Why McAllen Should Have Mattered in the Health Reform Debate

Jeff GoldsmithBack in June, Atul Gawande, a Harvard trained surgeon, published a riveting article in the New Yorker   about the physician community in McAllen Texas. If ever an article was strategically timed to influence the nation’s health policy debate, this was the one. His story was accompanied by a graphic showing a patient as an ATM machine.  President Obama read it and put it on his staff’s reading list.  Yet, it’s depressing how little impact Atul’s article has had on health reform.

Atul’s purpose was to explain a major policy conundrum: why some communities manage to spend as much as triple on Medicare services as other communities. McAllen’s physicians practice some of the most expensive medicine in the United States, second only to Miami, and spend seven thousand dollars per Medicare beneficiary more than the national average. Peter Orszag has said that eliminating this type of variation could cut Medicare expenses nationally by as much as 30% and actually improve the quality of care.

Mining the Patient for Profit

As Atul made his way through his interviews with local hospital executives and physicians, a pattern emerged. McAllen’s sickest Medicare patients saw 50% more specialists than comparable patients in El Paso (a Texas community not world famous for conservative medical practice).  McAllen’s Medicare population had far higher rates of elective surgery, and received two to three times as many cardiac bypass operations, carotid endarterectomies and coronary artery stents as patients in El Paso. The poorest community in Texas, McAllen is nonetheless the home both of a lavish physician-owned community hospital, that split its $64 million bottom line with its admitting physicians, and a heart hospital with physician partners.

McAllen physicians aggressively added high margin technologies to test for nerve conduction, bone density, ultrasound and high technology imaging equipment to their office practices. Health executives both in hospitals and the home care sector reported that many physicians expected to be paid for their referrals, some as much as $500 thousand a year. Home care agency managers reported that some physicians wanted to be paid for referrals with sex or college tuition for family members .

Atul’s conclusion:  “The primary cause of McAllen’s extreme cost was, very simply, the across-the-board overuse of medicine”. McAllen’s physicians were “mining” their credulous, poorly educated and impoverished patients for profit.  In my consulting experience, what Atul documented in McAllen is, in fact, happening across the sunbelt- Florida, Arizona, Nevada, Louisiana, Southern California, etc.- not just in south Texas.

It’s actually a national problem, not a one-community problem, moral failure on a grand scale.

Medicare’s Fraud and Abuse Statutes Are Riddled with Loopholes

As late as 1992, McAllen’s Medicare costs were about the same as the national average. The progression to doubling the national average had all taken place in the seventeen years since.  There is considerable irony here; 1992 was the year that Congressman Pete Stark succeeded in amending Medicare statutes to forbid physicians from profiting from Medicare referrals to facilities or services they owned.  These laws were aimed at staunching the growth of syndicated freestanding surgical and imaging centers.

What they did instead is spawn a vast and lucrative new legal subspecialty aimed at circumventing the intent of the Stark Laws.  Those seeking to continue to profit from self-referring Medicare patients have been assisted materially by two gaping loopholes in the Stark Laws- the in-office ancillary services exemption and the “whole hospital” exemption.

The “whole hospital” exemption protected physicians who were investors in an entire facility- typically in partnership with an investor owned company that built and operated the hospital.  This exemption led to a practice of investor owned companies syndicating hospitals that they would otherwise have closed, hoping to attract physicians away from stronger hospitals by giving them a share of the profits they generate.   The in-office ancillary exemption was intended to protect physicians who, for patient   convenience, did minor lab work and simple X-rays in their offices.  At that time, high technology imaging equipment like CT scanners and MRI scanners were so expensive that only hospitals or high volume freestanding imaging facilities could afford to purchase them.

By the late 1990’s, however, imaging equipment had been miniaturized and simplified so that small physician groups or even individual physicians could lease and operate them.   An exemption intended to protect $60 office x-rays is now protecting physician-owned MR, CT and PET scanners that generate thousand of dollars a day per physician in “ancillary” revenues. In fact, there is nothing remotely “ancillary” about an MR or PET scanner; orthopedic surgeons and oncologists now generate most of their incremental income from self-referring patients to their own imaging equipment.  There is a rich literature that establishes that physicians who own their own imaging equipment order from two to five times as many tests as those who do not.

Despite the Stark Laws, McKinsey estimated that physicians derived $8 billion in 2006 alone from partnership dividends from health facilities in which they had an ownership interest.  This does not count the cost of the extra,  economically motivated testing or hospital admissions.    Congressman Stark was so disconcerted by the failure of his legislation to stem the tide of  avaricious physician behavior that he told the American College of Radiology in 2007, after his party returned him to the Chairmanship of the Health Subcommittee of Energy and Commerce, that he was disinclined to press further to tighten the statutes.

Could the Part B “Crater” Help Kill Health Reform?

As health reform grinds to its conclusion, policymakers are scrambling to avoid a ruinous 21% reduction in Medicare physician fee payments mandated by the 1997 Balanced Budget Act. This methodology, the Sustainable Growth Rate (SGR), capped the growth in Part B spending, and mandated that physician fees be cut each year the growth exceeded the cap.  Congress has overridden this mandate every year except one (2002), with the resultant accumulation of hundreds of  billions in unrealized savings that nonetheless count in the CBO deficit calculations.   The unrealized Part B savings are like a huge bad mortgage on our federal balance sheet. The physician business practices Atul documented in his article have contributed in a major way to the depth of this crater.

This SGR “crater” has significantly complicated health reform. Physician groups want a permanent reprieve from the fee cuts.  Inclusion of this reprieve in HR3200 was single handedly responsible for the bill not being deficit neutral. The innovative Senate solution was to put the reprieve in a separate bill that substituted a ten year freeze on physicians fees for the mandated cuts, adding the cost equally to a$14 trillion federal deficit in 2019 because it was not offset by other cuts or additional revenues.   (The SGR “reset” bill failed in a floor vote in mid October, despite intense pressure from both the AMA and advocacy groups for Medicare beneficiaries.)

A CBO analysis last December put the price of substituting a ten-year fee freeze (which won’t be sustained either) for the BBA mandated fee reductions at $318 billion.  If you permit physician fees to rise at the rate of the medical inflation index (MEI),  the cost rises to $439 billion.  If you also hold Medicare beneficiaries harmless from the growth in their premiums because you declined to cut physician fees according to the SGR formula, the price tag rises to $558 billion, or almost 2/3 of President Obama’s $900 billion price cap for the entirety of health reform.

Why Can’t Ending Self-Referral Help Pay for Health Reform?

