Are low-cost hospitals offering false economies?

A common belief that low-cost hospitals are "penny-wise and pound-foolish" because they discharge patients early only to result in higher readmission rates and more inpatient costs down the road is more myth than reality, according to a new Commonwealth Fund-sponsored study published in the Archives of Internal Medicine. Examining 2006 discharge, cost and quality data for Medicare patients with congestive heart failure (CHF) or pneumonia at more than 3,000 U.S. hospitals, researchers found no clear relationship between cost and the quality of care or between cost and death rates.

Differences in the cost of care were fairly extreme for low-cost vs. high-cost hospitals. Care for a typical CHF patient cost $1,522 in the lowest-cost hospital compared to $18,927 in the highest-cost hospital. Care for a typical pneumonia patient ranged from $1,897 to $15,829.

Results were mixed in terms of quality of care. Compared to low-cost hospitals, high-cost hospitals generally had higher quality of care (89.9 percent vs. 85.5 percent) and lower mortality (9.8 percent vs. 10.8 percent) for CHF patients. However, low-cost hospitals had higher quality of care (86.6 percent vs. 85.7 percent) and lower mortality (10.9 percent vs. 11.7 percent) for pneumonia patients.

CHF patients had a higher risk of readmission within 30 days at low-cost hospitals compared to high-cost hospitals (24.7 percent vs. 22.0 percent). However, pneumonia readmission rates were almost even: 17.9 percent for low-cost hospitals vs. 17.3 percent for high-cost hospitals. 

The slightly higher readmission rates at low-cost hospitals didn't translate into higher long-term inpatient costs. In a comparison of six-month inpatient costs, patients first seen in low-cost hospitals fared better than those initially seen in high-cost hospitals. The six-month cost total for CHF patients at low-cost facilities came in at $12,715, compared to $18,411 at high-cost facilities. For pneumonia patients, the six-month total at low-cost facilities was only $10,143 vs. $15,138 in high-cost hospitals. 

To learn more about the study:
- read the Commonwealth Fund summary
- check out the Archives of Internal Medicine abstract

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