Controlling Health Care Costs by Seduction

The past failure of insurers and care providers to control medical costs challenges the Obama health care team to redesign health care to provide broader coverage while managing costs. If the past is any guide, they will fail just as certainly as those who went before. The problem is that those working on the new health care plans do not fully understand why existing plans failed over the past 30 years. The panoply of managed care ideas; HMO’s, rationing, pre-approvals, denial of benefits, denial of service, reduction in fees have all failed to reduce medical costs. If we wish to get past these failures, we need to think about seducing those who control the costs.

The phenomenology of health care shows that medical costs are a function of fees and utilization. Fees are what we pay for a medical service. Utilization denotes the variety of services available. Almost all medical services are performed or ordered by physicians. The ever spiraling cost of medical care amply demonstrates that coercive methods used by insurers and managed care proponents against physicians have failed to bring about the desired results.

If physicians cannot be coerced into cooperating, perhaps they can be seduced.

Seduction works when the seduced feel or believe that the rewards of being seduced outweigh the costs. Keeping it simple, what rewards can a health care plan use to seduce most if not all physicians and care providers?

— Let’s pay them fairly. Stop pushing down on the fees paid to physicians. After all, this is a relatively small part of the total health care cost. Let them actually make enough money to pay for their malpractice insurance premiums.

— Let them play god. Allow the physicians to determine the course of treatment without interference from the demons of payer pre-approval and denial of service.

— Pay them promptly. Don’t challenge or refuse to pay medical bills for services already provided. If physicians were auto mechanics they would put liens insurers.

What physician would not be seduced by these rewards? This is the medicine of their fathers and grandfathers (or mothers) when doctors belonged to the country clubs. There is, however, a price to pay; a cost to keep the rewards of this seduction. It’s a small cost, a bearable cost, a cost that will not diminish the physician’s independence or respect.

In joining this health care system, the care provider must agree to practice lean medicine as expressed in a simple, common sense, set of treatment guidelines. These are proven to work effectively in lowering medical costs yet have been accepted by thousands of physicians. For example, one of the guidelines states, “Be sparing in the use of tests and studies unless indicated by clinical findings”. This is not medical care rationing. The choice of obtaining expensive tests or studies is completely up to the physician. All that’s asked is that they ensure that clinical findings call for the tests.

Agreement is voluntary and willing compliance follows from the rewards of seduction. Critics may ask what happens if the physician does not practice lean medicine or follow the guidelines. In those cases, after consultation and discussion of the benefits, the physician will either correct the behavior or be dropped from the system. That is penalty enough. Another questioner might ask, “How do we know whether physicians are complying with the guidelines”. I believe that software already exists that could be easily modified to manage this health care system. It is true that all medical bills, reports, and payments would have to flow through this system to facilitate the management of care but that could have additional benefit by creating a cash flow that could help fund the system.

Finally, who are the payers in this system? Is it single payer, private insurers, or self insured employers? Actually, it could be all of these. The simplicity of the system is that it can be put in place with any type of medical insurance system. The insurer or payer would benefit from lower medical costs and needn’t bother with managing care.

Ultimately we would all benefit from this health care system. Lowering costs of health care by practicing lean medicine could save 30% to 50% over current medical costs. Patients would benefit by assurance that they would get appropriate care. Physicians can practice medicine, and insurers can add to their bottom line. There are no losers. But it all begins with seduction of physicians.

