Study pours cold water on idea that teaching hospitals are more costly for Medicare patients

hospital doctor with patient
Overall funding of Medicare patients is less over time for those admitted to teaching hospitals. (monkeybusinessimages/Getty Images)

Overall costs of care were similar or lower at teaching hospitals versus non-teaching hospitals for Medicare beneficiaries undergoing common medical and surgical procedures, according to a new study funded by the Association of American Medical Colleges and published in JAMA Network Open.

Researchers who looked at data from more than 1.2 million hospitalizations found major teaching hospitals had higher initial costs than non-teaching hospitals, but total costs of care at 30 days were lower at teaching hospitals due to post-acute services and readmissions. And looking beyond, to 90 days out, the results were similar.

In the media and the general population, there is a general consensus that teaching hospitals are more expensive than non-teaching hospitals, so insurers and policymakers have often advocated shifting care from these institutions in order to save costs on Medicare patients. However, the analysts of this Harvard T.H. Chan School of Public Health study raised doubts that care at teaching hospitals is more expensive than care at non-teaching hospitals.

The study asked three major questions:

  • Is hospital teaching status associated with differences in total spending for Medicare patients?
  • Are there different patterns of spending associated with hospitalization in minor teaching, major teaching and non-teaching hospitals?
  • How do these patterns of spending among hospitals vary by clinical condition?

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Looking at the costs of hospitalizations for all 21 conditions in the study, treatment at a major teaching hospital was associated with the highest total spending after 30 days, $8,529, followed by minor teaching hospitals at $8,370 and non-teaching hospitals at $8,180. Outpatient care spending was also highest among major teaching hospitals, accounting for a $25 difference with non-teaching hospitals.

However, observed 30-day costs were lower at major teaching hospitals compared to non-teaching hospitals for 12 of 21 conditions.

And results were the opposite for readmission rates. Costs for major teaching hospitals were $2,960 versus $3,075 at minor teaching hospitals and $3,205 at non-teaching hospitals. And for post-acute care, the aggregate costs at a major teaching hospital were $6,015 versus $6,239 at a minor teaching hospital and $6,260 at non-teaching hospitals. When comparing all post-discharge claims, major teaching hospitals had the lowest spending, $9,276, versus $9,576 at minor teaching hospitals and $9,743 at non-teaching hospitals.

Treatment at a major teaching hospital was associated with 7% lower odds of having any readmission spending for medical conditions and a difference in total readmission spending of negative $123. This pattern was similar for readmission spending for surgical procedures and for post-acute care spending after hospitalizations for medical conditions

There were no such associations for surgical procedures with the exception of coronary artery bypass grafting, for which teaching hospitals had higher hospitalization costs ($20,289 at major teaching hospitals versus $19,509 at minor teaching hospitals and $19,262 at non-teaching hospitals). Therefore, the difference between major and non-teaching hospitals came to $1,027.

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“The association between treatment at a major teaching hospital and similar or lower total spending may seem unexpected given a general consensus that teaching hospitals are more expensive and that the involvement of trainees in patient care is relatively inefficient. This study suggests that although costs are somewhat higher for the initial hospitalization at major teaching hospitals, spending after hospital discharge, particularly on post-acute care services, is generally lower,” the study concludes.

The reason for this association is unclear, but the researchers hypothesize that greater treatment intensity or better care processes may reduce later complications and the need for post-acute care. Or, it could mean that teaching hospitals are better at reducing redundant care.

The study does raise the question of whether indirect medical education (IME) payments—those used to pay for physician training at teaching hospitals—should be included in the cost of care. The inclusion of IME payments increased Medicare spending at teaching hospitals by about $1,204 at 30 days.