The failure of Atul’s analysis to connect to fraud and abuse evasion was disconcerting.  At the end of his article, Atul mused about how to get physician communities to practice a more conservative style of medicine like the salaried physicians at the Mayo Clinic.  He discussed the Elliot Fisher idea of capping Medicare cost increases at  the hospital service area level, converting physician and hospitals into a kind of virtual HMO.  Some of this magical thinking might actually survive in a final health reform bill (See our Aug 17 blog in Health Affairs: “The Accountable Care Organization: Not Ready for Prime Time” )

Applying the Kumbaya logic of  “accountable care” to McAllen’s physician community isn’t going to fly.  It is somewhat akin to social workers and agricultural specialists going to the Taliban and the opium growers in Helmand Province of Afghanistan and persuading them to grow arugula and take up yoga instead.

The “pay for play” solicitations Atul reported in McAllen are in direct contravention of the “anti kickback” provisions of Medicare law. Yet these solicitations often result in hospitals paying bogus “medical directorships” to physicians, which are rarely challenged.  Hospitals all over the US are facing extortionate demands from their surgeons to cover emergency room call, with the clear signal that they will move their surgery if they are not compensated. Hospital payments to physicians has become hospitals’ least controllable and fastest growing expense.

The Scandal is What’s Legal

To paraphrase Michael Kinsley’s comment about campaign financing, the real scandal about Medicare fraud and abuse is what’s legal.   Closing the twin loopholes in the Stark Laws mentioned above could save tens of billion of dollars over the next decade. It would also make it easier for hospitals to resist demands by physicians to joint venture services that physicians would otherwise place in their offices or in freestanding facilities.

Indeed, the President’s FY10 budget requested a 50% increase in funds for Medicare fraud and abuse enforcement, but these funds were to be targeted at the twin Democratic bête noirs- Medicare Advantage contractors and the pharmaceutical companies.  Other than freezing the development of new physician-owned hospitals and requiring public disclosure of physician ownership and payments, most of the health reform legislation reported out by Senate or House committees have left the Stark Laws essentially intact, loopholes and all.  The physician owners of McAllen’s “gleaming” Doctors Hospital of Renaissance raised $500 thousand in Congressional campaign contributions, according to the New York Times, to protect their lucrative franchise.

Shutting down Medicare profiteering seems like a no-brainer  strategy to help finance health reform.  Uncovering revenues to support health reform has been so sketchy that one Congressperson referred to the process as “looking under the sofa cushions for loose change”.  Closing the in-office exemption seems like a particularly tempting target, given that it will markedly slow the growth of imaging spending.

Salaried group practices with compensation schemes that do not reward “ancillary” revenue growth or with a significant fraction of their incomes “at risk” through capitated contracts could keep their “ancillary” income, as could research facilities or those with a large percentage of uncompensated patients.  Public disclosure of ownership or physician “payola” from pharmaceutical firms and device manufacturers, as the Senate Finance Committee bill provides, is a laughable substitute for actually protecting the Medicare patient and taxpayer from economic abuse; disclosure won’t change a damned thing.

Physician self-referral is an expensive, taxpayer financed abuse of professional power.  Do oncologists really have a right to own their own PET scanners, or orthopedists their own MR machines?  Should surgeons profit from the hospital’s legal requirements under EMTALA?  Taking these expensive perks away would reduce some physician incomes, to be certain  Heaven forfend!  Yet for a Congress that has great difficulty taking money away from anyone, even if they are stealing, that might prove challenging.

Jeff Goldsmith is president of Health Futures Inc. He is also the author of a book released this year titled “The Long Baby
Boom: An Optimistic Vision for a Graying Generation.” Health Futures specializes in corporate strategic planning and forecasting future health care trends.

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45 replies »

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  3. Jeff,
    As we demonstrated with the actual all-payer data, Dr. Gawande’s use of the Dartmouth Atlas makes for a gripping read but is badly flawed. The “excess” spending in McAllen does not actually occur in McAllen, but in Houston and Galveston and Dallas and San Antonio. I continue to assume that the self-referring physicians who drive all of this excess are not driving 60-300 miles to deliver that care.

  4. “I have encountered two instances of what could be unnecessary tests ordered,”
    “What on earth is a patient/parent supposed to do in this case?”
    It is common for smart consumers when unsure about something to seek a second opinion. You asked what a patient/parent was to do, I suggested calling a free 24 nurse line that is specifically designed to assist members with such situtions and you went off sorta pompous like.
    Nurse lines don’t rely on the knowledge of an NP. NPs work off medical protocals written by panels of physicians.

  5. Please explain to me clearly, Nate, why I should call a nurse that I don’t know, who does not know me, after I spoke to my physician and he recommended a course of treatment?
    Do you usually check with an anonymous nurse every time you see your doctor, just to make sure he is right?
    Is it common practice for people to go to doctors and then call some nursing service afterward?
    What arrogance are you talking about? I don’t have a problem with seeing an NP for routine stuff, but the logic of calling one for a second opinion to that of a physician escapes me.

  6. In the absence of rampant M&A amoung the PCP community, something I think would actually go a long way to reduce cost, empty buildings 16 hours a day, maximize equipement, and allow for greater investment in technology, nurse lines are a proven and cost effective second opinion.
    Not all nurse lines are equal you need to have one with a cost containment mentality. The concept is no different then precert for hospital and any other test. Medicare has radiology management providers in test pilot, this is the same thing. That arogance is why you over pay Margalit. In fact didn’t we discuss your company health plan and how badly you over pay for that because you know better then the professionals how it should be set up?
    Sadly there is a large portion of the population that likes to complain about the cost but are unwilling to do anything about it.

  7. Get serious Nate. I’m not going to call a nurse to validate what a physician recommended any more than I’m going to post a question on some internet forum.
    MD as HELL, are you hinting at a need to maybe restructure the way primary care is delivered?

  8. Don’t call the nurse advise line. They will never tell you not to get seen if you want to.
    The doctor ordered the test just to be sure because of the perceived standard of care if something happened to be wrong, no matter how unlikely.
    The big clinics order less tests because they have more internal colleageal support for clinical opinion without testing. They also have a culture of acedemia, which is usually anti-test. They control their risks with internal redundancy of opinion, expert opinion. That is not so in primary care.

  9. “What should most people, who have no idea what an MRI is for, do?”
    Take their cell phone out of their pocket and call the 24 hour nurse line most people have access to.
    “And while we’re at it, please show me another “industry” where the goods sold include life and death, and where basic economic principles like supply and demand still apply.”
    off the top of my head;
    1. Car saftey like brakes and tires
    2. Air Travel
    3. Saftey equipement for work sites
    4. Guns
    5. Alarm Systems/Home Monoriting
    6. boat saftey/life vests
    Can you name one where supply and demand don’t apply?