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  2. Let’s throw the ball a little further down the field.
    Lean medical care implies having a level of control. While we can specify to doctors that they should practice lean care, how do we know they will comply? Trust but verify. A control mechanism must follow patient care to ensure that physicians stay reasonably within the lean medical care parameters. In my experience, the best control model is a group of care management physicians and other medical professionals who monitor the system using software and the telephone. This group, not insurer nor provider based, work to see that patients get optimum, appropriate, care.
    It’s true that reasonable differences in the interpretation of lean medicine will occur and the system has to have flexibility built in. Recognize that lean medical care does not have to be perfect in every instance to produce dramatic cost savings. Just the effort by large numbers of physicians with monitoring and gentle nudges will suffice to make it work.
    The lean medical care model with a monitoring group of care managers will also have an effect on medical malpractice. In my 10 year experience in a lean medical care system, no lawsuits were filed. My thought on this is that when the patient has a lean medicine physician and a patient advocate in the monitoring group to whom he can talk, there is a much lower chance of a lawsuit.
    I don’t think that is sufficient, however, and believe that some of the legal responsibility for care must fall on the care managers. Certainly we believed that when we worked in the lean medical care system. We knew that if there was going to be a malpractice lawsuit, we would be joined. I’m not sure of all the legal ramifications of this but if the failure is purported to be one of lean medical care in a particular instance, then the managers should be defending shoulder to shoulder with the care provider.
    Finally, keep in mind the real purpose of lean medical care. It is intended to assure appropriate medical care. It isn’t an excuse for poor care, inadequate care, or less care. Savings in medical costs will follow from doing the best we can.

  3. “Here’s a novel idea- Incrementally shut down 1/3rd of US laws schools by 2015 before they further ruin medicine and the nation.”
    Certainly less lawyers would allow them to accept less vulture-istic cases.
    “Why can’t malpractice insurance be part of the plan? A single-pay plan for physicians and one for physicians?”
    I think you meant a plan for physicians and patients. Not a bad idea for seduction. Patients of single-pay would have to accept (and sign for) a different tort system, which would also attract physicians. But phyisicans would have to allow better guild oversight for negligence. Thing is would the guilds carry out proper oversight?

  4. “Isn’t it clear that our healthcare system is structurally unsound and uneconomic?”
    No it is not. We don’t have a healthcare system, we have 50 state systems, 3+ federal systems, and tens of thousands of employer systems. Majority of the employer systems are structurally and economically sound. Medicare, Medicaid, and a couple states are compelte failures dragging down the aggregation of the whole. You can’t blame the succesful systems for the failures of the public systems.
    “and the federal government should adopt policies that will cause change to happen”
    Government has adopted policies and that is how we got the mess we are in. Government is incapable of inelligent regualtion. 40 years of failed healthcare reform proves this. Only removing government will allow the systemS to be fixed.

  5. When will each participant in our healthcare system stop shifting the blame to the “other” guy, and stop looking for seemingly “easy” fixes such as a single payer plan (when was the last time government control fostered better quality, better service, lower costs and/or innovation of anything?).
    Isn’t it clear that our healthcare system is structurally unsound and uneconomic? We don’t always deliver the best care, and the care we deliver certainly is not low cost!
    Everyone agrees our healthcare costs too much but they argue that it’s the other guy’s fault! The fact is that no one is making a killing from our outrageously expensive system. Payers are not (and I suspect that even their high-priced execs will see their compensation cut in the near future). Employers are not. Doctors are not. Hospitals are not. Pharmas and supply houses are not. Vendors are not. Government is not. Consumers are not. The uninsured are not. And I suspect even most malpractice lawyers are not.
    If no one is benefiting financially from our overly expensive system, isn’t it clear that the problem is systemic? Instead of shifting blame, I think it’s time to analyze what’s wrong with our system.
    Three professors at the Harvard Business School (Clay Christensen, Regina Herzlinger and Michael Porter) have done just that. Their independently arrived at conclusions are similar: our healthcare delivery system and institutions are bloated with overhead, rigid, unsound and foster behavior that perpetuates rather than cures our problems!
    Instead of specializing to engender greater proficiency, more highly skilled care and innovation, our hospitals try to be all things to all people. And as they get bigger and try to dominate their markets in order to realize supposed economies of scale, their overheads get bigger and their charges go up, not down. The same applies to big pharma, whose mergers stifle rather than stimulate innovation which is their lifeblood.
    In reaction, payers and employers (including Medicare and Medicaid) try to drive down their costs by reducing what they pay doctors and hospitals. Moreover, payers have little incentive to offer innovative policies that meet consumers’ unique needs.
    And despite the fact that physicians increasingly won’t or can’t afford to invest in bloated, expensive EMR systems, EMR vendors add more and more bells and whistles to their systems thereby driving their prices still higher!
    Two other villains in this process are well-intentioned non-profit organizations and committees, as well as certain government agencies who support requirements that effectively entrench the players who aren’t meeting physicians’ needs while freezing out innovators who might.
    What’s the solution? We have to revamp our system — and the federal government should adopt policies that will cause change to happen (this is where government can do good without actually getting involved in healthcare delivery). For specifics, I refer you to Professor Christensen’s, “Innovator’s Prescription,” and Professor Herzlinger’s “Who Killed Health Care.”

