As Ezra pointed out recently, the cost of your health care depends a lot on where you live. An MRI that costs $1,080 here in the United States would come in at $280 in France. Even within the United States, there’s big variation in how much we pay for the exact same treatment.
Not all health care cost variation, however, has to do with geography: It turns out that what kind of facility you seek treatment at matters a lot, too. An episode of cancer treatment costs 24 percent more at a hospital than if the same course of treatment were carried out at a doctor’s office, according to a new analysis from Avalere Health.
The Avalere study aimed to compare the net costs, everything paid by both the patient and the insurance company, of patients’ course of treatment. It compares cancer care that’s managed by a doctor’s office (about 75 percent of current treatments) versus those overseen by a hospital. They controlled for patients’ age, gender, length of cancer treatment and prior cancer history.
What they saw was a significant cost difference. The average course of chemotherapy treatment managed in a physician’s office cost $28,200. The same treatment administered in a hospital cost $35,000. For some cancers, the difference was even more stark. Genitourinary system cancers, which includes cancers of the prostate and kidneys, costs $8,960 when managed by a doctor’s office. At a hospital, the costs more than double to $19,592.
What explains the difference? Avalere CEO Dan Mendelson thinks it comes down to how much medicine gets used in each setting. “You have, in the hospital, a more intensive set of resources being used,” he says. “The best way to say it is that, utilization is driving the more expensive care we’re seeing in hospitals.” Hospitals tend to have more resources at their immediate disposal. Another test or scan could be just a phone call or short walk away.
One key issue the Avalere study did not include data on was the outcomes: Did those who received the more expensive, more intensive hospital treatment have better outcomes? I was unable to track down research that has compared the two types of treatment facilities by how healthy their patients end up.
The study was able to partially control for health status, by looking at prior history of cancer, but Mendelson thinks more research is needed to look at what might be different about the two sets of patients.
“It is conceivable that patients who seek care in hospitals are more complex, and that would be very useful to know,” he says. “We were able to control for age, sex and previous cancer status which gets you pretty far. But we’re not saying that you could move those treated in hospitals to a doctor’s office and save 24 percent. That would be a stretch, because we don’t know enough about who these patients are.”
What Mendelson is saying though, is that where you get treated matters — and could start mattering more.
Right now, the health reform law is encouraging the development of “Accountable Care Organizations,” where health care providers band together to manage a set of patients’ treatment. Hospitals are launching Accountable Care Organizations, as are some of the really big physician practices.
“As we move towards integration, I think this study says that the choice of where that integration is based matters,” says Mendelson. “You might consolidate care in a setting that has, historically, been more expensive. Or, you can start from a place where things have been less expensive.”