  10. Margalit,
    Even though you did not address the question to me, I can tell you that I am looking to work on it; no, barely any work at all done about this question (I think there is a peds cardiology study, mainly about sthg else, revealing some soft supportive evidence). Let me just tell you that the anecdotal evidence from people working in the US and having worked elsewhere is very strong. That should give you pause.
    I can tell you multiple examples of patients expecting inappropriate tests, at times explicit requests, at times unspoken expectations that generate at times palpable tension/dissatisfaction if unfulfilled. I received a Press Ganey questionnaire back with the remark: Dr. (me) saw my daughter for fainting spells, and he did not even order a brain scan. At times, I do the unnecessary tests from my specialty myself, because it’s better I do them than the PCP who is than overwhelmed with potential incidental findings.

  11. I just wanted to jump in here concerning Stark loopholes. You guys that are into fighting fraud and self-referral should look into what the gastroenterologists and urologists are up to. They are gutting the pathologists by opening their own in-office histology labs and then hiring a pathologist to read the slides at fees well below Medicare. By doing this they get all the technical fee and at least half the professional fee. It is all about the money.

  12. Do we have any studies measuring the assertion that over utilization of expensive tests, like MRI for migraine, is mostly due to patients insistence to have those tests done?
    Personally, I have encountered two instances of what could be unnecessary tests ordered, and both instances started with the following statements from my pediatrician: “it’s probably nothing serious, but just to make sure, I’ll order XYZ…”
    What on earth is a patient/parent supposed to do in this case? The doctor is not sure. Should I bring my health policy knowledge to bear here and override the physician, who in this case is a fantastic doctor that I completely trust? This was not a self-referral.
    What should most people, who have no idea what an MRI is for, do? Tell the doctor to hold on to that thought and rush home to check what they say on the internet?
    I understand that your personal experience, MD as HELL, is different, but I’m looking for more than anecdotal evidence. Is there any out there?
    And while we’re at it, please show me another “industry” where the goods sold include life and death, and where basic economic principles like supply and demand still apply.

  13. not sure what praise CC is getting, they offer great care but far from affordable. It is a great example of not everyone gets to drive a bentley in life nor should everyone grow up thinking it is a birth right to.
    People need to start paying for their own care again, only then will they get back n touch with the cost aspect of it. When living unhealthy cost them money and when an unneeded test comes out of their pocket then they will start contributing the effort required.

  14. I can only second hell MD. We have a culture of overutilization – deeply engrained in many patients and physicians alike.
    Since a reason driven campaign from the health care sector propagating cultural change (“more tests does not provide better outcomes”) appears very unlikely – since many physicians are part of the problem, the system (i.e. medicare, “affordable” private insurance) likely will financially implode.
    The only other option I see is a group of docs really and conscientously going with the effective guidelines (no MRI for migraines and no surgery for axial backpain etc.) and offering care at a “discount” plan, with the same or better outcomes (I am not sure whether this fully applies to the praised Mayo or Cleveland Clinic systems, I practice in extended proximity to Mayo).

  15. You need to change the patient incentives in order to have any impact on overall costs.
    Change the physician and the insurance company all you want. Neither is making the patient come in for care. Neither can keep the patient from coming in. Only the patient can change.
    Find a way for them to not want the MRI. Find a way for their lawyer to not tell the jury the patient should have had a MRI.
    You will have to redefine the “standard of care” for every medical question that reaches a jury.
    If we have a doctor-patient relationship, we are compelled to treat the patient according to the standard of care prevailing in our area. If we are negligent in our care and do not meet the standard of care, and if that negligence causes harm to the patient, then we are liable for damages.
    The problem is that the standard of care is determined retrospectively in each case after the outcome is known.
    Change this, somehow, and you change all of healthcare. Otherwise you are just wasting your time.

  16. “what type of provider organizations should the US really have especially”
    Independent primary care who feed competing specialists group who can admit to multiple hospitals.
    i.e. competition, competition, competition at every and all levels.
    Very transparent
    “What leads you to think that this is the case and that this is even plausible?
    In all those developed countries we compare ourselves to, the consumer pays almost nothing directly and they still mange to be more cost effective and less expensive.”
    It worked and continues to for 300+ years. They are less expensive becuase they deliver less care. Effective is a subjective measure that varies, People in NHS denied the treatment they think they want obviously don’t find their sytsem very efficient, just as those uninsured in ours don’t find ours to be. You will also notice that most of those same systems are increasing members cost at time of service as they are all quickly on their way to insolvancy.
    Million of the uninsured pay for their own care becuase they find it cheaper and more efficient. Most employers 55% with benefit plans self fund becuase they find it cheaper and more efficient.

  17. Barry wrote:
    “Referring doctors, with such tools, should be able to make more cost-effective referral recommendations than they do now.”
    Assuming they even care, which I don’t think they will.
    “I think the litigation environment and the resulting defensive medicine is a big deal even though it cannot be precisely quantified.”
    I think the defensive practice excuse is used as cover for good old fashion bill padding. Yes it cannot be quantified because those states with tort reform cannot be pointed to as better controlling costs. Texas has tort “reform” yet that it hasn’t stopped McAllen docs from filling their pockets just the same. Look also to Florida which also has tort reform as well as McAllen like billing centers.
    The other aspect to community rating of tiers would be places like McAllen where those few interested in seeking a lower cost provider just can’t and are “community rated” to pay higher coverage in a tier they’re trapped in.

  18. Margalit,
    The quote to which you refer was intended to draw a sharp contrast between what I would call a CYA mentality and a pure cost-effectiveness or value for money mentality.
    As for spending per capita being much higher in the U.S. than it other developed countries, I think there are numerous factors that drive it. The litigation environment and the defensive medicine that flows from it is one factor. With respect to end of life care, I think there is a general consensus that Europeans and others are more accepting of death when the time comes than we are in the U.S. A lot of futile end of life care is likely patient or family member driven though doctors and hospitals also happen to get paid more if they do more, no matter how useless. Medical prices, especially for hospital care and brand name drugs are substantially higher in the U.S. than elsewhere. By contrast, generic drugs, believe it or not, are actually cheaper here. There is more imaging here, now a $100 billion per year business. A lot of this, if not patient driven, is perceived by doctors as necessary to satisfy patient expectations and to project the image of being “thorough.” The entrepreneurial mentality is probably more prevalent among doctors here than elsewhere. Finally, geographic differences in the way medical education is financed drives U.S. doctors to feel that they need to make more money than doctors elsewhere just to pay off their debt. That, in turn, leads many to gravitate toward more lucrative specialty medicine at the expense of primary care. As I’ve said numerous times, there is no silver bullet that will fix this but there are lots of silver pebbles. Cumulatively, they add up.

