Why is Health Care So Expensive in Rural Louisiana?

Most discussions of regional variations in healthcare focus on the nation’s cities. Below, a first-of-its-kind map from a post on the Daily Yonder titled “The Uneven Cost of Rural Health Care.”

Daily Yonder/Dartmouth Health Atlas

map shows the difference in per capita Medicare costs among 1,845 rural
hospital service areas. Green areas have costs below the national
average. Brown areas are above the national average. For a larger
version of the map, click here.

The map and the post are based on data collected by researchers at the Dartmouth Medical School. Doctors and economists there take a sample of Medicare costs from some 1,843  hospital service areas where a majority of the  people are  living in rural or exurban zip codes.

The green areas on the map denote hospital service areas that spent below the nation of average of $8,176 per patient (averaged from 2004 to 2006) for Medicare patients. The brown areas spent above the national average. The white areas represent urban hospital service areas, and in a few cases, areas with no data. 

When comparing rural areas, the researchers used data that is adjusted for differences in race, sex and age. (It is important to recognize that “the Dartmouth research” includes years of studies. Different studies analyze the data in different ways. When comparing medical centers, Dartmouth researchers have adjusted for differences in the patients’ income and local prices as well.) There are, of course, many variables to consider: “Research has shown that some of the variation is due to differences in the prices paid for similar services, and some is due to differences in illness,” Dartmouth’s researchers acknowledge, “but even after accounting for these factors, twofold differences remain.”

What is remarkable is that, despite the many different ways that the Dartmouth teams have sliced into the data, the conclusion is always the same.  They find widespread variations in how very similar patients are treated that have little to do with medical needs—or the patients’ preferences. High-cost regions remain high-cost regions even if there is a large turnover in the population shifts –for example, after the closing of a military base.

And here is what is most interesting: “the differences in spending are almost entirely explained by differences in the volume of health care services received by similar patients.”  In other words, we’re not talking about variations in prices, but differences in how much care patients receive. In high-cost areas, patients receive more intensive, aggressive care. They see more specialists, and undergo more tests and treatments. Yet outcomes are no better. Sometimes they are worse.

Some have suggested that the work done by Dartmouth researchers targets the nation’s “big cities” by painting urban areas as more wasteful when dispensing care. But “this map illustrates that variation in health care spending is not just about big city versus rural areas,” Dartmouth College economist Jonathan Skinner told The Daily Yonder. As Skinner notes the map reveals that “even within rural there is a large variation in costs.” (I would add that while the study of how academic medical centers (AMCs) manage chronic diseases in the 2008 Dartmouth Atlas shows that some big-city hospitals provide more aggressive and expensive care, it also reveals that other urban medical centers–such as the Cleveland Clinic, Mass General and Yale-New Haven –practice a more conservative style of medicine.  Care is both less intensive, and less costly.  So this is not a story of New Hampshire researchers failing to understand the problems that urban hospitals face.)

Meanwhile, this new map shows that the differences among rural areas are as great as the cost variations from one metro region to another. Moreover, the high cost rural service areas are generally in the same places where there were cities with high Medicare costs.  This suggests that that the medical culture of  an area influences how doctors practice medicine.

In the June 1 New Yorker, for example, Dr. Atul Gawande wrote about the high charges for Medicare patients around McAllen, Texas, where he found a “money culture” driving medical spending skyward. “Medicare costs in the rural regions of far South Texas are among the highest cost in the nation,” Daily Yonder reports. Meanwhile, “Louisiana has the highest costs statewide; and six of the ten most costly rural hospital service areas are in Louisiana.”

Maybe patients in Louisiana are simply sicker? “Places with sicker patients do spend more,” Skinner writes in the September 9th issue of The New England Journal of Medicine. “But that discrepancy accounts for only 18% of the total difference between the highest and lowest cost regions.” Skinner calculates that 70% of the difference between high and low-cost areas is due to “discretionary decisions by physicians.” Doctors in some areas simply order more tests and hospitalize more patients.