  6. Sounds like a great idea. The only problem I see is when a patient ends up with something that probably would have been found on a specific test even though that test was not indicated by the physical exam, i.e. the patient had non specific, diffuse abdominal pain but no fever, no vomiting, only mild tenderness diffusely, but 2 days later got very ill and was found to have a ruptured appendix.
    If you’re in the medical field you would know without a doubt that the physician’s behavior was perfectly valid and does not constitute a mistake or poor judgment. If you’re the patient all you see is that it could have been found earlier and the choice was made not to do so. This kind of thing inflames patients and makes them mistrustful, and can lead to what the practioners believe are frivolous lawsuits, the plaintiffs believe is justice, the insurance company believes are settlements, and the lawyers believe are easy money.

    ** 2.6 Million New Jobs,
    ** $317 Billion in Business Revenue,
    ** $100 Billion in Wages, and
    ** $44 Billion New Tax Revenues
    You can find out more about this study here: http://www.CalNurses.org/
    The press release is here: http://www.calnurses.org/media-center/press-releases/2009/january/nurses-to-congress-expanding-medicare-could-reverse-job-losses-and-repair-our-broken-healthcare-system-and-safety-net.html

  8. The health insurance companies have played a major role in our current healthcare crisis. They make huge profits and their CEOs make millions, while the rest of us are denied care.
    • Ronald A. Williams, Chair/ CEO, Aetna Inc., $23,045,834
    • H. Edward Hanway, Chair/ CEO, Cigna Corp, $30.16 million
    • David B. Snow, Jr, Chair/ CEO, Medco Health, $21.76 million
    • Michael B. MCallister, CEO, Humana Inc, $20.06 million
    • Stephen J. Hemsley, CEO, UnitedHealth Group, $13,164,529
    • Angela F. Braly, President/ CEO, Wellpoint, $9,094,771
    • Dale B. Wolf, CEO, Coventry Health Care, $20.86 million
    • Jay M. Gellert, President/ CEO, Health Net, $16.65 million
    • William C. Van Faasen, Chairman, Blue Cross Blue Shield of Massachusetts, $3 million plus $16.4 million in retirement benefits
    • Charlie Baker, President/ CEO, Harvard Pilgrim Health Care, $1.5 million
    • James Roosevelt, Jr., CEO, Tufts Associated Health Plans, $1.3 million
    • Cleve L. Killingsworth, President/CEO Blue Cross Blue Shield of Massachusetts, $3.6 million
    • Raymond McCaskey, CEO, Health Care Service Corp (Blue Cross Blue Shield), $10.3 million
    • Daniel P. McCartney, CEO, Healthcare Services Group, Inc, $ 1,061,513
    • Daniel Loepp, CEO, Blue Cross Blue Shield of Michigan, $1,657,555
    • Todd S. Farha, CEO, WellCare Health Plans, $5,270,825
    • Michael F. Neidorff, CEO, Centene Corp, $8,750,751
    • Daniel Loepp, CEO, Blue Cross Blue Shield of Michigan, $1,657,555
    • Todd S. Farha, CEO, WellCare Health Plans, $5,270,825
    • Michael F. Neidorff, CEO, Centene Corp, $8,750,751
    This executive compensation could be used to provide quality healthcare for millions of Americans! We need to get the insurance companies and their lobbyists OUT of healthcare. NON-PROFIT, SINGLE-PAYER IS THE ONLY OPTION.
    If you want to learn more, go to:

