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Study: Western Pennsylvania region spends more on health care

| Monday, March 26, 2012

The Pittsburgh region uses "substantially" more health care services than comparable cities, costing the region an extra $187 million a year, according to a report released today.

With competition for medical services likely to heat up between the region's two health care titans, UPMC and Highmark, the Pittsburgh Business Group on Health commissioned the study to better understand how hospital capacity might affect health care spending. The organization is a nonprofit coalition of more than 80 companies that seeks to find ways to lower costs and increase value in health care.

"Based on this type of information, and the current climate, employers have the best opportunity in years to influence the payments and delivery of health care services in our region," said Cheryl Melinchak, president of the business group's board and director of benefits for Westinghouse Electric Co.

Health care spending in Pittsburgh was more than in three similarly sized regions, the study said.

"We found that the higher use of services in the Pittsburgh region is producing higher costs for health care," executive director M. Christine Whipple said.

The report's authors examined the relationship between the supply of hospital beds and the frequency and length of hospital stays in Pittsburgh, Cleveland, Cincinnati and St. Louis. Pittsburgh and Cleveland had more beds per 1,000 residents, 4.2 and 4.3 respectively, than Cincinnati and St. Louis, 2.6 and 3.5 respectively.

The researchers also found that Pittsburgh and Cleveland had higher hospital occupancy rates than Cincinnati and St. Louis, meaning that the regions with more beds filled those beds more often.

"Patients cared for in regions that have a greater relative supply of beds and physicians spend more time in the hospital, have more frequent physician visits and get more diagnostic tests and imaging services," said Dr. Elliott Fisher, professor at the Dartmouth Medical School and researcher at the school's Institute for Health Policy and Clinical Practice.

By taking the total number of days patients stay in the region's hospitals each year and dividing by population, the researchers calculated a bed-days-per-patient ratio. Pittsburgh had the highest ratio, meaning patients here spend more time in the hospital than patients in Cleveland, Cincinnati and St. Louis.

Using an average hospitalization cost, they determined how much extra money was spent on health care in Pittsburgh, Cleveland and St. Louis as compared to Cincinnati, which had the lowest number of beds and use of hospital services.

Pittsburgh spends $187.3 million more than Cincinnati, while Cleveland and St. Louis spend $127.1 million and $74.4 million more, respectively.

The study did not address whether patients in Pittsburgh receive higher-quality care or have better outcomes as a result of the additional spending. And because it used one estimated average hospitalization cost, the calculations might not accurately reflect health care spending in the regions studied.

"Without knowing the actual payments to providers for health care services, it is unclear just how much more employers, and their employees, are paying for health care in our region," Whipple said.

But employers should push for a health care payment system that focuses more on value than on volume, said Francois de Brantes, executive director of the Health Care Incentives Improvement Institute and one of the researchers.

"Employers should demand from their health plans new payment models that impose financial risk on providers for excessive and unwarranted use of services," de Brantes said.

UPMC Health Plan, UPMC's health insurance subsidiary, announced last week that it is introducing an online program that allows members to comparison shop for routine medical procedures.

"There's a growing concern that the costs in this area are becoming unsustainable... especially for chronic conditions" such as diabetes, heart disease and lung disease, Highmark spokesman Michael Weinstein said Sunday. "Higher quality care ultimately can result in holding and controlling the costs."

Highmark, the state's largest health insurer, has said it wants to develop a competing health care delivery system that will focus on increasing quality and reducing costs. Highmark has said it will spend nearly $1 billion to buy the five-hospital West Penn Allegheny Health System, local doctor practices and urgent care facilities, and build outpatient centers around the region.

Because Highmark is seeking to become a competitor, UPMC refuses to negotiate new reimbursement contracts with the insurer. That means UPMC's 19 hospitals and 3,200 doctors will be out-of-network for Highmark members after June 30, 2013.

A spokesman said UPMC representatives had not reviewed the study Sunday and declined to comment.

Health care experts have said the region likely will notice higher quality and lower costs from the increased competition between UPMC and Highmark.

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