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Continued: Health care reform: Can Mayo emerge a winner?

  • Article by: CHEN MAY YEE , Star Tribune
  • Last update: January 29, 2010 - 12:02 AM

ROCHESTER, Minn.  - Almost four years ago, the doctors who run Mayo Clinic took a big gamble.

Despite a long history of staying out of politics, they catapulted out of southern Minnesota and onto the national stage to join Washington's debate over health care reform.

The goal: Get Medicare to reward the most efficient hospitals and pay less to the least efficient -- cutting waste, raising quality and saving money all around.

Over the past year, that argument has attracted a growing line of converts, including President Barack Obama, who frequently invoked the Mayo name during health care speeches. If a final health bill passes -- and that's a big if -- it's likely to include a payment formula that would reward efficient, high-quality providers like Mayo.

But Mayo's victory has come at a price. With some $250 billion in annual Medicare hospital spending at stake, the new payment formula has kicked up a huge fight between potential winners and losers. It has even raised the question: Is Mayo as good as it claims?

"When you're in the public eye, this happens," said Dr. John Noseworthy, Mayo's chief executive. "But I don't think [we've taken] a solid hit."

For more than a century, the famous clinic in Rochester has treated presidents, foreign royalty and Minnesota farmers alike. Last year, Mayo ranked second only to Johns Hopkins Hospital in Baltimore in U.S. News & World Report's list of America's Best Hospitals.

Its gold-plated credentials gave it a powerful voice in the health care debate. Leading a coalition of hospitals from the Midwest and Pacific Northwest, Mayo proposed a radical new payment formula, called a "value index.''

Instead of paying the same amount every time a hospital or physician does a procedure -- which encourages more procedures -- Medicare should pay for value, Mayo leaders said. "Value'' would combine patient outcomes, safety, service and total costs over time.

By this measure, other health systems in Minnesota would do well, too. "It's absolutely the right thing to do," said Ken Paulus, chief executive of Allina Hospitals and Clinics.

It was an engaging idea for policymakers desperate to rein in the country's runaway medical costs. Sen. Amy Klobuchar, D-Minn., and others went to bat for Mayo in Washington, and the idea of paying for value was written into both the House and Senate health bills.

That drew the ire of hospitals on the coasts and in the South, who say they cost more not because they are inefficient, but because they treat sicker and poorer patients in urban settings.

"The people in Minnesota are just going to say, 'We want our money,'" J. Thomas Rosenthal, chief medical officer of the UCLA Medical System told the Washington Post. "It's just 'Give us your money. You people are wasteful and we're not and we deserve it.'"

According to the Dartmouth Atlas of Health Care, an influential compendium often cited by supporters of a value index, Medicare pays $93,842 per patient over the last two years of life at UCLA, compared with $53,432 per patient at Mayo's flagship St. Marys Hospital.

In the crosshairs

The debate has subjected Mayo, and the Dartmouth researchers, to two critiques: Mayo has low costs because its Midwestern patient base is affluent and healthy, and its Medicare billings are low because it can recoup costs by charging high prices to people with private insurance.

Both have bruised Mayo's sterling image a bit, but health care experts say that neither one explains away the clinic's reputation for high-value medicine.

Last fall, Dartmouth researchers responded to critics with an article in the New England Journal of Medicine. Even after taking into account race, poverty and health factors, they concluded, more than 70 percent of the differences in spending between high-spending places and low-spending places could not be explained away by the claim "my patients are poorer and sicker."

Instead it came down to more hospitalizations, more doctor visits, more diagnostic tests.

"What the high-performing systems have figured out is how to take great care of patients and keep them out of hospitals while treating them parsimoniously when they are in the hospital," said Dr. Elliot Fisher, one of the Dartmouth study's authors. "They do what's needed."

Some of the nation's most prominent experts agree.

"[The Dartmouth Atlas] can tell high users they are probably wasting taxpayers' money," said Alain Enthoven, a retired professor from Stanford University and health policy veteran. "I think the Dartmouth analyses are very valuable in showing the wide variation in medical practices, suggesting some very good organizations like Mayo and Intermountain Healthcare [in Salt Lake City] can do the job for less resources."

The second critique -- that Mayo merely shifts costs to patients with private insurance -- may ring true to Minnesotans who will scratch their heads over the notion that Mayo is a low-cost provider.

Looking at price per procedure, Mayo is expensive compared to local competitors. For example, a colonoscopy costs $1,177 at Mayo and $570 at Allina, according to Minnesota HealthScores, a website that shows what private health plans pay.

Medica, the state's No. 2 health insurer, groups Mayo among the most costly hospital systems it contracts with.

But the national debate is being driven by Dartmouth data, which are based on standardized Medicare prices.

Mayo also looks efficient to the Dartmouth researchers because it is less likely to perform wasteful procedures.

"What people need to understand is on a national basis, Mayo and other Minnesota providers do a better job of avoiding unnecessary services for patients," said Jim Chase, president of MN Community Measurement, which publishes the Minnesota HealthScores website. "But the price Mayo gets paid per service may be higher, too."

Toward a solution

All of this has Mayo on the defensive.

"I've watched them for 30 years," said Dave Durenberger, former U.S. senator from Minnesota and health policy veteran. "They are so good at doing the right thing. But they're not good at doing the politics."

Noseworthy says Mayo has no regrets about getting into this debate, but isn't convinced it will reap a windfall. Even if a health bill passes this year, payment reform will take a few years to finesse and roll out.

"I don't have a financial analysis of how this bill would affect us," Noseworthy said. "But there is nothing in [it] that's going to put Mayo Clinic on Easy Street, I can tell you that."

Meanwhile, at Dartmouth, Elliot Fisher is working on a solution that focuses instead on rewarding good primary care -- where doctors get to share the savings when they keep patients healthy and out of the hospital.

"We need to figure out how we don't harm any of the leading academic centers who are most upset about the value index," Fisher said. "It's not about the good guys and the bad guys. It's about getting the incentives right to help everyone improve."

Chen May Yee 612-673-7434

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