GAO Report: Study Finds Wide Variation in Hospital, Physician Prices
Concerned with the escalating cost of the Federal Employees Health Benefits Program, Rep Paul Ryan (R-Wis) asked the United States Government Accountability Office to analyze the geographic variation and prices in the FEHBP. What it found was that hospital prices varied as much as 259%, and physician prices by as much as 100% across metropolitan areas.
Analyzing 2001 claims from several large national PPOs participating in the FEHBP, which in 2004 served close to 8 million enrollees, the GAO found that the PPOs paid an average of 18% higher hospital and 11% higher physician prices in metropolitan areas that had less competition among hospitals, defined as areas with a higher percentage of beds concentrated in the two largest hospitals or networks. Price also varied depending on prices negotiated between the PPOs and the hospital and physician providers. In addition, areas that had less HMO capitation also saw PPOs paying a higher average price. Areas with less HMO capitation, on average, saw hospital and physician prices more than 10% higher than metropolitan areas with the most HMO capitation.
Removing the various costs of doing business, such as rents, salaries, and differences in services provided, the GAO found that while some metropolitan areas had prices at both extremes of the average, most had prices closer to the middle. A hospital price index was developed by dividing the average price for a hospital stay in a metropolitan area by the average price for all 232 metropolitan areas included in the study. The average price index value is 1.00 (see Figure 1). Areas that tended to have higher hospital prices were also found to have higher physician prices. The analysis showed that hospital stays and physician prices tended to be highest in the Midwest and lowest in the Northeast.
Figure 1. 2001 hospital and physician price distribution indices from GAO report. To create these indices, the researchers divided the average price in a metropolitan area by the average price in all of the metropolitan areas included in the study. The prices were adjusted for both case mix differences and the underlying costs of business. Each index is not of actual dollar prices and is based on FEHBP PPO payments for hospital stays and physician services. The five metropolitan areas with the highest adjusted hospital prices in the 232 areas included in the study are: The GAO withheld the name of the metropolitan area because the area had only one hospital and the data were proprietary (1.829); Dover, Del (1.680); Biloxi-Gulfport-Pascagoula, Miss (1.591); St Joseph, Mo (1.578); and Milwaukee-Waukesha, Wis (1.568). The five metropolitan areas with the lowest adjusted hospital prices in the 232 areas included in the study are: Orange County, California (0.515); Pueblo, Colo (0.609); Ventura, Calif (0.635); Albany-Schenectady-Troy, NY (0.674); and Newburgh, NY-Pa (0.675). The five metropolitan areas with the highest adjusted price for physician services in the 319 areas included in the study are: La Crosse, Wis-Minn (1.484); Wausau, Wis (1.459); Eau Claire, Wis (1.418); Madison, Wis (1.414); and Jonesboro, Ark (1.348). The five metropolitan areas with the lowest adjusted price for physician services in the 319 areas included in the study are: Baltimore (0.729); Lowell, Mass-NH (0.743); Nassau-Suffolk, NY (0.744); Washington, DC (0.746); and Fort Lauderdale, Fla (0.747). Source: Government Accountability Office. Federal Employees Health Benefits Program: Competition and Other Facts Linked to Wide Variation in Health Care Prices. Available at www.gao.gov/cgi-bin/getrpt?GAO-05-856. |
“The information that we present is really only stated in comparison to a national average, and it summarizes a huge number of prices for different services into one number,” says Bruce Steinwald, director, health care for the GAO. “These prices are adjusted for both case mix differences and for the underlying costs of doing business that vary from community to community. It is not an index of actual dollar prices.
“We observed that there were substantial variations and adjusted prices across regions, and we tried to ask at least a few questions about what could account for those variations,” he says. “We included some measures that we thought reflected competition, both structural competition and how concentrated providers are, and then we had other measures of HMO penetration as a measure of the relative power of the purchaser organizations compared to the provider organizations.”