  19. MG;
    Limiting this discussion to ambulatory care (not even necessarily primary care), what is a group physician practice for, anyway? Call/vacation coverage, overhead sharing, and someone whose opinion to ask on the occasional difficult case. If the overhead and call coverage were taken care of, then you have left only the important issues: communication and coordination with other care providers, be they (other)specialists, physical therapists, home health workers, etc., as you care for each of your individual patients. It is for this reason that I believe the cottage industry of isolated physician practices needs to change to another model. That model would be one which takes care of the overhead (including malpractice) and call coverage issues, and eliminates the hassle factor to a large degree. It would also implement a quality program and set practice standards to ensure everyone is practicing quality care and being sufficiently productive as not to dump on everyone else. In return, both docs and patients would benefit from streamlined care with greater continuity and fewer “dropped balls” of the current chaotic system.
    Wouldn’t you accept some loss of autonomy to practice medicine in peace, without all the current dysfunction and daily frustrations? I sure would like that.
    Now exactly what model we would use is not something I can answer right now, but I think being allowed to try out different ones would lead fairly quickly to the answer. This is how to collect the evidence you say is lacking. I think Barry’s ideas of paying in tiers based on value (=patient outcome per dollar spent, NOT straight capitation) would encourage such experimentation.

  20. Barry, regarding this quote:
    “…and the bill were being paid out of their own pockets as opposed to by an insurer or taxpayers, it would probably suggest a much less expensive and more cost-effective protocol…”
    What leads you to think that this is the case and that this is even plausible?
    In all those developed countries we compare ourselves to, the consumer pays almost nothing directly and they still mange to be more cost effective and less expensive.
    This notion that the consumers have the ability to drive up costs by demanding expensive treatments, while the poor doctors have to comply against their better judgment sounds a bit unrealistic to me.

  21. The lower valley of Texas – Harlingen, Brownsville, McAllen has a predominance of retired people – plus, it’s the home of a lot of winter Texans – those living up north who come down for the winter. I would expect Medicare costs to be higher in an area where the population is older.

  22. Good discussion generally. Basically it comes to this – do you believe in the Homo Economicus model that the new behavioral economists at the University of Chicago that heavily pushing that that individuals (in this case physicians) almost always directly respond to economic incentives and they take precedent generally over other issues including general softer “societal” norms?
    Its has been looked at in kind of a piecemeal fashion but I still haven’t seen a good through look at the current state of ‘professionalism’ among American physicians from a sociological standpoint but incorporating enough financial and organizational theory and direct data to really come through with some clear and definitive conclusions.
    One of the things that I have been fascinated by in this whole debate in an indirect fashion is really the discussions that have taken place about what type of provider organizations should the US really have especially on the ambulatory side. It is frankly amazing that there really isn’t enough comprehensive evidence either way to definitively argue that the benefits of larger physician practices out weigh those of smaller physician practices.

  23. I would like to offer a few thoughts on this.
    First, the insurers all claim that they can easily tell who the high utilizers are in a given region or a specific specialty. Assuming some ability to risk adjust patient populations for both socioeconomic status and medical complexity, we should be able to group doctors and, perhaps, hospitals into tiers based on both cost-effectiveness and quality like we do for drugs now. If patients want to see a less cost-effective provider, they should be prepared to pay a higher copayment for the privilege.
    Second, I think robust and user friendly price and quality transparency tools could go a long way toward improving medical market information and reducing asymmetries. Referring doctors, with such tools, should be able to make more cost-effective referral recommendations than they do now. Moreover, to the extent that there are nuances or quirks in the metrics used to establish the tiering rankings, the referring docs should be in a much better position than patients to understand those and take them into account.
    Third, I think the litigation environment and the resulting defensive medicine is a big deal even though it cannot be precisely quantified. Even a doctor who orders an unnecessary test usually cannot tell us precisely how much of the decision to order it was driven by defensive medicine, how much was money driven, and how much was an attempt to satisfy or placate the patient. Taking medical disputes out of the hands of juries and giving them to specialized health courts could bring much needed objectivity and consistency to the dispute resolution process.
    Finally, I think it would be interesting to hear from doctors and their specialty societies about the extent to which the establishment of community standards and protocols reflects the reality of the litigation environment we all live in. If the society sees each patient as a potential plaintiff who might be quick to sue in the event of a bad outcome, it suggests an expensive protocol that includes plenty of tests to rule out even very low probability diseases and conditions. On the other hand, if patients are seen as thrifty, cost conscious individuals who just want doctors to apply their best judgment and treat them as though they are members of the doctor’s own family and the bill were being paid out of their own pockets as opposed to by an insurer or taxpayers, it would probably suggest a much less expensive and more cost-effective protocol which, at the end of the day, would likely result in outcomes as good or better than what we get from the high cost, defensive medicine approach we have now.

  24. Jeff raised a really deep point in his last comment, and I hope it doesn’t get lost. In summarizing Arrow, he reminds us that economic forces are not the only available controls on physician behavior. Economic incentives are quite blunt, and their design is too far removed from the point of care to take individual patient factors (not to mention patient preferences) into account.
    Professionalism (a kind of informal social control) allows a much finer and better governance of physician behavior. And yes, we do need to govern physician behavior–it’s a classic principal-agent problem–but social controls don’t _feel_ bad to most physicians. Economic controls often do feel bad. They’re too blunt; they don’t feel fair. So not surprisingly, there’s a lot of resistance to the idea of returning to capitation.
    The trouble is that the links between policy changes and informal social controls are not as obvious as the links between policy and economic incentives. Strengthening professionalism (call it Kumbaya if you must, but it’s the only thing that will save us) is always a local exercise. When we talk about disruptive innovation, the biggest beneficial disruptions in health care are likely to rely on successful social controls on physician behavior…not payment innovations or fancy technology.

  25. Now Matthew; don’t get defensive. You know there are some loonies on this blog as well as anywhere else, haha!

  26. I agree with John Graham. That self-referral is disgusting. And it’s particularly shocking that everyone who reads this blog is REQUIRED to go to a conference in which the blog owner has a financial stake (or at least is heavily recommended to go by someone with 7,000 years of professional and religious authority over them). And of course that the taxpayer or their employer pays for that conference admission no questions asked. AND further, if anyone challenges this, the blog and conference owner makes sure that his friends in Washington DC prevent any interference in that business process.
    On the other hand there are those lunatics who disagree with John Graham and who believe that people who read this blog and also decide to go to a conference co-owned by the blog owner–even if attracted by an inducement on this blog to do so–are making their own free-market decision to do so using their own money.
    Those lunatics probably also think that Vic Fuchs proved the concept of physician-induced demand several decades ago. And incredibly numbered among those lunatics is probably every health care economist who’s studied the problem….with the exception of John Graham.