The evidence suggests that excess capacity can lead to more aggressive care. For instance, when I was writing Money-Driven Medicine, I learned that the supply of hospital beds per capita is higher in Louisiana than in many other places. And if the beds are there, physicians tend to use them. Skinner offers a further explanation: “ I wouldn’t be surprised if in some high cost areas you had high numbers of physician-owned hospitals,” he told the Daily Yonder referring to  specialty hospitals owned by entrepreneurial doctors.

 Sure enough, with just a little Googling I discovered a recent article in Louisiana’s the advocate.com, noting that “Louisiana, with 23 physician-owned hospitals already built or planned, is second only to Texas in specialty hospitals. Baton Rouge has three of the hospitals: Greater Baton Rouge Surgical Hospital, The NeuroMedical Center Surgical Hospital and Surgical Specialty Centre.

Critics have long suggested that when physicians own hospitals, they are more likely to send their patients to them for tests and treatments. A study published in Health Affairs, comparing "practice patterns of physician owners before and after they became owners” confirms that rates of use of [magnetic resonance imaging], physical therapy treatments, and [direct medical education] increased significantly” when physicians have a financial interest in a hospital.

Physicians also tend to refer healthier patients to their own clinics, while sending sicker patients to community hospitals. While physician-owned hospitals claim that they provide better care,  “peer-reviewed research finds that lower unadjusted mortality rates in cardiac specialty hospitals are largely attributable to the fact that these facilities admit healthier patients,” the Health Affairs study notes. “After adjusting for procedural volume and patient characteristics, mortality rates and outcomes were similar.”  Finally, even though the patients are healthier, the Medicare Payment Advisory Commission reports that care at specialty hospitals owned by doctors tends to be more expensive.

The American Hospital Association (AHA) has been a consistent critic “self-referral,” which it says results in over-treating patients and driving up costs.  Today, the AHA is applauding health care reformers who hope to include a ban on construction or expansion of hospitals owned by doctors in the final legislation.  This may be another way that reform will reduce waste, and rein in spending.  Time will tell.
To read the full post on the Daily Yonder, click here .

10 thoughts on “Why is Health Care So Expensive in Rural Louisiana?

  1. This is interesting, but kinda puzzling as well. What explains the western Upper Peninsula of Michigan? It’s hard to believe over-utilization, physician-owned specialty hospitals, etc, is happening here in such a remote, seasonally populated area.

  2. My first impulse when I saw the map was to look up McAllen and El Paso, Texas.
    Since both are urban hospitals neither of the zip code service areas were included in the study, so those two areas are white.
    But the exurban/rural areas radiating around each of those cities jump off the page at anyone who recalls Dr. Gawande’s article.
    You always say we need a scalpel to cut the waste, but in a few cases a chain saw might be in order.

  3. These findings really highlight the inability to enable cost control using the current free market approach to health care. Maybe changes to regulation could solve the problem, but the current system is definitely not offering the necessary tools to promote efficiency and cost containment.
    When patients are ill, they have little choice but to trust their doctor in terms of knowing what treatment and tests they might need. In the case that the doctors run their own hospitals, the result is a form of conflict of interest that this study seems to show results in escalating charges to patients.

  4. There needs to be clearer separation between the financial interests of physicians and hospitals, and the ordering of testing and ancillary services. In my Vermont rural community our only hospital has taken over the practices of the local surgeons and ob/gyns, who apparently were struggling due to the high percentage of Medicare and Medicaid patients in our area, and malpractice insurance costs. How will we know that the hospital administration won’t directly (or indirectly) encourage these new salaried physicians to order more tests and services that will improve the financial gains of the hospital (that may in part be passed on to the physicians), but not necessarily for the benefit of the patient. Hospital (in-patient) care is also now almost exclusively delivered by salaried hospitalists in my community. As others have pointed out, hospitalists tend to order more tests, than primary care physicians do when they supervise their patients’ hospital care. Is this because the hospitalists are less familiar with the patient, or is this a result of hospital administrative incentives. I suspect it may be some of both.
    To best utilize our limited health care dollars, policies should be developed to separate these conflicts of interests. I think this is one of the reasons some have proposed global health care budgets, as a way to better minimize over-testing and over-treating patients. Tort-reform measures to limit the costs of defensive medicine would also improve the value that patients receive from our limited health care dollars.