  9. Hello Peter:
    I have been thinking about an “incentivized” system like this also. Of course if there is no trust, i.e.
    – will this doctor skip a procedure?
    – will this patient sue me for something I cannot control?
    then the problem is not fixed. Also in my nascent idea, I cannot find any “fix” for large stakeholders who seemingly must take a “haircut”. Specifically,
    – pharma
    – boated hospital administration
    – lawyers
    – device makers
    I think doctors & patients want “lean medicine”. I guess that the others are not so gung-ho. Maybe I am wrong!

  10. I forgot about DRG’s. Thank you.
    All of these failed “management” ideas, or disquised rationing or disquised fee reduction systems (and soon an inchoate, half baked elctronic record mandate) are always layered one on top of the next. A new one comes, but the old ones do not disappear. Fairures at controlling costs, they are successful in degrading system inefficiency, and in adding to the administrative and compliance costs, to say nothing of the additional inconvenience for the patient and the doctor.
    Policy wonks must thank goodness that no evidence based efficiency standard is applied to their clerical initiatives.
    Ill: The malpractice problem is insoluble without drastic changes. Awards are growing expodentially. This is unsustainable, just as expodential growth medical costs is unsustainable. More and more bad outcomes are deemed avoidable by increasingly scientifically unsound paid experts. The problem is cases are wrongly decided by the courts.
    Being sick is very dangerous. Tragic outcomes are common, even with the best of care. Rarely does a patient’s care not involve judgement which in retrospect appears less sound than it did prospectively.
    Since only a tiny fraction of bad outcomes result in lawsuits, and this tiny fraction is nearly breaking the back of critical specialties, the situation is much worse than commonly acknowledged. The reason: a tiny change in the willingness of patients with a bad outcome to file suit from 1% to 2% will make many critical specialists near insolvent. Many OB’s pay over $200,000 a year for coverage. If that doubled, how much do think it will cost to have your baby delivered?
    Note that with only 2% filing suit, the vast majority of really bad outcomes (the other 98%) will NOT be suing. So a very small change in behevior of the general public could creat a crisis. This is another reason that vilifying doctors will drive up medical costs.
    General comment regarding costs: The PBS special on medical care around the world stressed that care in many countries was “free”, with “no bill”. The relavent comparison is how much does the average citizen here and in another country pay in TAXES + MEDICAL CARE. In england, there is no bill, but your after tax income would be much lower than it would be here, even after paying our high medical bills.
    Also not stressed is the fact that lawsuits in Europe are virtually non-existant. If you want our medical care to be European, then lets have a European civil justice system too.

  11. Let’s set the WayBack machine, Sherman. OK, Mr. Peabody. Let’s go to pre-1983. Back to the time of the original RVS and UCR. Back to the time of genuine insurance instead of “healthcare plans”, which are not insurance products but look like them. (Sort of like a PA looking like a doctor). I am sure everyone realizes that this seduction is where we came from. but without strings, prior to DRGs and HMOs and all the other loser plans. Unfortunatly, the strings of Godfathers Kennedy and Obama on the doctor would still be pulled. Seduce all you want, but no deal. Get yourself a PA.

  12. I agree with the concept of seduction.
    My sense is that the reform crowd, while undetered by a long series of failures, (HMO, pre-qualifications, PPO, capitation, P4P … and the list goes on..)has the medical profession in its sights. Having decided that the insurance companies, hospitals, drug makers have influential friends, the doctor is the only target left.
    As I have noted before, I think demonizing doctors is a bad idea. Remember the fable about the north wind and the south wind, consistant with the seduction option. The doctors that come to the profession as a calling, the majority in my opinion, are not going to keep going into medicine to be the villian in a national melodrama about greed and to be the ATM machine for the trial bar.
    This is really a crisis. Not the crisis that gets discussed here. Even without the uninsured, Medicare will drag down the whole country without reform. Demographics is going to give us a single payer, without additional help, de facto in a few short years.
    This is like Butch Cassidy and the Sundance Kid: you won’t jump ’cause you can’t swim, …the fall will kill you. Why worry about the uninsured, rising premiums for the barely insured, etc…Medicare alone, without expansion will kill the entire economy.
    The discussion about tort reform has not even begun in medical wonk circles. Lawyers make a lot more money with a lot less work than doctors do. They will not compromise until the whole country revolts.
    Tort reform has commonly been diluted and overturned by the courts. This means that it will have to be a long time until any legal reform is trusted by the medical community. It is later than you think.
    A possible entry point: iron clad tort protection for medicare patients. The Federal programs and VA has it and mortality doesn’t suffer.

