Can Low-Intensity Care Solve High Health Care Costs?

How much you spend on medical care depends on what you get, but also where you get it.

Confoundingly to many, the cost of the same procedure on the same patient by the same physician can vary by thousands of dollars depending on whether it’s performed in a hospital, a hospital’s outpatient department, an ambulatory surgical center or a doctor’s office. It can also vary by who’s paying the bill — which insurer or public program.

And even for the same insurer, cataract surgery might cost twice as much in a clinic affiliated with a hospital compared with an independent surgery center. The cost of cancer care is significantly higher in hospital outpatient departments compared with community practices, partly because insurers often pay hospitals double for chemotherapy drugs. Delivering a baby in a teaching hospital costs about $2,000 more than in a community hospital.

Some of this is a result of different prices. Some reflects differences in how much care is delivered: its intensity.

Either way, such cost variation across care settings has led policymakers to consider paying more evenly for medical services regardless of where they’re delivered, and to shift care from expensive, high-intensity settings to cheaper, low-intensity ones. Doing so, the thinking goes, could result in more efficient use of resources by health systems.

But new research also shows the downside of this approach:A study of Medicare hospitalizations found that almost all patients are more likely to survive at teaching hospitals, which tend to be more expensive. Amid our enthusiasm for more efficient care settings, we should be cleareyed about the limitations: Sometimes less is more, but sometimes more is more.

To some extent the shift toward cheaper settings is already happening. Medicare has started to close the gap in payment rates between hospital-owned clinics and private doctor’s offices through site-neutral payments . The Massachusetts Health Policy Commission has recommended that more patients be diverted to low-cost community hospitals from high-priced academic medical centers. And insurers are encouraging health systems to shift hospital care to less expensive outpatient clinics, rehab facilities and even patients’ homes.