Mayo Clinic provides optimal care, cheaply
The recent publication of the latest edition of the Dartmouth Atlas of Health Care, (published by Dartmouth's Institute for Health Policy and Clinical Practice) compared the cost of health care at a number of top-notch institutions. Medicare spending for patients in the last two years of life at the top five teaching hospitals in the country showed quite a variance: from $93,000.00 per patient at UCLA and $85,000.00 at Johns Hopkins, to $53,000.00 per patient at the Mayo Clinic.
Are residents of the east and west coast generally sicker than midwesterners? Certainly the statistics on mortality and health care costs would not support that conclusion. So what explains the difference? First, the general cost of living in Baltimore and LA is higher than the cost of living in the Twin Cities; that probably plays a role. But the cost of living isn't double: the study found that services were priced relatively similarly.
Rather, the difference is primarily a function of UCLA and Hopkins providing more services and more in-patient days. Why does that occur if the patients are no "sicker"? Physicians at UCLA and Hopkins are paid on a fee-for-service basis; Mayo physicians are salaried: the incentives in the former institutions are all toward performing every possible service that can be justified. The incentive at Mayo is to tailor services to the patient--and no one claims that Mayo provides second-rate service.