Why This California Hospital is a Model for Price and Quality Transparency

By Fortune

Categories: Featured News, Orthopedics

Its website discloses readmission rates, surgical site infections, and price.

Everyone is calling for transparency in prices for health care services. If you could shop for health care services it is likely competition would improve quality and lower costs. But, as we all know too well, health care is not like shopping for computers, cars, or even electricians and contractors. There are almost no price information and limited quality data.

One health care provider is not waiting for companies like Castlight to solve the transparency problem, but has taken the initiative on its own. Since 2012, it has posted its quality data on its web site for all the public to see and has the comprehensive prices for all its surgical procedures on a web site.

Hoag Orthopedic Institute is in Orange County, California—not a county known for its progressiveness. Hoag produces annually a 45-page book on the quality of its health care entitled the Outcomes Report. Of course the book has the expected announcement of distinctions and awards as well as the usual grateful patient testimonials. But that stuff is at the back of the book. The first 30 pages are filled with graphs, charts, and data that would thrill a policy wonk.

You can see how many hip and knee replacements and other types of operations Hoag performed over the last three years. It’s valuable data, since there is a volume-quality relationship—the more a surgeon does the better he or she performs. More importantly, Hoag discloses its clinical outcomes—readmission rates, surgical site infections, and other complications. But who cares if there are no infections if most patients don’t experience pain relief and don’t get back to playing golf and other normal functions after their knee is replaced? Hoag discloses those data too. For instance, the 2015 report shows that among the patients who underwent knee surgery, the pain score on a validated measure went from about 50 before the operation to 80 at nine months after (higher is better). And on the question of getting back to sports and recreation, scores went from about 25 to nearly 60, six to nine months after the operation.

Hoag also discloses their quality improvement projects, like the one to minimize the need for general anesthesia during knee surgery allowing for faster recoveries. They also tout their use of a new xenon light system to reduce infections. The report even contains information about some health interventions you don’t expect orthopedists to care about, do, much less collect data on such as ensuring their patients get influenza and pneumonia vaccinations. At Hoag, the immunization rates are above 97% for both compared to 90% nationwide.

And it is possible to get the comprehensive prices for the operations Hoag performs. Go to OSCOC.com and then click on the “cash rates” and you can see a table with the global price if a person is self-paying for a procedure. A total hip replacement is $20,250 and that includes the facility fee, the surgeon’s fee, the hip implant, the anesthesiologist’s cost, overnight stay, and a surgical assistant—everything but the rehabilitation. A partial knee replacement is also $20,250 while a spine fusion is $38,000. (The rehabilitation is not included since most self-paying individuals go back to their hometowns, far away from Orange County, and get it there.) These prices are right there for everyone to see.

Of course there are things to complain about. The quality data are not broken out by individual surgeon. And patients report that Hoag can do better in communicating about medications. And to get the pricing data you have to go to OSCOC web site rather than the Hoag site. But the fact is Hoag has released both its quality and price data on the web for the world to see. Totally transparent. Not surprisingly, it is consistently at the tippy top nationwide.

Why is Hoag different?

Hoag Orthopedic Institute should have a terrible reputation as a rapacious money grubbing hospital. After all, it is a for-profit, physician–owned orthopedic specialty hospital in southern California. These hospitals—which typically focus on high-profit cardiology and orthopedic procedures—cream off low risk, well-insured patients, dumping the high–risk patients and those on Medicaid or with no insurance to community hospitals that can no longer cross subsidize their care using revenue from the “good paying” patients. Because of their questionable practices, the Affordable Care Act prevented the creation of more of these physician-owned hospitals.

So again, why is Hoag is different? First, rather than maximizing revenue by stealing the good patients from the local hospital, it is a joint venture between the local, not-for-profit community hospital and the physicians. And it actually cares for poor patients. For instance, 40% of its patients have Medicare, and in 2014, Hoag provided over $1 million in charity care including 300 operations for the underserved and in 2015 it is on track to provide over $2 million in charity care. The website even tells patients how they can get financial help for their surgery.

Second, the guiding principle of the hospital was that it would try to prove that a “focused factory” for one largely elective specialty could dramatically improve outcomes and reduce costs, making it the market leader in value. Hoag never advertises. It only puts out its quality report every year. They believe superior performance is advertising enough.

Third, the partners believe in themselves and are willing to compete on quality and price. They are maniacal about collecting data, and using it to drive infections to zero, patient experience and perceptions of care to 100%, and pain and functional outcomes ever higher. Moreover, Hoag is one of the few health care providers to do time motion studies to actually determine true costs and identify inefficiencies to be eliminated. They stock only 2 hips prostheses so competition among suppliers drives costs down. They do rigorous pre-op care so no cases are canceled at the last minute wasting expensive operating room time. No equipment is sterilized between cases—they stock enough equipment just to roll in new sterile equipment—reducing operating room turn around times and infections from quick but inadequate sterilizations. They saw that there was variation in the cost of rehabilitation without differences in outcomes, they shifted care more to the lower cost outpatient setting.

Again things could be better. Hoag still operates only five day a week. Capital-intensive operating rooms are used 55 hours a week—only about a third of the time. Surely, they could be more efficient by operating on Saturdays and Sundays just like most stores do. And they have not yet been able to negotiate better rates on screws for spine operations.

But Hoag shows that transparency on price and quality in medicine is not spine surgery. It can be done, not tomorrow or by the end of the decade, but today, if only physician leaders had the courage to put all their data up on the web. Patients need it to shop for medical care the way they shop for other important and expensive products. We should require all medical facilities follow Hoag’s lead.

To view the original Fortune article, please click here.