Health Affairs, 22, no. 6 (2003): 111 doi: 10.1377/hlthaff.22.6.111 © 2003 by Project HOPE	New Online   Senate Health Reform Bill   Rewarding Providers   Public Option Policy Brief   Health Reform & Abortion   Delivery System Reform

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Teaching Hospitals

PROLOGUE

The Mission Costs Of Teaching Hospitals

In an effort to clarify the ongoing debate about how to calibrate these subsidies, Lane Koenig and colleagues at the Lewin Group and Harvard Medical School present new estimates of the relative costs of mission-related activities. In the absence of clearly differentiated data, the estimates may be controversial, but they represent a promising step toward a more evidence-based GME policy. Koenig and colleagues find that the cost of activities not directly related to teaching are substantial, led by the expense of maintaining standby capacity; they warn that abrupt reduction of certain payments to teaching hospitals might have unintended consequences for services that are essential to the overall health needs of their communities. Finally, although it is important to be able to analyze the components of mission-related costs, the authors caution that they do not support "balkanization" of subsidies, "because teaching hospitals’ missions are highly interrelated and mutually supportive." Perspectives by Joseph Newhouse and Stuart Guterman round out the discussion.

In a second paper, Rob Mechanic examines typical estimates of inpatient costs at Massachusetts hospitals and finds that recurrent allegations of excessive hospital spending in the "medical mecca" are overstated. Private investment in research and grants from the National Institutes of Health are reported as revenue by Massachusetts hospitals and lumped into per patient spending figures, Mechanic explains, which creates a mistaken impression of profligacy. In fact, he finds, Massachusetts hospitals "have lower inpatient costs than peer institutions in other states." Nevertheless, pressure on hospital spending will continue, Mechanic concludes, and it will be incumbent on the state’s prestigious academic health centers to pioneer in the development of high-tech care that uses information technology to realize the dual goals of high quality and cost-effectiveness.

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