  13. Joe Mersol is exactly right.
    It needs to be emphasized (I know I sound like a broken record if you read my other posts): Currently, there is NO incentive (other than respect for the greater good) for a doctor to order fewer (noninvasive) tests, but many to order more:
    -financial (depending on the setting, often not present)
    The current tort system can function like this (and trial lawyers do make it work that way): If there is a bad outcome, try with RETROSPECTIVE ANALYSIS (hindsight) how the outcome possibly could have been influenced. Then find a highly paid medical expert (usually 500 Dollars per hour, many relatively underpaid academic physicians who gladly accept) who testifies that intervention x would have improved the outcome “more likely than not”. If the plaintiff is sympathetic and the expert appears convincing to the jury, you have a good chance of getting a jury to agree that there was negligence. And as already pointed out, litigation is expensive not only in terms of dollars, but also emotionally difficult (remember, the accusation is negligence, implying carelessness) and time consuming (trial 1-2 weeks, many hours of preparation prior, of course unpaid).

  14. With all due respect to the folks at Mayo, value requires an analysis of both price (what is charged) and cost. With respect to the “Lean” champions, there is unbelievable opportunity for cost savings if hospitals outcomes were as good every day as they are on the best day. The most renowned hospitals in the U.S. have 3-4X variation in the outcomes of specific DRGs on a day-to-day basis that is difficult to explain.

  15. Peter,
    Please, show me the way. My experience is that an involved patient and family are easier to take care of than a suspicious, demanding, unrealistic family. Reasonable patients accept and acknowledge the risks and benifits of certain tests and treatments.
    It is also much easier to be lean with a patient who has a regular doctor, someone they know and trust. Trust is difficult in the ED. Patients more readily accept a bad outcome from their regular doc than from a stranger. The entirety of the discussion of reform is about a monolithic system where it is assumed that nobody knows anyone. How can anyone trust in a system like that?

  16. Here’s a novel idea.
    Incrementally shut down 1/3rd of US law schools by 2015 before they completely ruin the Profession of Medicine and the nation for that matter.
    Dr. Rick Lippin

  17. Here’s a novel idea- Incrementally shut down 1/3rd of US laws schools by 2015 before they further ruin medicine and the nation.
    Dr. Rick Lippin

  18. When discussing lean medical care, the question of malpractice is raised constantly. This is understandable since the threat and cost of malpractice weighs heavily on care providers.
    Lean medical care raises issues since it asks doctors to limits, among other things, tests and studies that doctors ordinarily request as they practice defensive medicine.
    There are ways of handling malpractice in a lean medical care system that can reduce the incidence of malpractice lawsuits.

  19. Interesting points, but you’ve left out one major force – the threat of malpractice suits. If you assume that a CAT scan costs about $1k and a lost malpractice suit costs around $1M (obviously gross estimates), you can see that it’s cheaper to order 999 extra unnecessary CTs than to lose 1 malpractice suit.
    It’s not the cost of the suits themselves, it’s the threat of the suits that drive costs up. I would wager that a very high percentage of tests are ordered after an MD is more than 99% certain of a diagnosis, but orders another expensive test just to make sure that he’s not missing some unlikely condition that will get him sued.