  27. “And despite the temptations to enrich themselves, the vast majority of physicians actually behave this way (Bev MD?- talk to us about this)”
    Jeff – I think the above statement is correct, but doing the right thing for patients and doing the right thing for yourselves is easy to commingle. Example: interventional cardiology. The cardiologists gradually started stenting everything that moved because it seemed logical that opening up an artery would naturally improve blood flow, prevent MI’s, improve overall mortality, etc. etc. It also happened to be very lucrative. I think the cardiologists who deliberately stented people who didn’t need it were few – but in gray cases, and given the above train of thought plus the reimbursement, stenting literally exploded across the country.
    Lo and behold, when studies came out showing that stenting did not have the desired effects except in certain supgroups of patients, coupled with the late thrombosis finding (which, BTW, it took a pathologist to find, not a cardiologist), then suddenly stenting plummeted – temporarily. So was it bad doctors? Of course not. But was lots of $$ made during the many years before the contrary evidence reached critical mass? Yes.
    Also, dr’s feel victimized by the system (particularly Medicare) and therefore the attitude creeps in that “they’re trying to screw me, so I better get what I can before it all falls apart.”
    I am sure other physicians can weigh in on this subject also.
    As to why I retired early, it was mostly due to an internal situation in my group – a new chief who didn’t want any medical practice responsibilities and wanted to bring in new sources of revenue – while I just wanted to practice medicine in peace, and have him take his share of the work. He was one of the “entrepreneurial physicians” of whom you speak.

  28. At the University of Chicago, we were taught that all of us are rational actors who respond with alacrity to economic incentives (and also that markets are animated by “perfect information” and are therefore all-wise and all knowing).
    The problems come when we don’t know what to do and place ourselves in the hands of others. Nobel Laureate economist Kenneth Arrow in his legendary essay “Uncertainty and the Welfare Economics of Medical Care” talks about what he termed “moral hazard”, the twin temptations of people to overconsume something they perceive as “free” and of their professional agents, such as physicians, to enrich themselves at their client’s expense. If we do not trust physicians to exercise their professional judgment in an ethical and thoughtful fashion, then we doom ourselves to suboptimal medical care. Any civil society is founded on trust, and if we cannot trust those who help us, we’ve got a big problem.
    Arrow’s solution to the moral hazard problem was professional ethical standards enforced by colleagues. He said (and I agree with him) that “. . . the behavior expected of sellers of medical care is different from that of businessmen in general. . . the customer cannot test the product before consuming it and that there is an element of trust in the relation. . . the ethically understood restrictions on the activities of a physician are much more severe than on those of, say, a barber. His behavior is supposed to be governed b a concern for the customer’s welfare which would not be expected of a salesman”.
    Perhaps this sentiment belongs to an era when we did not lock our houses or cars, or worry about someone stealing our electronic passwords, and we should just “get over it”. I’m not ready to go there. All physicians take a Hippocratic Oath (look it up) in which they pledge to put the interests of their patients before anything else and to exercise their power in a compassionate and judicious way.
    And despite the temptations to enrich themselves, the vast majority of physicians actually behave this way (Bev MD?- talk to us about this). There are a lot of physician communities who still believe they have a special trust and behave that way There are also a lot of places where it is simply viewed as inappropriate for physicians to make a million dollars a year (and there’s no place to park your Ferrari without it being keyed). Whether it is professional restraint or social restraint, physicians in those places view what they are doing as something more than merely commercial activity and behave accordingly.
    It may be that modernizing the Stark Laws are a waste of time. I view the process as somewhat akin to modernizing our securities laws to protect investors from people selling worthless securities, or from markets like derivatives that grow to the point of posing what the economists call systemic risks. My colleagues at MedPac and in academe think it is time to junk fee for service payment, and they may be right. I think the unacceptable levels of overhead we have in health insurance can be tied back to paying per unit of care, rather than paying for relationships, as I’ve advocated in my writing. The problem is that the organizational capacity to manage global risk does not exist in most of the places I’ve worked in, and won’t in a decade.
    Perhaps it’s merely an aesthetic concern, but I think medical profiteering damages the entire medical profession, and that it will exist under global payment, medical homes or other alternative payment models. Relationship based payment can be scammed as well. If we cannot count on the profession to police itself, and to use its power in a dignified and thoughtful fashion in our interests as patients, we still need the club in the closet of legal enforcement (and public scorn) to keep the medical system honest.
    Why I wrote this blog is that there is a lot of waste in our medical care system, and that what Atul wrote about should be stopped somehow before we suck additional money out of our struggling businesses and households to pay for health reform. I think the millionaire doctors in McAllen (and Miami and Phoenix and Orange County . . . .) should help pay for health reform.
    (Can Bev MD please remind us why she quit practicing medicine)

  29. The theory of physician-induced demand is unprovable. We might as well build a literature demonstrating that restaurants with wood-burning ovens sell five times as many pizzas as those that don’t, and blame the restaurants for stimulating demand. All demand is supplier-induced to the degree that the entrepreneur stimulates latent demand in a consumer.
    But if we’re concerned about self-referral, let’s talk about a conference producer who is inducing demand for something called Health 2.0 by hosting an informative and interesting blog. He uses this blog to promote his conferences, a clear conflict of interest. This is probably a situation that the U.S. Department of Health & Human Services and the Federal Communications Commission should collaborate to stamp out.
    After all, it’s not like we live in a free country – at least not with respect to health care.

  30. “The bills on the table would eliminate medical bankrutpcy.”
    Actually it would eliminate all but one Medical BK, the US. So we trade a few million individual BKs for breaking the entire nation.
    “Medicare is now paying $1 for every 14 aents of additional value that Medicare Advantage patients receive.”
    Maggie never did learn basic math, for the sake of accuracy Medicare is paying $1.14 for roughly $1.12 of benefit, the difference is MA does Medicare benefits for 98% the cost of Medicare. Maggie’s flawed attempt at propoganda implied Medicare is overpaying by a factor of 7, which obviously is not true. Or she isn’t aware Medicare Advantage covers both Medicare’s benefits plus additional benefits.
    “The president announced that the SGR cut wouldnt’ happen and was very staightforward in telling us what it would cost.”
    Just like he was strait forward with;
    accepting public funding,
    no lobbyist in his administration,
    posting bills online to read before voting,
    all negiotations done on cspan,
    well I could go one as long as Maggie’s post with examples, so when Obama says something we should obviously believe him.
    “As part of their fear-mongering conservatives”
    Don’t listen to those crazy right wingers, its not like Medicare has 34 trillion of unfunded liabilities or anything. Every thing is fine we can just keep spending away like we have and it never has to end, Maggie and Obama promised…
    “In addition, Medicare has announced that it is slashing fees for MRIs and CT scans. ”
    It will work this time for sure, just ignore the past 30 years of history where every time CMS slashed reimbursements utilization just rose to make up for it. Doctors won’t figure it out to just run more test to make up for the lost revenue per test, they aren’t that bright.
    “And it is refusing to pay for an excessive number of prevetable hospital readmission.”
    60 minutes just did an investigation where people opened offices billed medicare for billions in goods and services never delivered and Maggie thinks this new law is going to stop hospitals from billing for preventable readmissions. Ignore the fact Medicare has no system to actually enforce this, we all know how accurate self reporting is. It’s called liberal economics, just make up the number you need then hope it happens. When it doesn’t work out just blame the boogy man to your right.
    “I’m becoming very tried of unnamed sources in cynical Obama-bashing or reform-bashing healthcare stories.”
    THis is only allowed when Maggie is bashing conservatives and making up facts for new books, how dare you engage in this against his most holly or whatever Sting calls him these days.
    Notice how reading a couple studies makes one an expert able to solve all problems, no real world experience required, everything they tought in class is all you need to know.
    By Maggie’s logic if accountable care worked in some small isolated cases it must work for the entire nation. THis is great news;
    open carry works incredibly well in rural and small town America so it should be great in big cities, you on board maggie?
    My self funded groups have negative trend so the entire nation should be self funded with me right maggie?
    A really hot girl had fun with me on a date once so all hot girls should date me right maggie?
    “That legislation assures access to health care for the poor, the working class and most of the statistical middle-class.”
    Just like Medicare assired grandma would never go broke from a prolonged hospitalization and Medicaid assured the poor would receive adequate care….oops not such a good example, well the did promise to.

