Wachter pic (informal)I just finished reading Atul Gawande’s June 1st New Yorker piece – it’s the Talk of the Health Policy Town – on healthcare’s “Cost Conundrum.” Like most of Atul’s work, the article is lyrical, powerful, insightful, and correct.

As you’ve probably heard, Gawande profiles the town of McAllen, Texas, whose healthcare costs are nearly double the national average. He swats away the usual explanations (our patients are sicker, more obese, more addicted, more Mexican; our lawyers are nastier; our quality is better…) to unblinkingly zoom in on the real culprit: a culture in which providers’ greed trumps the patients’ interests. He contrasts McAllen’s healthcare culture with that of El Paso, just 800 miles up the border, a town with similar demographics but whose healthcare costs are exactly half as high. He also describes the Mayo Clinic, which manages to deliver the best healthcare in the country, perhaps the world, at a fraction of McAllen’s costs.

His main point is that policymakers need to focus less on who pays (i.e., should there be a “public plan”?) and more on creating physician-led accountable entities that manage the dollars and possess the wherewithal and incentives to make rational choices about how to organize care – the ratio of primary care docs to specialists, the number of MRI scanners, the algorithm for the workup of chest pain or gallstones. Atul understands that we can’t snap our fingers and change culture, but that culture will change when structure and incentives are lined up correctly.

The article is both hopeful and depressing. Hopeful because it says that in order to save healthcare costs from bankrupting America, we don’t need to look to Germany, or Denmark, or Canada for inspiration – the models for how to deliver high quality care at a survivable cost are already here, in the good ole’ U.S. of A. We simply need to create a policy landscape that either forces McAllen’s providers and healthcare organizations to become more like El Paso’s (or better yet, Mayo’s) or makes their businesses unviable if they don’t.

Depressing, because in the absence of vigorous federal action, the docs and administrators in El Paso are more likely to start behaving like those in McAllen than the converse. Why? If the healthcare pie begins to shrink, we can expect physicians and communities that have been less profligate to become more entrepreneurial (“why am I being so careful while those other guys reap all the profits?”), not more circumspect.

We won’t have another window to fix healthcare in this generation, and so we’d better take advantage of this one. As I’ve mentioned before, the Obama administration’s game plan is to drive our system toward the optimal quadrant of the two-by-two quality vs. cost matrix: high quality at reasonable cost. This direction is undeniably correct, but the whole thing can feel a bit bloodless and wonky when budget director Peter Orszag explains it. Gawande’s article puts a human face on the issue of cost variations, which makes it an essential read for anyone who cares about healthcare, policy, politics, or the future of our nation.

Robert Wachter, MD, is widely regarded as a leading figure in the modern patient safety movement. Together with Dr. Lee Goldman, he coined the term “hospitalist” in an influential 1996 essay in The New England Journal of Medicine. His most recent book, Understanding Patient Safety, (McGraw-Hill, 2008) examines the factors that have contributed to what is often described as “an epidemic” facing American hospitals. His posts appear semi-regularly on THCB and on his own blog, Wachter’s World.

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33 Responses for “Gawande Nails It on Healthcare Costs”

  1. Peter Lysaght says:

    Another homegrown model for how to deliver high-quality care at a survivable cost is American dental health care. The dentists and hygienists have been pursuing prevention-first for over a generation now, and can still afford to drive BMWs.

  2. I tacked this comment on to another posting, but I guess more relevant here. The fact that the Gawande essay seems to be a new revelation to politicians responsible for deciding on any legislation seems to indicate to me the “emperor has no clothes” nature of all of the normal verbiage from those legislators.
    Below is a link to an article from the NYTimes on the current politics of healthcare legislation and why any attempt at reform that is beneficial to the ultimate payer – the patient as tax-payer or employee or direct-payer – never goes anywhere.
    Apparently President Obama just read the recent essay by Dr. Atul Gawande about medical service spending in McAllen Texas (with comparisons to the delivery “model” and spending patterns at the Mayo Clinic and in Grand Junction Colorado).
    http://www.nytimes.com/2009/06/09/us/politics/09health.html?_r=1&hp