  20. Mrs. Nesbitt makes one reasonable point: paying doctors less is not the answer. But the “seduction” needs to be substantial payment reform that incentivizes doctors to: a)do no more or now less than what is necessary to diagnose and treat patients, b)be aware of and adhere to established clinical guidelines, and c) be rewarded for outstanding care.
    I also agree that doctors should be paid promptly. But I disagree that it would currently be advisable to let doctors “play god” and stop all precertification and utilization review. There are too many non-clinical pressures on physicians to provide unnecessary care or unproven care.
    But rewarding docs for high quality, cost-effective care is one of the most important tasks that can be done to reduce overall costs. This requires major payment reform that currently rewards for treatments, tests, and procedures. The more you do, the more you are paid. That has not and will not result in high quality, affordable, accessible health care.

  21. You’re on to something. The original Kaiser plan was to set up a system in which professionals were paid fair wages in return for delivering the professional expertise they were trained to provide. Paid to do a job. What a concept!
    I think a lot of decisions are made, unfortunately, with an eye to litigation more than medicine. I took my wife to several orthopedic practices a few years ago in search of relief for excruciating, unrelenting back pain. We went to three unrelated clinics before finding a doctor willing (and knowledgeable) enough to refer her to an orthopedic surgeon (who resolved the problem) without further ado.
    At one practice a doctor told us plainly “I can tell you that I will not be doing surgery on you. My partner and I decided not to pay malpractice premiums for both of us, so if either of us does surgery it will be him doing the work. That will help keep your final bill somewhat lower.”
    I’ve been wondering why community health clinics shouldn’t be more heavily staffed and enlarged. If the private sector can have doc-in-a-box places and “urgent care” places, then why not do the same with community health? They already do TB tests, vaccinations and other routine procedures. More money there would be well spent for well care visits, indigent care, and chronic disease management.
    EMT’s and firemen save lives in life or death situations. Unfortunately, if you’re uninsured, unable to pay and ain’t about to die you’re out of luck.

  22. Ms, Jacobs,
    You are exactly right, right, right, etc.
    The question I am trying to address is how do we build a system that manages for value. I am suggesting, slightly tongue in cheek, that we need to seduce physicians into providing value by practicing lean medicine. Not being totally naive I know that the effort will have to be managed but the concepts are worth examination.

  23. RDGS-RAVI,
    Thank you for the challenging comment. You are right, of course, about the failures being in charge of designing the new system. Talk about dumb and dumber.
    With respect cost savings in the system I am proposing, these are not measured per patient but rather savings in medical costs for the system as a whole. I think that physicians can be seduced into practicing lean medicine specially if we can solve the malpractice problem.

  24. I think what Mr. Nesbitt is referring to is what we at the Mayo Clinic Health Policy Center call “value.” We define value is better outcomes, better service, better safety (reduced errors) divided by the cost of care over time.
    If we structure our system to deliver value, and then pay for that value, the quality of our health care — and the health of our population — will improve and our costs will go down. It’s about the right care, at the right time, in the right place, by the right provider, for the right reasons, at the right cost.
    Evidence-based medicine, interoperable health IT, are all parts of a well-functioning system. But incentives are needed, and for that we need to change our system to pay for value — not pay for service.
    See more details about value at: http://www.mayoclinic.org/healthpolicycenter/value.html .

  25. It is not as important to know necessarily know why past attempts failed as to have creative people with integrity working on the project.
    If you follow the typical steps of a product development process: understanding what the goals are, who are the stakeholders, customers, what could go wrong, etc, one can design a great healthcare policy and plan.
    Now as we all know that our value system has degenerated to the level that few people say one thing and do other. The current workshop on healthcare, we had people who have presided over the failures of the past and now are working on the next one…they are master of failure not success.
    Let me give you an example…..Insurance companies are upfor universal health…but the definition of that now is that everyone will be required to have insurance and government will subsidize for those who are onlower end of economic spectrum.
    Well…they get 16% increase in revenue immediately. Now there will be a perception in cost reduction due to increased pool. Everyone will celebrate and then few years later..you will be in for surprise.