Leaders of Maryland's renowned teaching hospitals are feeling vulnerable as the push for a health care overhaul focuses attention on the tremendous differences in hospital costs around the country.
Urban academic medical centers such as top-ranked Johns Hopkins Hospital and the University of Maryland, with its world-class trauma center, are more expensive to run than community hospitals and rural teaching hospitals. The difference can mean patient bills that are higher by thousands of dollars.
Administrators at these urban medical centers fear the national focus on cost-cutting will hurt their ability to train doctors, research diseases and treat complex problems. Community hospitals don't perform these expensive tasks, but medical centers say such work is essential to their mission.
And, the urban centers argue, they're more pricey than rural teaching hospitals because they treat poorer and sicker patients in an area with higher costs.
"To do what we do takes a certain infrastructure, making teaching hospitals more expensive," said Jeffrey A. Rivest, president and chief executive officer of the University of Maryland Medical Center, which trains half the doctors in the state. "If there are specific reductions through Medicare and Medicaid revenue cuts, this will hinder the nation's ability to be a leader in innovation and creators of advancement in care and more cost-effective care."
The U.S government has long paid urban teaching hospitals higher rates through Medicare. But now legislative proposals would slow the growth of Medicare payment rates overall and would study geographic disparities in spending - findings that could limit the amount of money going to pricier hospitals nationwide.
Maryland hospitals are not specific targets - in fact, the state has been hailed by some analysts for efforts to keep hospital costs down. But influential and hotly debated research from Dartmouth College on the cost of care at the end of chronically ill patients' lives ranks the state sixth-highest in the nation. Lawmakers and the White House have seized on this research, which shows big differences in regional health care spending, as evidence of waste.
Hopkins and the University of Maryland are the state's costliest hospitals, according to Dartmouth data from 2001 to 2005. Medicare reimbursed the University of Maryland, the highest spender, $95,000 per patient in the last two years of life. The national average was about $53,000.
"It's just remarkable how much it differs from place to place," said Dr. David Goodman, director of Dartmouth's Center for Health Policy Research. He added, "Being an academic medical center is not really an important explanatory factor for why costs are higher. This is the immediate response from these hospitals when you talk to them."
Differences show up even within the same region. The state of Maryland, which sets hospital rates, follows the lead of the federal government by allowing teaching hospitals to charge more for care. Thus, Hopkins can charge $155 for a chest X-ray, while St. Joseph Medical Center in Towson - not a teaching hospital - can charge $84.
Hopkins and the University of Maryland say they support the goals of health reform but don't want it to mean fewer resources for training and innovation. "Medicine will not advance by doing the same thing over and over again," said Dr. Edward D. Miller, dean and CEO of Johns Hopkins Medicine.
Cutting costs is part of the strategy to help pay for expanding coverage to most of the nation's uninsured. Reform proposals would cap the annual increases in Medicare rates paid across the system, and they would also reduce the extra funds going to hospitals caring for a large share of uninsured patients. Fewer patients without insurance would be good for medical centers, but the centers are wary of reductions to Medicare - typically a hospital's largest payer - before the benefits are clear.
"So, everyone's trying to do the math - how do the cuts compare to the add backs," said Carmela Coyle, president of the Maryland Hospital Association.
The economic implications go beyond the hospitals' bottom lines. Big medical centers are a key economic engine in Baltimore and some of the largest employers in the state. Teaching hospitals and medical schools in Maryland employ 75,000 people, said the Association of American Medical Colleges.
But everyone, hospitals included, agrees that a health care overhaul won't be successful if it doesn't make the system more efficient and affordable. From 2000 to 2007 alone, annual health care spending per person in the U.S. jumped more than 50 percent to about $7,400, according to federal figures provided by the Henry J. Kaiser Family Foundation. The overall cost of living - and incomes - increased far less.
The House health care proposal, which passed earlier this month, would direct the Institute of Medicine of the National Academy of Sciences to study geographic differences in Medicare payments and recommend changes that would promote "high value care." The bill says that only a joint resolution of Congress could prevent the recommendations from going into effect.