Looking into cost shifting as an explanation for varying prices, the GAO says its research did not support such a conclusion. “It’s a hypothesis that people often advance when public payors are paying a low amount or they are more predominant—there has to be more cost shifting to private payors to make up for the difference,” Steinwald says. “You often hear that stated, so we attempted to determine where public payors were predominant or where the payment rates were especially low or the private sector fee is higher, and we did not find that to be the case.”
“FEHBP PPOs did not pay higher prices in metropolitan areas with a higher percentage of Medicaid or Medicare beneficiaries, a larger uninsured population, or lower Medicaid payments,” the report reads.
The report found that physician prices were an average of 10% lower in metropolitan areas that had lower adjusted Medicaid payment rates. No significant association between Medicaid payments and hospital prices was found. Information that could be associated with price included in the study, however, was controlled. Excluded factors included pharmaceutical, mental health, and chemical dependency claims, as well as laboratory, radiology, anesthesiology, unspecified services, and services billed without a uniform code across all PPOs included in the study. In order to adjust physician payments, the Medicare methodology was applied.
The study did not make any recommendations.
“Our mission is to support the Congress and their decision-making,” Steinwald says. “What we hope, or what I would, just as a personal measure, hope is that the information we presented in the report would encourage both providers of health care services and purchasers in various communities around the country to take another hard look at their local health care system to see if they’re functioning the way they would like them to.”
UnitedHealth Puts Consumers in Driver’s Seat
The consumer-driven trend in health insurance could require a seismic shift in marketing focus for providers, including radiology services, if it catches on. According to an article in the Wall Street Journal, one of the major players in health insurance is betting millions that it will.
In the past 2 years, UnitedHealth Group, Minnetonka, Minn, has acquired two pioneering companies in consumer-driven health plans, according to the October 24 article. Consumer-driven plans feature high deductibles ($5,000, for instance) and low premiums, thereby incentivizing patients to shop around for the best care at the lowest price.
UnitedHealth Group acquired health savings account (HSA) pioneer Golden Rule in 2003 for $500 million, and then bought Definity Health Corp for $300 million late last year, a smaller insurer that offered a consumer-driven plan. The company even bought a bank, called Exante, to help manage the assets in HSAs, which are expected to amount to between $10 and $20 billion by 2010, according to the article.
The Journal article cites statistics that illustrate the insurance industry’s barriers to growth: just 66% of private, full-time workers have employer-sponsored health insurance, down from 80% in 1989. And the number of people with commercial health insurance has remained flat since 2000, even though the US economy added 3.5 million jobs.
“Our agenda isn’t to try to preserve yesterday’s approaches, which none of us is satisfied with,” William McQuire, MD, UnitedHealth CEO, told the Journal. “If we can’t find new ways to provide value, we won’t grow.”
Not everyone thinks the plans will succeed. Criticisms cited in the article include: the sickest patients, who account for the majority of health costs, would decimate a $5,000 deductible quickly, thereby eliminating the incentive to save; and patients are likely to face difficulty in ascertaining the price of a medical service. The article also noted that the young, healthy employees most likely to set aside employer money in a health care savings account traditionally subsidize care for older and sicker employees, and employers who encourage HSAs run the risk of disrupting the basic economics of health insurance.
Low-Dose Radiation Poses Increased Cancer Risk
A new report has found that exposure to radiation for medical purposes, working around radioactive materials, and smoking tobacco all have a potential risk of adverse health effects in humans, including raising the risk for solid cancers and leukemia.
In an update of a 1990 study, a report released in July from the National Academies’ National Research Council focused on low-dose, low-linear energy transfer (LET) ionizing radiation—radiation that is powerful enough to break biomolecular bonds and cause DNA damage.
“The main issue is what is the risk of radiation at very low doses,” says Richard R. Monson, MD, ScD, committee chair, and associate dean for professional education and professor of epidemiology at the School of Public Health at Harvard University, Boston. “We concluded that the data were consistent with the so-called linear no-threshold [model].”
This model says the smallest dose of low-level ionizing radiation has the potential to cause an increase in health risk to humans.
Focusing a portion of the study on the health effects of radiation for medical purposes, the committee reviewed published studies, paying close attention on estimating risks of leukemia, and lung, breast, thyroid, and stomach cancer in relation to radiation dose.