  3. Great article. Run, don’t walk, to read up on the issue of physician behavior and medical costs and my suggestions for a solution at http://www.leanmedicalcare.org.
    Following the debate in congress, it seems clear that the Pols don’t have any insight into how to get control of medical costs. While I’m not certain that my proposed solution is the only answer, it is the only solution I have seen that would have a reasonable chance to control medical costs by assuring appropriate medical care.
    I am at an impasse in trying to figure out how to get the attention of policy makers. They get thousands of emails and letters and cannot read them all. Other than standing on the steps of the Capitol in hair cloth robe, shouting about biblical level disasters to follow a poorly crafted and implemented health care reform effort, I am at a loss.
    In any case, it’s with pleasure that I read this article about physician accountability the reform. Thanks, for sharing these views.

  4. Richard Scoville says:

    Thanks, Wendell, for the link to the NY Times article, which, by the way, mentions a proposal floated in the Senate Finance Committee to ‘solve’ the problem of Medicare spending variation by capping payments in high cost areas. Wow, talk about rearranging the deck chairs! The problem is the incentives that flow from fee-for service.

  5. Matthew Holt says:

    Hmmm…nice article and all but Gawande is well well late on this. Usually a New Yorker article is precursor to a book or movie. In this case Shannon Brownlee wrote the book 2 years ago.\
    Still I guess it doesnt hurt

  6. Nice to read about some rational understandings in the health care industry. If anything is going to help save dollars it is managing costs and care, not providing more underfunded entitlement programs.

  7. DCDan says:

    Right on! This was a fantastic article.
    Incentives in our current system all run upstream (toward bad/expensive results).
    Blessed are the peacemakers, and the ones who can turn this coal into a diamond.

  8. Suresh Kumar says:

    Great article. It shows and exposes what a mess our Healthcare system is today! “High Quality at a reasonable costs” and Obama’s health strategies ought to work.
    Technology and process redesign and most importantly “self serve health control” by all of us can help drive towards this goal. Just a thought “how about universal and common healthcare plan for all. Raise the taxes by 5% and provide free healthcare to all”
    We are working towards a “PHRONDEMAND” that will provide the “Self Serve health control” to all….stay tuned.
    Suresh
    603-930-9451

  9. Ann Robinow says:

    A great article, as was Brownlee’s book, Overtreated. In the long run, the answer is to make providers accountable to their PATIENTS for the value (total cost and results) of the care they deliver. If the patient’s share of health care costs was lower when they elected to use more efficient, higher quality providers, then providers would find ways to improve their value. Changing how we pay providers is absolutely necessary but not sufficient. Even if we move to global payments of some kind, providers will need a reason to keep their global costs in line, or they will just position to command the highest possible global payment. Involving consumers and driving market share to the greatest value has to be part of the solution.

  10. Atul does hit it on the head again. I wrote about his article and compared it to the NEJM article by Berwick, Davis and Elliott looking at how physicians could influence health reform – sort of a macro v. micro viewpoints. See – http://www.healthpolcom.com/blog/2009/06/01/theory-v-practice-in-health-reform/

  11. Doc99 says:

    Perhaps the authors conveniently forget that Mayo is also a leader in “Executive Physicals.” How do profit-generating Executive Physicals fit into Evidence-Based Medicine?

  12. Deron S. says:

    To pin the overutilization on greed is a bit lazy in my view. Overutilization is only one of several main cost drivers, and it alone has many drivers. Greed probably isn’t even the biggest. Not basing decisions on evidence, fear of lawsuits, not having enough time to spend with patients, and patient pressure are big factors as well.
    Gawande’s article was good, but it’s just another example of a one dimensional look at our healthcare crisis. Insurance companies are typically the target, now we’re shifting to providers.

