WSJ Is Good on Medical Transparency

How’s that expression go?—“Sunlight is the best disinfectant.”

The Journal’s Thomas M. Burton this morning shows Louis Brandeis’s adage is literally true in Pennsylvania, where a state body publishes hospitals’ “medical outcomes” data, with the result being that embarrassed, poorly performing hospitals clean up their act while the system as whole controls costs.

For example, Pennsylvania three years ago published its first report on hospitals’ infection rates that arise largely from intravenous catheters and tubes left in too long. Infection numbers the following year fell 7.8%, as hospitals responded with steps designed to lower infections.

The average payment in 2006 for hospitalization where a patient acquired an infection was $53,915; with no infection, the average payment was $8,311, according to state reports.

It sounds too good to be true, and the Journal finds a few soft spots, mainly that the panel’s stats, even with adjustments, can’t take into account the challenges faced by academic and other hospitals that treat the most complicated cases. But no one is seriously arguing that state health-care consumers should not have access to data on hospital quality.

The theory underlying the Pennsylvania program is that, to create a truly competitive health-care market, consumers need hard information showing which hospitals perform better.

It’s just hard to argue with that.

I give the Journal credit for giving some attention to a body that has been a Pennsylvania fixture for two decades and which offers some intriguing possibilities for the federal healthcare debate. I also appreciate the paper’s down-the-middle treatment. The facts speak for themselves. The panel, and its implications, has received some attention nationally, but not enough.

When you think about it, the panel is yet another example of how government can provide the framework in which markets can function more efficiently. With the information, Hershey Co., a good example cited in the story, could offer its workers a health plan based on the agency’s data (the company is self-insured) and cut its expenses by 50 percent over several years. Without the information, that doesn’t happen.

I also admit I like the fact that the panel’s name, Pennsylvania Health Care Cost Containment Council, or PHC4, is sure to get the black-helicopter/birther crowd in a lather.

But perhaps those who like opacity in markets can take heart:

State legislators have tentatively cut the PHC4’s budget to $2.8 million this year from $5.4 million in 2008, largely because of a state deficit.

That seems like a bad idea.

My one beef is that health insurers’ role didn’t get the scrutiny it deserves. While hospitals must provide data on outcomes, insurers so far are not required to disclose what prices they pay hospitals.

The state agency hasn’t been as successful in obtaining the prices that insurers pay to hospitals, information that would be important because it would allow patients and payers to factor in prices when choosing hospitals. The agency has legal power to get that information from insurers and publish it, but it has done so only for heart surgery. An agency spokesman says insurers didn’t refuse, and that lack of manpower at the agency explains this omission. One person familiar with the events says many insurers wouldn’t divulge prices.

Interesting, but that seems to be more than a passing detail. It’s hard to imagine a market functioning properly without published prices. This seems especially urgent given the story’s anecdotal findings more expensive care does not produce better outcomes. According to a Hershey executive quoted in the story:

Results shocked him. “The correlation between cost and quality was zero,” he says. “You go in thinking that all hospitals are pretty much equal, but this was eye-opening. Generally, higher-cost hospitals had poorer outcomes.”

But opacity in insurance markets is a topic unto itself.

Anyway, good story.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.