With the increase of CT for full body scanning in early detection screening for diseases, people are exposing themselves to higher organ doses of radiation than was found in single-film x-rays, the study says.
Examining models representing a similar sex and age diversification across the United States, taking into consideration everyday radiation factors an individual would see in his or her lifetime, the study predicts that about one out of 100 people would likely develop solid cancer or leukemia from an exposure of 100 mSv, a dose roughly equivalent to 100-200 chest CTs. Another 42 of those people are expected to develop solid cancer or leukemia due to other causes. About half of these cancers would result in death. The study does say, however, that the results are “uncertain” because of the limitations in the data used.
The committee says additional studies need to be done on people who receive CT treatment, especially infants and children. It also recommended that more research needs to be done to see whether low-dose LET radiation also causes heart disease and stroke, among other health problems.
Industry News
The KLAS Top 20: 2005 Mid-Year Report Card’s ambulatory and imaging center PACS specialty category named Dynamic Imaging, Allendale, NJ, No. 1 for its IntegradWeb PACS…..Medicsight, London, and TeraRecon Inc, San Mateo, Calif, have signed a non-exclusive partnership to incorporate Medicsight’s ColonCAD and LungCAD image analysis software tools with medical imaging products offered by TeraRecon…..The American Society for Therapeutic Radiology and Oncology(ASTRO), Fairfax, Va, has published Understanding Clinical Trials: Facts to Help Patients Make an Informed Decision, a brochure designed to help people living with cancer and their families better understand clinical trials. It has also published the patient information brochure Radiation Therapy for Skin Cancer: Understanding Your Treatment Options. In October, ASTRO launched www.rtanswers.org , a Web site dedicated to providing information on radiation therapy treatment for people with cancer. Additionally, ASTRO and the ASRT Education Research Foundation, Albuquerque, NM, will award four one-time program development grants to US colleges, universities, or medical institutions interested in opening radiation therapy programs…Intuitive Imaging Informatics LLC, Bell Canyon, Calif, has received 510(k) clearance from the FDA for its ImageQube, a Web-based PACS…..Witt Biomedical Corporation, Melbourne, Fla, launched its Smart Proactive Observation Technology (SPOT™), a customer service software program designed to remotely monitor customers’ cardiology enterprise hardware operating systems, and applications. The company also received the 2005 Award for Customer Service Leadership in the PACS markets from Frost and Sullivan…..iCAD® Inc, Nashua, NH, has signed a technology partnership with MagView Systems, Burtonsville, Md, to integrate iCAD’s Second Look® 300 and 700 CAD systems with MagView’s mammography information software. The company has also partnered with TeraRecon Inc, San Mateo, Calif, to integrate TeraRecon’s Aquarius 3D tools with its Computed Tomography Colon CAD software to help identify potential polyps in CT colonography images. Partnering with cancer research charity The RITA Foundation, iCAD has agreed to donate a Second Look 700 CAD system to the University of Florida Breast Health Center at Shands Jacksonville. iCAD’s Second Look CAD system was used in the Evaluation of Breast Cancer with a Computer-Aided Detection System by Mammographic Appearance and Histopathology study published in a September issue of Cancer…..Sectra, Linköping, Sweden, and R2 Technology Inc, Sunnyvale, Calif, announced an extended cooperation agreement where R2 will distribute Sectra’s universal mammography workstation and other PACS components. Sectra has also signed a strategic alliance with Kestral Computing Pty Ltd, Melbourne, Australia, to market its RIS and PACS in Australia…..Creative Computer Applications Inc, Calabasas, Calif, has entered into an agreement and plan of reorganization with StorCOMM, Jacksonville, Fla. The transaction is subject to regulatory review and