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opinion | Dr. Howard Grant

Academic medical centers drive up costs in the health care marketplace

Massachusetts has a problem: Even with all the work we have done, health care costs are outrageously high and unsustainable.

On average, every Massachusetts resident spends 36 percent more on health care than the national average.

Why? Too many of us choose to have our care delivered in the most expensive setting possible — academic medical centers and teaching hospitals — rather than at local community hospitals. Nationally only 16 percent of all Medicare hospitalizations occur in academic medical centers and teaching hospitals. In Massachusetts that number is 40 percent. The truth is, according to many state-funded studies, the quality of care provided at community hospitals is as good as, or in some cases better than, teaching hospitals.


Here’s an example: Say you need a knee replacement. You could either choose to go to your local community hospital or you could go to one of Boston’s five academic medical centers to have that surgery. Many of us, without even taking a second to consider our options, will choose to have a common procedure done at what is perceived to be one of the best hospitals in the country, when equally exceptional care is available at community hospitals — closer to home — for a fraction of the cost.

It’s because of decisions like this that the cost of health care in Massachusetts is higher than any other state in the nation. These decisions have resulted in half our community hospitals closing in the past 30 years, with both North Adams and Quincy losing hospitals this year, and the fate of Lynn’s hospital remaining unclear. In each case, these hospitals are the economic drivers of their community.

Yet we have never lost one of our academic medical centers or teaching hospitals. In a normal, competitive marketplace, that would not be the case. But the health care marketplace in general, and the Massachusetts marketplace in particular, is anything but rational when it comes to cost.


These excessive health care costs mean less money for education, infrastructure, transportation, and public safety. In 2014, health care accounted for $2.8 billion more in the state budget than it did 10 years ago — a 21 percent increase. Imagine the difference even a small percentage of that money could make if reinvested in our schools, roads, police, and fire departments.

The good news is that, together, we can fix this problem. Here’s how.

First, we must better educate providers, employers, and the public on the benefits of choosing high-quality, high-value settings for medical care. We need to reverse the trend of patients automatically choosing the most expensive option available to them. This may mean a shift in the way we pay for health insurance, with consumers having to pay a premium to go to a higher-cost setting — just like any other retail environment.

Second, academic medical centers and teaching hospitals must redirect less complex care back to lower-cost community settings whenever appropriate. Right now, the five academic medical centers operate about 3,100 beds in expensive facilities. In order to maintain profitability, every one of these beds needs to be filled — at your expense.

Last, and most important, we need effective competition in the health care marketplace. In Massachusetts, our largest health care system is four times the size of its nearest competitor, and gets paid approximately 40 percent more than its competitors for the same quality of care. In a retail environment, this system would have to reduce its prices, or consumers would choose other providers who offer the same high quality and a lower cost. That’s just not happening here. People still gravitate toward more expensive academic medical centers.


The competition in Massachusetts needs to be bigger in size and geographic scope to develop efficiencies, exercise buying power, rationalize service distribution, manage the health of large and geographically spread populations, and support capital investment. And physicians need to be committed to work tirelessly to place patients in the right settings — with no less quality — and at a more affordable price.

By bringing real competition to our health care marketplace we can maintain the highest quality care, while improving access and reducing costs.

There’s a reason Massachusetts is considered the health care capital of the world. But if we remain complacent and keep the status quo, not only will our quality of health care suffer, but so too will our quality of life.

Dr. Howard Grant is president and chief executive officer of Lahey Health.