  31. David, I’m sorry, but I must be missing the point somehow. If the main thing that drives physician behavior is monetary incentives, how exactly is capitation going to be a good solution?
    Sure, it will contain health care costs in general, but the same money driven attitude will cause physicians of the McAllen type to withhold needed treatments and pocket the difference. The Mayo docs will not experience any change in behavior.
    If we accept your initial assumption that monetary incentives are the strongest motivator and the McAllen docs “are acting rationally from an economic perspective”, just like the Mayo docs do, then the only conclusion one can draw is that we should provide all of them the same incentives that Mayo docs have – salaried positions.
    The only remaining question is who should the employer be.
    In my opinion your assumption cannot be correct since different physicians, in different locations, do not seem to react the same way as in McAllen to the same monetary incentives. Maybe it’s something in the McAllen water supply…..

  32. I had to read the whole post after seeing Matthew’s “Kumbaya and arugula” excerpts on Twitter ….
    The problem in McAllen and elsewhere is simply that health care providers are doing exactly what they have been incentivized to do. They are acting rationally from an economic perspective. We agree with the rational activity in the Mayo context, but not in the McAllen context. Since, in our society, money is the strongest motivator, it is imperative that we alter the monetary incentives in health care so as to change behavior to the behavior that we as a society deem to be better — yielding better outcomes, better distribution of economic resources, etc. Tinkering with, or eliminating, the in-office ancillary services exception won’t do it: when you push in on the balloon here, it bulges out there. (And regulation is always perpetually behind innovation in the marketplace; I’ve experienced that both as a regulator and in the private sector. Can’t blame Stark for failing to anticipate miniaturizaiton of diagnostic technologies, though he has said himself that he wishes he hadn’t gotten those rules through in the first place.)
    Time to burst the balloon and start inflating a new one. We need a new payment system. Perhaps the global payment system that Massachusetts may be rolling out (shh … don’t call it capitation) will do the trick; perhaps another eperiment will be more productive. The point is that we need to continue experimenting with reimbursement methodologies — and in the very near future (or, more realistically, let’s say in five years) throw the switch and leave fee-for-service in the dust.
    Instead of bemoaning what’s legal in our mixed-up, crazy reimbursement sytem, I think it’s time to blow it up.
    (Maggie makes a good point re: SGR – the 21% cut won’t (can’t) happen, nobody really expects it to, and the cost (at least initial years’ cost) has been budgeted for. I’ve written more about SGR on my blog, so won’t belabor the point here. Yes, it represents a big chunk of change, but it’s not the main issue here.)

  33. “Change will require a generation” is largely bunk. If you substantially changed the fee schedules, you would see physicians adjust overnight even though they would go kicking and screaming and rightly so to some degree.
    Reality is there no one has really figured a good way to do this although there are some interesting demonstrations projects that are ongoing and it is just really problematic with claims data even if you have most of the claims data, personnel, and adequate software to analyze it.

  34. Wow, Maggie; that has to take the prize for the longest comment ever! (:
    Without confessing that I haven’t read every word of every comment, I have a simple question: why do physicians have such political power, anyway? They are a relatively small and disorganized group (not counting the AMA, which is largely ignored by its own constituency).
    Yes, they provide the care, but they are not going to stop doing so en masse if there is drastic payment reform. And I favor drastic payment reform, not just this tinkering around the edges. Even Jeff’s suggestions are tinkering around the edges. Bundling of physician, hospital, home health, physical therapy, all types of care per patient condition, based on value – using Porter’s definition of value as patient outcome per dollar spent.
    Tinkering will get us nowhere. I agree with Dr. Kibbe that real change will take a generation, but there’s no time like now to start.
    ps yes, I am retired (early), and my viewpoint is skewed by being a patient with a 10K deductible and thus paying my own health care costs – and seeing the overcharging and general dysfunction out there. When more people do this, things WILL change.

  35. I think Jeff is coming around to my way of thinking. To get the modest reforms (although as Maggie says they are progress) everybody needs a bribe.
    In my perfect world Obama would have let health care collapse and waited till then to do a major reform. I think that date will be put off by this round but only for a decade or so.
    On the other hand we DID have a financial collapse and as far as I can see no reform, so perhaps nothing is as much as we can expect to get…and anything else is a bonus

  36. rbar – You are correct that physicians have a perverse relationship with how they get paid (ie. the more tests that they order, the more they get paid) however this is the smaller of the many problems.
    1)Tort reform is needed. This is not a minor cost (14 cents of every healthcare dollar)
    From the WSJ –
    “At the University of Miami School of Medicine’s patient practice, 14 cents out of every dollar collected in fees for services to patients goes toward buying medical malpractice insurance, says William Donelan, the university’s vice president for medical administration. That figure doesn’t include costs of defensive medicine, which are difficult to quantify, he says”
    2)More Health Insurance only insulates patient and provider from the real costs. This is the truly perverse relationship, from Payor to Provider/Patient.
    From the Atlantic –
    “For almost all our health-care needs, the current system allows us as consumers to ask providers, “What’s my share?” instead of “How much does this cost?”—a question we ask before buying any other good or service. And the subtle difference between those two questions is costing us all a fortune.”
    I agree with you in principle, but this line of thinking; that Providers are the problem, is not the answer and it very well may turn into one of our biggest problems.
    I recently had lunch with several medical residents and only one said that they would encourage their children to go to medical school. They simply don’t want to deal with the mess that medicine has become.
    I am afraid if we continue this attack on physicians, we are going to have a big shortage of health providers.
    Need proof? I work with a group in Malawi, Africa and Malawi has 200 doctors for 12M citizens (1 doc for every 60,000 in the US we have one doc for every 375).
    There are lots of reasons for this shortage, but not allowing docs to own PET scans is not the answer to what ails our healthcare system.