shareholder approval, and is expected to be complete at the end of fall 2005…..Navix Diagnostix Inc, Taunton, Mass, has completed its acquisition of Phoenix Cardiovascular Inc, Doylestown, Pa…..Creative Computer Applications Inc, Ann Arbor, Mich, and Integrating the Healthcare Enterprise have signed a 2-year, renewable associate charter agreement to formalize the existing cooperative relationship between the two groups, convey mutual benefits to their members, and establish the framework for future joint work projects…..According to the KLAS 2005 Cardiology PACS report, ScImage, Los Altos, Calif, has been rated as the overall highest ranked private cardiology PACS company by its customers for its PICOMEnterprise, which was rated as the best Web-based solution for telemedicine. ProVation Medical, Minneapolis, and ScImage have entered into a co-marketing agreement: ProVation will offer ScImage’s PICOMEnterprise to its customers, and ScImage will offer ProVation’s MD Software for cardiology documentation and coding compliance to its customers…..Frost and Sullivan has recognized Barco, Kortrijk, Belgium, with the Growth Strategy Leadership of the Year award for capitalizing on the 3D medical imaging arenas, and the Technology Innovation award for its success in the US mammography imaging market…..GE Healthcare, Waukesha, Wis, has obtained FDA clearance for its OEC® Altitude, a fluoroscopic imaging system…..Hologic Inc, Bedford, Mass, and Esaote, Genoa, Italy, have entered into an exclusive 3-year distribution and service agreement in the United States for extremity MRI imaging systems manufactured by Esaote…..IMAGE Information Systems Ltd, London, has received the exclusive commercial rights for K-PACS, a DICOM viewing application…..Deloitte, a professional service firm, has named Imaging Dynamics Company, Calgary, Canada, to its Canadian Technology Fast 50, an annual program recognizing market presence, innovation, and the fastest growing technology companies in Canada…NightHawk Radiology Holdings Inc, Coeur d’Alene, Idaho, has filed a registration statement with the SEC about a proposed initial public offering of its common stock…..Mercury Computer Systems, Chelmsford, Mass, has partnered with IBM Engineering and Technology Services, White Plains, NY, to integrate the IBM cell broadband engine processor technology into medical imaging products…..RamSoft, Toronto, has received FDA 510(k) approval for its PowerServer 4.0 software suite upgrade to be used for primary diagnosis and analysis in digital mammography…..Eastman Kodak Company, Rochester, NY, and Electronic Healthcare Systems Inc, Birmingham, Ala, have signed a marketing and integration agreement where both companies will offer a comprehensive information and practice management solution allowing in-house management of imaging and information workflow, insurance eligibility, and patient billing functions for diagnostic imaging centers…..GE Global Research, Niskayuna, NY, and the Frangioni Laboratory at the Beth Israel Deaconess Medical Center, Boston, have received a $6.5 million grant from The Cancer Imaging Program of the National Cancer Institute to begin a 5-year research collaboration to enhance the imaging of cancerous tumors during surgery…..Toshiba America Medical Systems Inc, Tustin, Calif, is supporting a visiting fellowship program at Shands Hospital at the University of Florida.
People
 Jay P. Mazurowski, CRA |
During its annual convention, the American Healthcare Radiology Administrators installed its 2005-2006 Board of Directors: Jay P. Mazurowski, MS, CRA, FAHRA, 2005 president-elect/2006 president; Lynn A. McVey, president; Roberta M. Edge, CRA, FAHRA, past-president; Penny M. Olivi, CRA, finance director; and directors Deborah Clark; Stephen D. Clevenger, FAHRA; Kenneth A. Fazzino, CRA; Hazel C. Hacker; Richard A. Lewis, CRA; Debra A. Lopez, CRA, FAHRA; Jeffrey A. Palmucci, CRA; Carlos E. Vazquez, CRA; and Michelle M. Wall, CRA, MS…Barry Gutwillig has been promoted to executive director of marketing and business development by AMICAS Inc, Boston. The company also promoted Glen Lefeber to vice president of financial products and implementation engineering.