But figuring out what costs should be is not an easy job. Take just one issue: the mix of doctors. Robert Murray, executive director of the Maryland Health Services Cost Review Commission, says teaching hospitals argue that their costs are higher in part because doctors-in-training aren't always as efficient as experienced medical staff. But community hospitals complain that academic medical centers reap benefits from the cheap labor medical residents supply.
"So this is a complicated issue and also a controversial one at times," Murray said.
Goodman, of Dartmouth, said costs vary even among teaching hospitals. He said that remains true when controlling for differences in patient population, although the hospitals take issue with that. The Mayo Clinic, No. 2 behind Hopkins in U.S. News & World Report's hospital ranking, does well in Dartmouth's analyses. One of its hospitals, St. Marys in Rochester, Minn., gets just over $53,000 per chronically ill Medicare patient over the last two years of life. That's about the same as the national average, and a lot less than Johns Hopkins' $86,000.
And other research suggests higher spending doesn't improve health.
"The places where we spend the most on health care are the places where Medicare beneficiaries, for example, are the least likely to get high-quality but low-intensity care. Like flu shots, mammograms, eye exams for diabetics, aspirin after heart attacks," said Katherine Baicker, professor of health economics at Harvard School of Public Health.
Her research also found that high-cost areas have more specialists.
"We as physicians use whatever is available to us - we help by doing," said Goodman. "If there's more that allows us to do more - more physicians, more consultants, more availability of ICU beds - we use it."
Medicare's payment system rewards the do-more philosophy. But Ronald R. Peterson, president of the Johns Hopkins Health System, said many of the institution's doctors are medical school faculty with no financial incentive to seek costly tests. "These are salaried people who are trying to do the best possible job for their patient base."
Hopkins administrators say Dartmouth research only takes into account patients who died, rather than those saved by hospital care. The Mayo comparisons are unfair, they maintain, because Dartmouth's research looks at Medicare payments, not total costs. Maryland is the only state in the country whose system sets rates that all insurers must pay, which puts private insurers and Medicare on basically equal footing. In other states, private insurers often pay much more than Medicare.
Miller, at Hopkins, has spent months working with a coalition of academic medical center administrators to lobby Congress. The group pushed back efforts to change reimbursement rates without study. In a September ad in Roll Call, they called the Dartmouth studies simplistic and urged Congress to probe why the regional differences exist before "arbitrarily ending them."
Rivest, of the University of Maryland, said he fears cuts to hospital reimbursements would mean less money to train physicians at a time when more doctors will be needed to treat millions of newly insured Americans.
Both Hopkins and the University of Maryland say their hospitals serve a vital role by treating everyone from local residents to patients from across the country, and even the world, seeking their renowned specialists and top-notch trauma care. For instance, the University of Maryland received more than 8,000 very ill patients from hospitals around the Mid-Atlantic region last year alone.
Rivest said nearly half of the University of Maryland's 700 patient beds are in its intensive-care units. And Maryland Shock Trauma Center costs a lot to run, regardless of whether it's filled.
"Costs are the same, because you have to be ready for the worst, 24-7," he said. "Most community hospitals can't do this."
The Mayo Clinic has also been active in the health care debate - pushing for changes in payments. Dr. Raymond J. Gibbons, a Mayo cardiologist and professor of medicine, said he doesn't see it as big hospitals versus small ones, or urban versus rural. Instead, he said, he'd like Medicare to give everyone incentives to deliver excellent preventive care.
This sort of change is one Hopkins has tried and says can save money and improve patient care. Hopkins coordinates the care of Medicaid patients, and providers are paid per patient per month, rather than through the traditional fee-for-service model. The result has been a drop in total costs of caring for patients, including a 47 percent decrease in costs for patients with end-stage renal disease. But change - any change - makes many of the nation's health care players nervous.
"The moment you propose things, then you potentially threaten interests who see that, 'Oh, if this change takes place, we may be paid less,' " said Gibbons, of Mayo. "What they are really doing is defending the status quo. And the status quo is not sustainable."