  13. cmhmd says:

    City Name/State — Medicare reimbursements for hospice services per enrollee (2006)
    National Average US — $233.93
    Portland OR — $306.30
    El Paso TX — $126.19
    McAllen TX — $ 22.00
    Another factor impacting McAllen’s outlier status, I’m sure!
    It would be timely to hear more about this, especially give this recent Archives of Internal Medicine article:
    http://archinte.ama-assn.org/cgi/content/short/169/10/954
    This also, perversely, can make the hospital statistics in mortality look good, as well. As an intensivist, I can get almost ANYONE out of the the ICU and subsequently out of the hospital if I ignore the true outcome for the patient and the family: additional suffering, minimal prolongation of a life at its end, and so on.
    My colleagues who do practice best EOL practices know that our ICU and hospital mortality numbers suffer, but I have no doubt that having honest discussions with my patients and families is the right thing to do. You may have heard this for your patients, “Thanks for the straight talk, Doc,” or “Nobody talked to me about my prognosis before.”
    Of course, this is not new information, but we still need to do better as physicians:
    http://www.chestjournal.org/content/128/1/465.full?ck=nck

  14. I read Dr. Gawande’s New Yorker article (and all of his books) and agree that he makes some excellent points. I take issue with his inference that “entrepreneurial” doctors are by necessity greedy business people. Excellent and honest doctors can be “entrepreneurial” and still play by the rules and not game the system. It’s the creative entrepreneurial doctors who will figure out the answer to our healthcare dilemma(s), not the government drones. I agree with a previous comment above: look to the dentists for ideas how to deliver excellent preventive care. Every dentist I’ve ever known is entrepreneurial and good at “business”.They work under a different system that obviously works better than their medical counterparts. I haven’t heard a word about National Dental Care Reform.

  15. Although I agree with Dr. Berning regarding the potential for good to patients coming from so-called entrepreneurialism among physicians, unfortunately it has been my direct experience with physicians, among other sources of data, that “entrepreneurialism” to physicians almost invariably translates into some money-making scheme for the physicians that comes out of the pockets of patients through one route or another.
    “Entrepreneurialism” in industries that operate to a greater or lesser extent in a competitive environment – I know this from hands-on personal experience – equates to innovation or simply better management that provides one of the following:
    1. Lower price to the customer at the same level of service or quality
    2. Same price but better service or quality
    In fact there is no limit to this virtuous cycle.
    Because of the administrative, i.e. non-competitive-market-determined, nature of pricing in the medical services profession/business neither of these occur when physicians attempt to be entrepreneurial.
    Regarding dentistry, dental care has few of the characteristics of medical services. Costs of preventive services from dentists are modest but highly efficacious (they virtually all fall within the “precision medicine” category, a term used in an insightful recent book on healthcare), so people are more likely to be able to afford prevention and therefore willing to “demand” preventative services. Dental problems are rarely, if ever, life-threatening or life-limiting as are problems with other parts of the human anatomy. More expensive interventions such as dental implants are elective and therefore can be planned. That as opposed to the random adverse event nature of infirmity that is life-threatening or medical-limiting which creates the need for insurance for medical services, along of course with the much higher costs.
    I think Dr. Gawande (as do many others who have written on the topic) accurately depicts reality.

  16. Deron, these things are all part of the “shiny thing” strategy. Every week, sometimes day, something else is identified as the culprit for the sorrows of our health care system.
    Greedy private insurers, government inability to manage anything effectively, hospitals trying to fill beds, uneducated and over demanding consumers with no “skin in the game”, ignorance of evidence based practices, reimbursement models, faulty HIT, or total lack thereof, pharma giants, device manufacturers, lawyers, etc.
    Today’s “shiny thing” is greedy, or “entrepreneurial” doctors.
    I don’t think Dr. Gawande meant to imply that this is the source of our health care crisis. It’s just one more component of what is wrong and this one in particular can be traced, at least in part, to perverse reimbursement models.
    From reading Dr. Gawande’s other writings, I think he would agree that instead of trying to identify the elusive source of all evil and eradicate it in a big bang reform of all health care as we know it, maybe we should just set more evolutionary goals for ourselves and make incremental changes in the general direction of a more equitable society at a more reasonable cost.
    As for my personal 2 cents, as a first step I would have CMS increase primary care reimbursement and decrease payment for specialty procedures, instead of capping payments across the board, and offer people some decent, affordable, public option of coverage and, yes, make it mandatory.

  17. Deron S. says:

    Margalit – I agree 100% that the first step needs to be the rellocation of reimbursement. It won’t cost a dime and it directly addresses several key problems with the current system. Why aren’t more people pushing for this?

