The study comes in response to findings by the Dartmouth Atlas project showing hospitals and doctors provide exceptional value for Medicare in some urban areas and should be emulated. For example, a May 2009 article in the New Yorker, considered a must-read by President Obama as he prepared for health reforms, found a wide gap in value between hospitals in two Texas cities.
The Milliman study basically upheld that view, identifying 16 “high value” cities where hospitals deliver low costs per capita to both Medicare and commercial payors while also producing positive margins. These cities included Akron, Ohio; Fargo, N.D.; Honolulu; Knoxville, Tenn.; Pittsburgh; Portland, Ore.; and Tucson, Ariz.
Miilliman’s findings suggest good management drives the success of these hospitals rather than external factors that typically affect costs, such as wage levels, payor and hospital competition, geographic location and the ratio of primary care physicians to specialists.
However, the study found that exceptional Medicare value did not translate into exceptional value for private payors in nine cities, including Denver, Sacramento, Calif., San Francisco, San Jose and Seattle. Hospitals in these cities simply shifted the savings for Medicare to commercial payors.
Many other cities did not provide exceptional value for either Medicare or private payors.
Read the National Business Group on Health’s release on hospital charges.
