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Sunday, November 17, 2013

Fix the Handful of U.S. Hospitals Responsible for Out-of-Control Costs

Today's post was shared by NEJM and comes from

In May 2013, the Centers for Medicare and Medicaid Services (CMS) released CMS Medicare Provider Analysis and Review (MEDPAR) inpatient data that contain discharge information for 100% of Medicare fee-for-service beneficiaries using hospital inpatient services. This data shows what more than 3,200 hospitals in the United States were being paid for the most frequently performed 100 inpatient procedures. The variations were extraordinary. Some hospitals in the New York State were being paid 40 times as much as the world-famous Mayo clinic for some treatments.

This kind of variation is understandably a huge cause of concern at a time when health care costs are widely seen to be spinning out of control. Our research suggests, however, that the data contains a silver lining: The bulk of excess costs to CMS and inpatients for all the procedures — a total of $5.3 billion above the average across all hospital by procedure — are highly concentrated in just a small number of hospitals.

When we applied the techniques of Six Sigma analysis to the CMS data, we found that just 32 hospitals — less than 1% of the hospitals in the data — accounted for about 25% of the excess accepted charges. (Hospitals determine what they will charge, or bill, for items and services, and CMS then decides how much of that amount is appropriate and will be paid.) A handful of hospitals in New York State accounted for nearly half of them. Add some hospitals in...

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