Investing more in emergency care improves outcomes

Other things being equal, allocating a higher percentage of overall health care expenses to a hospital’s inpatient treatment is consistent with lower mortality rates among elderly Medicare recipients.

“We find that patients who go to hospitals that rely more on skilled nursing facilities after discharge, as opposed to getting them healthy enough to return home, are substantially less likely to survive over the following year,” says Joseph Doyle, the Erwin H. Schell Professor of Management at the MIT Sloan School of Management and co-author of a paper detailing the study.

Conversely, Doyle adds: “What types of hospitals are low-cost and have good outcomes? They spend a lot when you’re there, initially, but a lot less [after] you leave the hospital.”

The paper, “Uncovering waste in US healthcare: Evidence from ambulance referral patterns,” appears in the Journal of Health Economics. The co-authors are Doyle; John A. Graves, an assistant professor at Vanderbilt University; and Jonathan Gruber, the Ford Professor of Economics at MIT.

The study aims, in part, to address the fact that the U.S. spends about 40% more on health care per capita than the next highest-spending country in the Organisation for Economic Co-operation and Development (OECD), a group of 35 major nations — a figure that leads many to wonder whether there are significant ineffeciencies in U.S. health care spending.

In devising their experiment, the researchers took advantage of ambulance company practices that essentially provided a randomised group of patients to study, making it possible to compare outcomes at different hospitals.

The study uses Medicare claims data for hospital admissions from 2002 to 2011, focusing on patients who were at least 66 years old, and tracking their one-year mortality statistics. The study’s final database comprised 1,575,273 patients.

In many parts of the U.S., multiple ambulance companies cover a given area, and their assignment to patients is essentially random; the first available company will take a patient. However, ambulance companies often have agreements or preferences concerning which hospitals they deliver patients to. That means the ambulance companies are essentially delivering a randomised set of people to certain hospitals.

For this reason, the study avoids a basic problem in comparing hospital outcomes — that patients admitted to one hospital may be significantly less healthy, on average, than the patients admitted to another. All told, there are about 2,500 ambulance companies and about 3,000 hospitals in the data set.

The average 90-day spending on patients in the study is almost $27,500; for every additional increase in spending of roughly $8,500, the researchers found a reduction in mortality risk of about 2 percentage points. However, the study finds about a 5 percentage-point increase in mortality at hospitals that have relatively high rates of spending on “downstream” nursing facilities.

“We see this as a potentially novel quality measure for hospitals,” Doyle says. “Hospitals that have that profile where they send patients to skilled nursing facilities have higher spending downstream, and they have worse outcomes.”