  18. Colonel Ray says:

    Medical Care in the Rio Grande Valley of Texas by Colonel Ray
    This Texan has his dander up about the recent report about medical care in the Rio Grande Valley.
    The entire medical community and even the White House are all abuzz about the New Yorker magazine article that indicates that medical care is almost twice as costly per person in McAllen, Texas than in the rest of the USA.
    Per patient costs in McAllen were compared with those in El Paso, Texas because the author assumed the target populations would be similar in their demographic and ethnic populations and locations both right near the Mexican Border.
    Various other authors and medical professionals have come up with various reasons for this disparity such as greedy Doctors, a chubbier population, too many unnecessary medical tests, and a rash of other unsubstantiated reasons.
    I hate it when educated people do not understand statistics or when measuring trends in a geographical area without a complete understanding of the target population.
    Well here is the deal on the health care issue in the Rio Grande Valley of Texas, which includes the city of McAllen.
    I have lived in El Paso where my wife was a health care executive. I now live in the Rio Grande Valley where my wife is also a senior health care executive. In one of my Army assignments I served as a statistical analyst where I reviewed demographic and population trends.
    But forget all that, it’s just not that hard to figure this out. Every person who lives in the Rio Grande Valley knows the differences in our area and the entire rest of the country. You see every year starting around Halloween a great exodus starts in the U.S. Midwest and many Canadian Provinces. Thousands of RVs, Campers, Cars with Trailers, and Airlines transport around two-hundred thousand people to one specific area, the Rio Grande Valley. This wonderful group of people is not particularly diverse. Almost all of them are retired, ninety-five percent Caucasian and one-hundred percent with gray or silver hair.
    They come and have been coming to the Rio Grande Valley for decades with several goals in mind. Get lots of sun and lots of fun. They stay six months or even longer and they contribute hundreds of millions of dollars to the local economy. They fill the restaurants, they fill the beaches and they also fill the hospitals and Doctor’s offices.
    You see, the other goal that thousands of these Medicare eligible Winter Texans as they are known, have when they get here is to take care of their medical needs. The Rio Grande Valley offers a wide range of superb medical facilities that many of the Winter Texans do not have in the small rural areas up north that most of them come from. Besides they seem to find getting medical treatment or having an operation a little easier to handle in sunny eighty degree weather versus the minus ten degrees with lots of snow back home. Go figure.
    Now let me try and put this in perspective for you non-statistical types. The Rio Grande Valley has a population of around one -point -one million people. Just like most areas it includes people of all ages. When two-hundred thousand almost exclusively elderly people join your population base for six months per year, it is not the same as just growing by about twenty percent. The percent of the elderly Medicare eligible population in the area easily doubles.
    Coincidently the article in question here placed McAllen’s cost per person for medical care at around double that of the other compared population base in El Paso, Texas. Now unless El Paso has changed a lot since I lived there, there is no large influx of elderly Midwestern and Canadian visitors coming to stay for long visits each year.
    Since I have lived in the Rio Grande Valley this is not the first time I have seen evidence of studies in various areas from academics to economics to leisure studies not account for the tremendous and I may add positive impact of Winter Texans have in this area.
    I am generally a fan of substantial comprehensive healthcare reform in this country. But if this is the kind of research and statistical analysis driving the healthcare reform train, then we are in big trouble.
    I have a short message for the eggheads in Washington DC and uppity Dartmouth smarter than the rest of us Texans. Instead of guessing, next time put down your pipe, kick off the hush puppies, pull on some boots and come on down to Texas when you want to know something about the Valley.

  19. Deron S. says:

    And I guess you have no bias whatsoever despite the fact that your wife is a healthcare executive??
    Unless I am misunderstanding, most of the stats quoted in the article were based on Medicare cost per Medicare enrollee. That takes away much of the strength of an argument that claims that the area has a higher percentage of silver haired people.
    Secondly, I find it hard to believe that one of the main goals of the people that make up the “influx” is to get medical care.
    The bottom line, Colonel, is that you are turf protecting just like nearly everyone else in our healthcare system. It is that attitude that is precisely the reason why we are where we are today.