  5. Vermonter, Wellescent, Hootsbuddy, Lisa
    Let me suggest that, rather than Separating the financial interests of doctors and physicians, we
    need to Join their interests so that they work together, collaborating to do what is best for the patient.
    Could hospitals encourage their doctors to order more tests in order to increase revenue?
    Yes–but only if doctors and hospitals are paid more for doing more.
    Healthcare reformers want to “bundle” payments to doctors and the hospital, paying them a lump sum (to be divided) for a single episode of care that includes a bonus if outcomes are better.
    Both the doctors and hosptial would be paid for better quality– not for doing more. But to get the bonus, they would all have to work together.
    This works at Geisinger, and is worth trying elsewhere.
    Secondly, when doctors are on salary–at Cleveland Clnic, Mayo, Intermountain, Kaiser in Northern California, etc.
    experience shows that, despite the fact the hospital is their employer, care tends to be more efficient– better outcomes while using fewer medical resources.
    Yes, when doctors own hospitals, there is an inevitable conflict of interest.
    And “the market” does not work to avoid these unwarrangted variations in how much care patients recieve–variations which have nothing to do with the patients medical needs.
    Hootsbuddy– Well, okay, in a few cases, a chain saw might be in order!
    Lisa– I have no idea. One
    possibility: are there many retired auto-workers from Detroit in the Upper Peninsula?
    If so they have very good health insurance which might encourage providers to do more.
    Or higher spending (and wasateful spending) could just be part of the medical culture in this relatively affluent area. One would need to know more about the hospital(s) in the area.

  6. Maggie, I do think we need to be a bit careful about assuming that if more docs are salaried that they will adopt more efficient medicine.
    The names you point out–Cleveland, Geisinger, Kaiser, Mayo, Intermountain–all have one or both of the following traits: (1) they are also an insurer; (2) they have a decades long history of being an organization obsessed with quality as the highest goal.
    As noted, having docs on salary at a physician-owned hospital or a for-profit hospital isn’t going to result in a big push for outcomes-focused efficient care. Even at a non-profit hospital all bets are off…it will depend on the culture of the place.
    Integrated delivery systems aren’t just docs and hospitals working together. That is two legs of a stool. They need to be integrated with point where healthcare expenditures as revenue and healthcare expenditures as costs meet.
    Of course, there are all sorts of legislative ways to make providers more cost-sensitive even when they are not part of the same system that has to answer to the purchaser of coverage, but so far those are mostly far-off hopes rather than reality.

  7. jd-
    I absolutely agree that reform is not as simply as just putting docs on salary..
    But you are mistaken when you say that Mayo, the Cleveland Clinc and Geisinger are also insurers.
    Neither Mayo or Cleveland Clnic insure–they use outside insurers. And while some of Geisinger’s patients are insured by Geisninger, many are insure by outside insurers.
    We do know that, by and large, fee-for-service encouages, overtreatment.
    Of course, this does not mean that docs on salary leads to the right amount of treatment.
    I agree that the “culture” of the medical center and the community is most important. And that it takes years to build what is truly an “accountable care organization.”
    And I suspect that there are many different ways to structure these accountable care organizations. But by and large, they work best when docs are not paid for volume. Various forms of salary, salary best bonuses, or capitation seem to work better.
    This is why we need to start tomorrow!

  8. I work in a rural area, which apparently is in an over-utilization area. Having worked in a metropolitan area, what I have noticed is that home health care seems to be over-utilized. I have not been able to use the Dartmouth data to determine if that is true so this is a personal gestalt, only. Is there an easy way to graph the individual components of health care for these regions? (Physician, hospital, drug, home health?)

  9. Working in Rural–
    I’m not sure that there is a way to focus on home health care within the Dartmouth Data, but I do know that MedPAC (the Medicare Payment Advisory Commission) which tends to be very good on overtreatment, believes that we are overpaying for home health care, and has recommending reducing spending in that area (which I believe is happening this year.)

  10. It is strange to hear about the Health Care So Expensive in Rural Louisiana. I hope that conditions will improve in that area so that each patient can cure his illness at an affordable cost.