One constant refrain heard in national health policy circles is the need for “integrated” or “coordinated” care. To be sure, I have never heard anyone speak favorably of “disintegrated” or “un-coordinated” care. While there are many good-faith practitioners who do want to integrate and coordinate care for patients, these terms are often used to camouflage a more straightforward way to raise prices. Here’s an example from Bloomberg BusinessWeek:
For the past four years, Pennsylvania insurance company Highmark has watched its bills for cancer care skyrocket. The increase wasn’t because of new drugs being prescribed or a spike in diagnoses. Instead, the culprit was a change that had nothing to do with care: Previously independent oncology clinics and private practices have been acquired by big hospital systems that charge higher rates, sometimes three times as much, for chemotherapy drugs. “The site of care and the type of service provided does not change at all,” says Tom Fitzpatrick, Highmark’s vice president of contracting. “The only significant difference that we primarily see is the [patient] gets a wristband placed on them.”
Cancer drugs, already expensive, often double in price when hospital systems charge for them. A treatment of Herceptin, a breast cancer drug from Genentech, cost private insurers $2,740 when used in an independent clinic and $5,350 in a hospital outpatient setting, according to an analysis of 2012 claims by PricewaterhouseCoopers’ Health Research Institute. The price of Avastin, another Genentech cancer drug, increased from $6,620 to $14,100, the Health Research Institute says.
So, the price of an expensive drug can more than double when it is dispensed in a hospital. Strange, then, that the health insurers’ trade association has decided to persecute Gilead and other innovative drug-makers, instead of focusing more on how to reduce the cost structure of America’s bloated hospitals.
Health plans have had some success reducing hospital costs. One method is reference pricing, whereby an insurer will pay fully for a procedure at the lowest-cost, high-quality, hospital. Patients who go to another hospital pay the difference in fees out of their pockets. However, this has a long way to go before it is generally accepted. Medicare, i.e. the federal government, has proved utterly ineffective at preventing arbitrage between the physicians’ and hospitals’ fee schedules through the acquisitions described by Bloomberg BusinessWeek. The term of art for reforming this is “site-neutral payment,” but hospitals have successfully blocked it.