  37. Excellent points and well written review. The use of in-office imaging and referral for ‘unnecessary’ procedures however is not always profit driven. Many times it is simply bad medicine, poor education and falling to the path of least resistance.
    We own our own vascular lab and try to hard to maintain equipoise during the ordering of tests on our own patients. While we do ‘profit’ for the work we provide, we offer a highly professional service that exceeds any other option in our region. Simply put, it is better medicine and better care.
    Our imaging services are nationally certified, highly specialized and accurate and thus provides one-stop patient and quality-oriented results. As such we actually contribute to cost containment by avoiding unneeded repeat (or further) testing. In addition, by providing these services in a non-hospital based center, we avoid the added in-patient costs and co-payments required with such institutions.
    Similarly, many vascular interventionalists are moving invasive diagnostic and vascular access procedures back INTO the office. CMS now provides select office-based reimbursement that far exceeds our standard inpatient professional services reimbursement with the caveat of a single global payment to cover all expenses. The overall expense to the system is FAR less, avoiding the hospital-based costs and overhead. Everyone (except maybe the hospitals) wins: we keep a close eye on cost containment, the overall cost is less and we can glean income by operating lean and following appropriate care guidelines. Given the high percentage of M’care and M’caid pts we see, such sustaining services offset our continually increasing overhead (ie EHR…).
    This being said, I think that global “repeal” of the so-called Stark loopholes could likely have the unintended consequence of increasing cost and decreasing quality care.
    Of course, this does not address the rampant misbehavior of those who abuse the system for financial gain. Perhaps lessening the overhead burden with tort reform and concrete financial support for new technology, partnered with more intensive peer oversight would help??

  38. Jeff–
    An interesting post. You’re entirely right, of course, about physician-owned clinics and all kinds of self-referral.
    See the post I just wrote asking “Why is Healthcare So Expensive in Rural Louisiana?” http://www.healthbeatblog.com/2009/10/why-is-health-care-so-expensive-in-rural-louisiana-.html
    A major part of the asnwer: Lousiana is second only to Texas in the number of physician- owned clnics that it has.
    But I’m afraid have a major quibble with your post.
    Sometimes, commentators seem so bent on saying “the Obama administration isn’t doing enough” that they neglect to notice that it has already done a good part of what they think it should do.
    Are you aware that Medicare has already announced that it is slashing fees for tests done by physicians who have rented or leased the testing equipment and are using it in their offices? (The cuts are substantial.
    And, as you mention, reformer plans to halt construction and expansion of physician-owned clinics.
    Closing those clinics, or forcing physicians to divest themselvs of their interest in said clinics would be difficult. (I’m not a lawyer, but I can only imagine how complicated this would be legally.)
    I wish the clinics had never been opened. And I agree that they add significatly to the cost of healthcare–though only in some parts of the country. Physician-owned hospitals are not the major problem in Boston.
    You also write about the proposed cuts in Medicare reimbursements to physicians under the SGR formula as if this was a serious problem. In fact, no one is “scrambling to avoid them.”
    The Obama administration made it Crystal Clear when it submitted its first budget at the beginning of the year that Congress Would Not be cutting physicians fees by 21% in Janauary by not including that “savings” in its budget.
    In previous years, Bush included the sham savings in his budget, even though everyone knew Congress would never make such stupid, crude, across-the-board cuts. I just wrote about this here http://www.healthbeatblog.com/2009/10/maggie-on-lou-dobbs-last-nightthe-doctors-fix-and-the-boy-in-the-balloon.html
    As I explained on “Lou Dobbs” last week, the story about the “Doctor’s Fix” (a deal to avoid the cuts) is a non- story– much like the story of the boy in the baloon.
    There was no boy in the basket. There was no plan to slash Medicare fees to doctors by 21 percent in January. The “scheduled cut” existed only on paper. Every sensible perons knew it woudl never happen. Obama is a sensible person.
    Back in February As AMedNews.com reported: “President Obama on Feb. 26 offered a $3.56 trillion fiscal 2010 budget outline calling for sweeping changes to health spending and tax policy, including a recognition that Medicare’s physician pay cuts mandated by law are not practical. . . The president estimated that repealing the [cuts] would cost $330 billion over the next decade.”
    The president announced that the SGR cut wouldnt’ happen and was very staightforward in telling us what it would cost.
    The SGR cut was never part of health care reform or the savings that would pay for reform.
    As part of their fear-mongering conservatives kept talking about the SGR cut as if it was going to happen–and people who don’t follow the news believed them.
    To say that slicing Medicare reimbursements to all physicians by 21% is “not practical” is an understatement. Think about it. How many primary care doctors do you think would continue taking Medicare? ??How many geriatricians would simply retire???
    Okay let’s see where we are in terms of what health care reformer HAVE done so far: Medicare has already slashed fees for physicians referring to themselves for testing and we have halted expension or construction of new clnics. In addition, Medicare has announced that it is slashing fees for MRIs and CT scans. And it is refusing to pay for an excessive number of prevetable hospital readmission. All of this will save substantial sums–while lifting the quality of care. (Too many tests are hurting patients; in the case of CT scans, they’re being exposed to too much radiation.)
    Meanwhile, Medicare is planning to look at fraud and abuse involving drugs and Medicare ADvantage– what you call Medicare’s “bete noir”
    The drugs and devices that Pharma sells account for 16% of health care spending (this includes not just drugs sold retail (11%) but drugs administred in hosptials and doctors’ offices as well as the many devices that the drug industry now sells. My numbers on devices are from Wall Street analysts)
    Meanwhle Pharma enjoys profits margins of 16%. Sixteen percent of total spending and 16% profit margins . . . This seems to me a very good place to look for money.
    As for Medicare Advantage, and the savings to be found there: Medicare is now paying $1 for every 14 aents of additional value that Medicare Advantage patients receive. And, with the exception of a few well established Medicare Advantage HMOs, those patients are receving care that does not match the care under traditional Medicare. (I wrote about this here http://www.healthbeatblog.com/2009/09/more-on-proposed-cuts-to-medicare-advantage-seniors-would-save-far-more-than-they-lose.html
    It seems to me quite appropriate to look for savings there.
    Meanwhile, you write: “Uncovering revenues to support health reform has been so sketchy that one Congressperson referred to the process as “looking under the sofa cushions for loose change”.
    I’m becoming very tried of unnamed sources in cynical Obama-bashing or reform-bashing healthcare stories.
    Just who is “one Congressman”??? How much does he know about heatlhcare? Has he read the hundreds of pages of MedPAC studies that lay out a very good blue-print for finding huge savings within the system? Has he read the past 10 or of Dartmouth research (which MedPAC relies on to a high degree). Has he, perhaps, read the whole House bill (HR 3200) the Senate Finance Bill and the Help Bill? All of them incorproate parts of MedPAC recommendations.
    Has he heard of Jay Rockefeller’s legislation that would put MedPAC in charge of overseeing Medicare spending? Has he read that President Obama endorses the plan–or a similar plan? Does he realize how well that plan dovetails with HR 3200? Or is he just another amatuer pundit?
    IF “one Congressperseon” had read some of these docouments (or been well-briefed on them) he would realize that the legislation on the table already contains provisions for Medicare to begin squeezing the waste out of the system.The legilsation reocmmends using financial carrots and sticks to steer doctors and patients away from the $700 billion worth of waste in the system in the form of unncessary tests, unproven, ineffective treatments, unnecessary hospitalizations , and over-priced drug and devices that are no better than the over-priced drugs and devices that they re trying to replace.
    Physician-owned clinics are guilty of over-treatment, but they are only a part of the problem. And in parts of the country where there are few physician- owned clinics they are only a tiny part of the problem.
    It’s interesting that in his article, Atul Gawande makes it clear that he does not think that physician-owned hospitals are the core of the problem in that Texas town.
    Rather it’s a “money culture” that runs through all medical care.
    As for what you call the “Kumbaye logic” of “accountable care”–here you are simply sneering at Dr. Gawande.
    Gawnade, Berwick, Elliott Fisher and others know that accountable care can work because they have reported on it working in communities throughout the U.S. where doctors and hosptials have gotten together to replace competition with collaboration, usually moving away from fee-for-service (or pooling fees) in order to reduce health care spending in their communities while lifting the quality of care. Google
    Berwick, Gawande and “How did they do that” to find the story.
    Finally, I’m sorry for the rant. As I said I agree that phyhsician self-referral is a problem.
    But it’s hardly the whole problem.
    Most imporantly, I’m baffled by the many stories and posts–written by knowledgable, very intelligent people who support progressive reform– who seem bent on minimizing how much we have accomplished in just 10 months.
    We now have legislation that has taken giant steps foward.
    That legislation assures access to health care for the poor, the working class and most of the statistical middle-class. (We still need to figure out how to make care affordable for the upper edges of the middle class and the upper-middle class, but we have three years to figure it out. Basically, we need to bring down the cost of care by weeding out the unnecessary care. Then, premiums won’t be so high.)
    The bills on the table would eliminate medical bankrutpcy. (A couple earning $80,000 could wind up with $10,000 of medical bills, but no one in that position will go bankrupty over $10,000. Doctors and hosptials would let the couple pay the bills off over time–and probably offer some discounts–because they know that they Can pay $10,000. It’s when you owe $130,000 that you’re pushed into bankrupty because they know a couple earning $80,000 isn’t going to be able to come up with $130,000 even if given 36 months. )
    This is a huge step foward.
    Insurers can’t charge co-pays for primary care.
    This is a huge step forward.
    I could go on. It’s very easy to focus on what hasn’t been accomplished in the last 10 months. But why, I wonder, do so many progressive commentators take such a cynical view? Why do they minimize what has been accomplished? Why did so many say “we’ll never get a public option?” (And by the way, the public plan will be able to negotiate decent rates. By then, Medicare reimbursements to speicalists very many services will have been cut– while reimbursements for primary care will rise. And Medicare will no longer be rewarding hospitals for inefficiency. In other words, Medicare will have set a better example for reimbursements, and the public plan will use that as a benchmark. Meanwhile, as I’ve explained in recent post, 25% of the population will be eligible for the public plan the first year. Seehttp://www.healthbeatblog.com/2009/10/who-would-be-eligible-for-a-public-option-far-more-than-10-of-the-population.html#comments
    Not all will choose it. But the public plan, which will be mirroring Medicare, even if it pays slightly more, will have clout.)
    Meanwhile, the conservatives will continue to fight reform, tooth and nail, for the next three years. Reform-minded Americans need to support the process. Health care reform will not be an event. It will be a process,a long process. As Don Berwick points out, we’re trying to turn the biggest ship ever built.
    Rather than standing back, criticizing and nit-picking, everyone needs to help.

