A study released late last year pegs Dallas as one of the nation’s most expensive cities to have a procedure performed among both Medicare recipients and patients who are insured through a private plan.
The city is one of the rare exceptions where Medicare and private spending are very similar—the one problem being they’re also both exceedingly high. Dallas is the 34th highest in the nation for Medicare spending and the 40th highest for private insurance. According to a New York Times report, there are few cities with a discernible correlation between Medicare and private spending, a fact that seems to be opposite what was promoted by President Barack Obama ahead of the passage of the Affordable Care Act.
He argued that cities with low Medicare spending would see overall healthcare costs decline as a result of the reform law. We’d see increased price-shopping among patients, better transparency among providers, and varied delivery plans among payers (high deductible health plans, health savings accounts, accountable care organizations). And while some of these trends are arising, the study states plainly: It’s not enough, and all the consolidation in the marketplace may have driven prices higher.
“In terms of policy, our work suggests that vigorous antitrust enforcement is important and that hospital prices could be made more transparent,” the researchers write. “There is evidence that higher deductibles and cost sharing alone will not likely encourage shopping by patients.”
The report was prepared by researchers at Yale University, the University of Pennsylvania, Carnegie Mellon University, and the Centre for Economic Performance. It is among the first to analyze a database of private insurance claims, a fact that it qualifies as “an initial foray into understanding the cross sectional variation in healthcare spending.” It continues: “More work is needed to better understand the factors driving the growth in private spending over time.”
The topic is a notable one, especially in Dallas. Late last year, the Dallas Regional Chamber held its annual Healthcare Conference, packing a room with more than 200 business executives at Union Station. They were there to hear a panel between three men who have approached this cost conundrum differently, as moderated by Blue Cross Blue Shield of Texas’ Chief Medical Officer Dr. Dan McCoy.
Dr. David Ballard, Baylor Scott & White Health’s chief quality officer, touched on the benefits of a system that decided to merge with another. Dr. David Hayes, the Mayo Clinic Care Network’s medical director, discussed Mayo’s decision to begin partnering with like-minded providers throughout the country such as Dallas’ Methodist Health System. And finally there was Dr. Christopher Crow, the founder of Village Health Partners, whom McCoy half-jokingly described as the “hell-bent independent maverick.”
Though the aforementioned study had yet to be released, the three viewpoints illustrated the differing perceptions of how to contain healthcare costs. Ballard noted that merging two of the state’s largest nonprofit providers created a much broader pool to correct inefficiencies. It also meant a much larger population for the system to manage using its value-based care arrangement, the Baylor Scott & White Quality Alliance.
He said this is how the system discovered a massive overuse of imaging on Medicare patients suffering from back problems. Prior to initiating a new set of evidence based guidelines, the neurosurgeons would not see a patient without an X-ray. This fueled massive amounts of unnecessary imaging within the Quality Alliance: About 70 percent of all X-rays were deemed inappropriate. After this was caught, the system’s been able to drop the medically unnecessary rate to 6 percent over a 15-month period. Interestingly, the ACO includes a wide percentage of doctors who are not employed by Baylor—by grouping them all together, they were able to reduce costs at other practices, he argued.
“That’s a real concrete example,” Ballard said. “We do have some employed doctors, we have some employed primary care physicians, but most of these employed specialists are not employed by us. But they come together in the context of our ACO business model and end up creating a whole new dynamic by working together to reduce the cost of care.”
Hayes walked the room through its decision to not acquire, but to partner. The Mayo Clinic Care Network is more of an advisory arrangement, a venue for best practices and second opinions. Methodist gets the added bonus of the weight of Mayo’s brand, and Mayo gets some fees and a partner with whom to ping pong ideas off of. The network now is made up of more than three dozen partners throughout the U.S., Mexico, Puerto Rico, and Singapore.
Crow, whose Village Health Partners has provided a home for more than two dozen independent physicians, said that battling costs is a matter of awareness. You must be aware of the local conditions, and react based on those, he said. He’s launched an accountable care organization that has more than 300 physicians, which has help keep costs in line for the participating doctors.
“Look, there is no answer here,” Crow said. “In this conversation, there’s this independence versus consolidation (fight) where one says don’t do full consolidation or don’t do full independence. But (in reality) you do have to respond and flex like a rubber band to the local conditions.”