Presented at AHRA
The American Healthcare Radiology Administrators 33rd Annual Meeting and Exposition, San Antonio, August 7-11
Imaging Services, Next Chapter. Michael A. Silver, PhD, vice president of Sg2, Evanston, Ill, believes there is more good technology out there than most institutions will be able to buy, so savvy technology management will be increasingly important in the years to come. Look for: new monochromatic x-ray laser diodes to replace polychromatic tubes to transform x-ray imaging; 256-slice CT in 2007/9; MRI to emerge as the dominant cardiovascular diagnostic tool in 6-10 years; dedicated nuclear medicine cameras; new, targeted radiolabeled ligands and nanoparticles for combined imaging and targeted drug delivery. In an atmosphere of declining reimbursements, outpatient competition, credentialing challenges, quality pressures, and performance pressures, strategy and execution in adopting technology will make all of the difference. “Technology makes a difference only when basic business issues are well executed,” he noted. He urged hospitals to apply the following principles: customer-focused service business; add clinical value that makes a difference; produce quality reports; apply excellent radiology business management; engage in strategic technology adoption; and manage and execute radiology strategically.
MQSA Update. In order to meet the minimum qualifications to perform mammography services, a facility must be knowledgeable of the Mammography Quality Standards Act (MQSA) regulations and take the appropriate steps to successfully achieve compliance, says Bonnie Rush, RT(R)(M)(QM) and author of “MQSA Made Easy.” When it comes to inspector authority, the state has more authority. A state may impose more stringent mandates than MQSA, and facilities must meet those criteria. Practices may be shu down as part of a state inspection; however, those violations incurred cannot be entered into the MQSA database. The FDA can only recommend that facilities discontinue use of equipment, personnel, or practices that result in a violation. The key to inspections is to be prepared for them—they can happen at any time. Information on how to prepare for an inspection, as well as current MQSA updates, is available at www.fda.gov/cdrh/mammography .
Global Outsourcing and the Coming Revolution in Teleradiology Services. Since 2000, outsourced nightcall teleradiology has exploded as a rapidly expanding business model in both national and international operations serving the United States, says Robert Lufkin, MD, professor of radiology at the David Geffen School of Medicine at UCLA and chairman of the US Radiology On-Call Educational Foundation. One of the reasons for outsourcing is supply and demand—there is more work than radiologists available to do it. “In 1996, in a perfect example of what happens when politicians and medicine mix, the Medicare Budget Reconciliation Act capped the number of US radiology resident positions, thus freezing the rate of US production of new radiologists,” he says. Some advantages include saving money, improvement in service, and expertise. Every case submitted to the outsourced group is peer reviewed within 5 or 6 hours, he says. Lufkin warned against falling for a fraudulent service (do not do business with a teleradiology company unless they are JCAHO approved, Lufkin advises), and the stigma associated with outsourcing.
The Key to Strategic Growth, Research, and Strategy. Organizations that have a clear strategic direction spend more time on high-impact activities, understand true opportunities, realize positive returns within 18 months, realize a 25% increase in employee loyalty, adapt more quickly through change and innovation, are proactive, and achieve their vision of success, say Erica Olsen, MBA, and Elsa Ozuna-Richards, MSA, CMPE. The key to opening the door to growth is research. Know your market, both internally and externally. The information you gain from your research will help you build a strategic growth plan. When you have a plan designed, make sure staff members know what their roles in implementing the strategy are, and hold them, as well as yourself, accountable for their part. Keep it simple. Transitioning into an action plan should be done slowly—it is not an overnight process.
Letter to The Editor
Numbers Do Not Equal 100%
The June 2005 issue of Decisions in Axis Imaging News provided a very comprehensive outlook on the State of Radiology in 2005. However, the section titled “Share of Imaging” contained some erroneous information. The percentage numbers detailing the breakdown of payors does not add up to 100%. The numbers given miss the mark by about 10%.
I just wanted to bring this to your attention.
Robert F. Carfagno, President and CEO American Radiology Services Inc
Editor’s Note: According to a report titled “Nation’s Health Dollar, Where It Came From: CY 2002” from the Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group, 2004, CMS programs accounted for 33% of health care expenditures in 2002—with Medicare accounting for 17%, and Medicaid 16%. Other federal and state government payors covered 13%. Private health insurance accounted for 35% of the bill, and patients paid for 14% out-of-pocket. Other private payors funded the remaining 5%.
