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In health care, more is not always better

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The dominant perception in American medicine is that more is better: More insurance is better insurance, and more health care is better health care. If that were unambiguously true, cost control would be a really hard choice: Every dollar you weren't spending would be a dollar of health benefit somebody wasn't getting. But that's not what the evidence shows. Consider, as David Leonhardt does, the case of Richmond, Va.

Richmond has actually lost some of its hospital capacity over the last decade. In 1996, the area had 4.8 hospital beds for every 1,000 residents. Today, it has about three. The cause of this is, in large part, state regulations meant to cut down on supply. "Hospital care has been, in a word, rationed," Leonhardt says. The result?

The quality of care in Richmond is better than in most American metropolitan areas, according to various measures, and it continues to improve. Medicare data, for example, shows that Richmond hospitals do a better-than-average job of treating heart attacks, heart failure and pneumonia.

When I recently asked patients in Richmond whether they felt as if their care had been rationed, they found the question bizarre. “I feel like there’s nothing cheap about the care,” Janet Binns, a retired school district employee, said. After her elderly father fell down one morning, she e-mailed a doctor and was on the phone with him in minutes.

Yet when it comes to health care costs, Richmond’s rationing has made a clear difference. In 1992, it spent somewhat less than average, per capita, on Medicare — 126th lowest out of 305 metropolitan areas nationwide. Since then, though, costs have risen at a significantly slower pace than they have elsewhere. As a result, Richmond had the 39th lowest costs in 2006.

The regulations that squeezed the Richmond medical industry are much stronger than anything being contemplated on the national level. The state has a strong "certificate-of-need" program in which doctors and hospitals who want to move or expand need to demonstrate that there's a good reason to do so. That cuts down on expensive entrepreneurial medicine, in which doctors build out, say, a specialty cardiology unit and then, magically, it turns out that the area needed a lot more heart surgeries than it had previously been getting. And that, in turn, lowers costs. But it's hard to imagine any similar command-and-control solution being adopted on the national level.

Photo credit: Fayez Nureldine/AFP/Getty Images.

By Ezra Klein  |  December 30, 2009; 11:18 AM ET
Categories:  Health Economics , Health Reform  
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Comments


worth adding that Bon Secours has a very, very impressive quality improvement program. I've read their quality plan and it's top notch.

Posted by: ThomasEN | December 30, 2009 11:29 AM | Report abuse

And Maryland had a hospital rate setting system in place or over twenty years that has kept their per capita health care costs among the lowest in the nation. The Post did an article about this recently (IIRC).

Health Affairs abstract for article by Robert Murray below:

http://content.healthaffairs.org/cgi/content/abstract/28/5/1395

Setting Hospital Rates To Control Costs And Boost Quality: The Maryland Experience

"For decades Maryland has maintained a hospital payment system in which all payers—public and private—pay the same rates. This paper describes Maryland’s all-payer hospital payment system—the legislative goals and principles that directed regulatory efforts in the state; how well the system performs in meeting these goals; and current initiatives on payment design, quality-based reimbursement, and their application elsewhere in the health sector. Maryland’s rate-setting system is one of the most enduring and successful cost containment programs in the United States. Lessons learned are relevant to other states and provide useful bases for consideration of future health reform strategies. "

Posted by: grooft | December 30, 2009 11:45 AM | Report abuse

The major problem with the article is that it never makes it clear if it is talking about just the City of Richmond or the Richmond metro area. It really isn't a fair comparison to say there are less beds in the city itself, but ignore places like Henrico Doctors that didn't exist in 1996. I have no idea if the author is accounting for places in Chesterfield or Henrico Counties are at most 5 miles from the city limits, and unless that is made clear the study is not very valid.

Posted by: mjmart | December 30, 2009 11:56 AM | Report abuse

The economy is too complex to be adequately centrally planned. There is a simpler system to control costs, it's called the consumer.

http://www.investors.com/NewsAndAnalysis/Article.aspx?id=516427

Posted by: staticvars | December 30, 2009 12:13 PM | Report abuse

"it's hard to imagine any similar command-and-control solution being adopted on the national level." Good. Is there anyone in his right mind who doesn't understand that it's good to think about when care is necessary and helpful? Now, is there anyone in his right mind who thinks that the federal government is going to do a good job on that for my local hospital?
I work at Johns Hopkins, and a month doesn't go by when we don't buy and begin to implement some new expensive piece of equipment/instrumentation/software. Though I'm sure there are exceptions, I don't think you can point to one of them where we didn't feel that we're getting it because it makes a considerable improvement to our ability to take care of patients.

Posted by: MikeR4 | December 30, 2009 1:09 PM | Report abuse

Richmond may not be a good example of "rationing" effectively. The city has been undergoing pretty serious demographic decline(lower pop, higher unemployment,urban blight, etc) It is going to be very difficult to control for these factors when trying to make your case.

Posted by: zosima | December 30, 2009 3:03 PM | Report abuse

another in a continuing stream of superficial leonhardt nyt articles

Posted by: jamesoneill | December 30, 2009 5:23 PM | Report abuse

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