Government Drops Big Data Bombshell on U.S. Hospital Industry

May 19, 2013

(Editor’s Note: Dan Munro is a contributing editor to Forbes. His columns are collected under the heading, “The HealthCare Compass.)

(Editor’s Note: Dan Munro is a contributing editor to Forbes. His columns are collected under the heading, “The HealthCare Compass.)

To be honest, I never thought we’d get much further than Steven Brill’s epic Time cover story – Bitter Pill: Why Medical Bills Are Killing Us. We had seen some of the data in bits and pieces over the years, and we knew that many Americans were driven to bankruptcy through medical expenses, but Steven gave us fresh insight into the personal devastation behind the sheer cost of care.Image

The story is still reverberating throughout the healthcare system today – and it will likely be thought of in the same vein as the Institute of Medicine’s To Err is Human (1999) – PwC’s equally stunning The Price of Excess (2009) and perhaps to a lesser extent – Mary Meeker’s USA, Inc. (2011 – which highlighted the current and future calculus of healthcare on the balance sheet of USA, Inc.).

If there’s a single industry that has the capacity to drive our country over the proverbial cliff – healthcare is one really good candidate. It’s now at about $3 trillion (unless you use Deloitte’s number’s which are higher) – and accounts for roughly 18% of our GDP – per year. Our healthcare system is basically “an economic unit roughly the size of France” (from David Brooks recent article Health Chaos Ahead).

Still, the evidence Steven recounted wasn’t really systemwide. He did name hospitals by name, and he did show how widely divergent pricing was for similar procedures – at hospitals that were often in the same city or state. It remains a brilliant piece of investigative journalism, but it wasn’t systemwide evidence. If he cited pricing from 50 different hospitals (I didn’t count), it was still a small fraction of the total. The American Hospital Association puts the total number of Registered U.S. hospitals at 5,724 (2011 data).

In that sense, what he uncovered was effectively ”little” data. While there’s no formal definition of little data, I tend to think of it as anything that operates at the unit level. One account, one patient, one customer, one transaction, one record – or even one hospital. Relative to the overall system, the data Steven referenced was fractional. In a data driven economy – one that can easily drop coupons for baby strollers into your mailbox during the first trimester of pregnancy – little data won’t cut it.

This week the Government changed that – in a bold and stunning disclosure that will forever change the way we see hospital pricing at the truly national level. Called simply the Medicare Provider Charge Data – the government described it this way:

The data provided here includes hospital-specific charges for the more than 3,000 U.S. hospitals that receive Medicare Inpatient Prospective Payment System (IPPS) payments for the top 100 most frequently billed discharges, paid under Medicare based on a rate per discharge using the Medicare Severity Diagnosis Related Group (MS-DRG) for Fiscal Year (FY) 2011. These DRGs represent almost 7 million discharges or 60 percent of total Medicare IPPS discharges.

The team over at the Washington Post put a great interactive chart together that lets you see the cost data presented visually (and easily) at the individual state level for 10 different (and fairly common) hospital procedures. This is just a first (albeit compelling) pass on the actual analytics. The headline (by Sarah Kliff and Dan Keating) carried the full implication of pricing that spanned a difference of more than 470%. One Hospital charges $8,000 – another, $38,000.

It’s a veritable treasure trove of information that will be even more revealing as we dig deeper into the analytics – especially when we combine the cost data with clinical outcomes. That combination will finally give us the actionable intelligence that’s been missing for so long. Pricing alone isn’t sufficient because it can (and most definitely will) be argued that the quality of care warrants a significantly higher price.

Perhaps the most important single takeaway from this newly released data isn’t even the data itself but where it came from. It couldn’t come from an industry that’s kept pricing deeply cloaked behind legally binding contracts between providers and payers for decades. It came without much fanfare directly from our Federal Government. There was certainly ample time for the healthcare industry to self regulate, but they never did. Turns out the bitter pill Steven Brill referenced may well have had more than one patient in mind. Can big pharma be far behind?

image: healthcare/shutterstock

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