Bottled Water and Healthcare FeesPosted: December 3, 2013
I have always been amazed by the apparent marketing brilliance of bottled water companies. If someone would have told me years ago I, and many others, would spend three dollars for a bottle of water – something we can all get free from our water faucets – I would have laughed and said they were crazy. Shows you what I know…
That same marketing brilliance came to mind last week while reading an article on the Harvard Business Review (HBR) Blog Network, Fix the Handful of US Hospitals Responsible for Out-of-Control Costs, regarding CMS payments to hospitals for in-patient procedures. Using Medicare Provider Analysis and Review (MEDPAR) data published last spring by CMS, the authors applied a six sigma approach to identify hospitals that were three standard deviations from the average fee paid to hospitals for the most frequently performed 100 in-patient procedures. Their findings forced me to stop and make sure I was reading their conclusions correctly. Their findings:
- Payments to hospitals whose accepted charges were above the national average for those 100 procedures added $5.3 billion dollars in excess cost to CMS.
- Two of the top 100 procedures accounted for more than 10% of the total costs – major joint replacement (6.1%) and septicemia (4.6%). Major joint replacement payments varied between $9,000 – $39,000 per procedure and septicemia payments varied between $7,500 – $44,000 per treatment between hospitals.
- Less than 1% of the over 3,200 hospitals included in the data (32 hospitals) accounted for about 25% of that excess cost – over $1.25 billion dollars. By Six Sigma definition, what they were being paid was three standard deviations from the norm.
How are they doing it, and perhaps a better question is, how are they justifying the difference? I understand and appreciate the issue always raised when data like these become public…”Our patients are sicker than everyone else’s patients” but 5-7 times sicker?
After reading the HBR post, I couldn’t help but stop and think that these 32 hospitals appear to make the bottled water marketing teams look like amateurs.