  20. Santosh says:

    Good One

  21. Steve P says:

    Dental patients are less diverse than medical patients. Differential diagnosis is more limited, diagnoses less uncertain, treatment options are few in number, accounting is easier, after-hours emergencies are few, scheduled prevention visits dominate. And the real difference: in the ED where I’ve been attending for decades, there is an army of adults who can’t afford dental care of any kind and are therefore invisible to dentists who take care of the occasional charity patients who come to their attention. The unserved and underserved are a huge population. In our community their dental problems are eventually fixed when necessary by oral surgeons-in-training, who just remove teeth.
    In my experience even commercial dental practice tends to be a mom-and-pop business with a technology gloss, with extreme practice variation and hucksterism reminding me of my barber shop. Dentists tend to be cheerful and engaging individuals who are admirable at eliminating some types of pain, but are not an example of where we need to go with medicine.

  22. Process Engineer says:

    Where is the comprehensive study that details the areas of the health care process that can be changed to lower cost? How does the government”s proposal address the changes required to reduce these costs? Will there be undesirable side effects created? What is the cost to benefit ratio?
    You cannot improve a complex process, such as health care, with arbitrary changes. Without careful study to locate the root cause(s) of the problem and even more careful study of how well the proposed changes address the problem, you will be more like to add new problems without addressing the original problem.
    It seems to me that Congress has an expensive fix, with no idea of what is really wrong of if their proposal will fix it.

  23. Wayne says:

    Congress needs to adopt a policy of health care prevention.
    Our system is designed to only help after the affliction occurs.
    I am a firm believer in nutrition for preventive medicine.
    Our people could save a fortune with preventive care.
    In other words instead of an aspirin for the pain find the cause of the pain and address the reason.
    It is a simple solution and there is much doubt our leaders will adopt such a policy for health care.
    After all health care is what keeps our economy going at this point.

  24. M.Berger M.D. says:

    I have read this article and have tried to find out if the denominator used to determine the frequency of health care was the population of McAllen or some other factor. If the population from the census bureau was the denominator the statistics are inaccurate. The population of McAllen more than doubles from November until April every year with snowbirds. They use healthcare in McAllen since the majority are 65 plus but their residence is recorded as elsewhere. I often see these patients in Austin Texas because they do not want to wait for an appointment in McAllen in the busy winter months. I suspect this is a large contributor to the “overuse” of medical services in this community. El Paso is not comparable because no such increase of the population occurs there due to snowbirds.

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  27. Warren McInteer says:

    This is all an excellent debate; we need to focus not on politics , but on taking care of sick people.
    It is not just doctors – they are not the villans – it is everyone; the doctors, the nurses, the accountants, the CEOs the marketing managers, the dispatch nurses. They all want to maximise revenues and the client’s interests come second. I am an American living in the UK and the difference in the mind set of health care professionals in the US and the UK is huge. Like the Mayo clinic, people in health care here , are not in it for the money, but because they want to provide health care, save lives and make people better. I recently had a conversation with a therapist in the US about health care reform; her most important point in all this debate was getting her month-end bonus for hitting her target of patient referals for the month.
    The focus needs to be on the patient. The Mayo clinic model should be repeated all over the US. Another writer put it clearly – we have the solution in the US – we don’t need a German or UK system – just repeat the Mayo system.
    See this article for more of my opinion
    http://demockracy.com/index.php?s=mcinteer

  28. Really great lens, I found it very informative as well as insightful. There are numerous methods of dental implants, but i feel the Best dental implants are the dental office options, because you can consult with your dentist beforehand coupled with the expertise and experience, you can be sure to get the best treatment.

  29. James says:

    Good dentists take a personal interest in patients and their health. They are prevention-oriented but not faddists.I live in Mechanicsburg PA and Dr. William Spruill and Dr. Lillian Wong delivered the highest quality dental care while providing a comfortable family environment.
    Dentist Mechanicsburg PA

  30. Dentists and hygienist alike have an extremely hard time getting pts to follow proposed treatment. However, if patients came regularly to cleanings and took care of fillings early then the dentists and hygienists wouldn’t be able to afford those pretty little cars. I have just found that in general the public isn’t all that accepting of healthcare professionals and that it will always be a struggle for healthcare professionals to get patients to do treatments. Insurance dictates so much of what patients do and want in treatment that sometimes it feels like they are the doctor when they say what they will and won’t do. I’m not sure any reform will solve it.

  31. albert says:

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