  39. As I said elsewhere, the only solution I see is to pay physicians similar to the way judges are paid, with only mild financial incentives for extra (above average) productivity. Ownership in local medical facilities should be forbidden.
    Real tort reform is also needed. Yes, defensive medicine explains only some superfluous testing (that’s why the comparison studies in docs with own equipment vs outside referrals matter), but I am convinced (from own experience/observation) that it does matter, too.
    nk, the problem is that physicians order extra tests if they are direct beneficiaries of superfluous testing. Take that incentive away, and the number of tests ordered will decrease.
    “There is a rich literature that establishes that physicians who own their own imaging equipment order from two to five times as many tests as those who do not.” I made the experience that these kind of articles are hard to find, but I want to read this. Any reference from the rich literature, anyone?

  40. I would also contend that the physician practice of admitting their private patients to the hospital is also a legal form of self referral and is another huge source of abuse. Why do you think hospitals are so concerned about the RAC program?

  41. Jeff- Thank you. I get so tired of hearing the same largely endless and large empty series of excuses & denials you hear from physicians and especially from physician specialty associations/national organizations regarding this issue.
    Generally you hear that it is ‘someone’s else fault’ for high costs (e.g, pharmaceutical firms, medical device companies, etc) and that there are other reasons (e.g., ‘defensive medicine due to the lack of tort reform’, my patients are sicker) why physicians can’t really control utilization and costs. There are some kernels of truth to this but you get down to it physicians control an overwhelming percentage of how medical resources are utilized. “Eat what you kill” pervades many physicians’ offices yet.
    When you boil it down, physicians essentially want in national reform efforts is to get paid more through the restoration of SGR formula cuts, have strict caps on malpractice suits even if that hurts patients who are generally harmed, take no more responsibility for getting serious about drumming the handful of truly bad doctors out of the business permanently, and have absolutely no more scrutiny or oversight.
    Well, if care was cheap in this country or the quality was really that much superior, I wouldn’t have as much of an issue with this. However both of those arguments (especially the quality and safety ones) have been thoroughly discredited and debunked the past 15 years.
    Don’t mean to overlook the difficulties that physicians experience nor discredit them as a critical part of the healthcare system but I am tired of hearing the “woe is me” arguments from one of the best-paid and most secure occupations in the U.S. and generally their refusal to both better police themselves and take greater responsibility at a national level.
    Generally the individual physicians I have talked to the past several months are moaning and complaining about the reform efforts and how “they are being shutout” of the conversation. When I ask them a followup question if they contacted their local Congressman/Senator or if they have become more active with their specialty society, you generally get a “no” with litany of weak excuses.
    If physicians want a greater role and voice in healthcare, they need to get their heads out of the sand and become more involved with their specialty societies to get them to slightly alter their organizational message. Additionally, they need to get serious about policing their own ranks and drumming out the truly handful of terrible doctors (lets say about 5%). Just because you have an M.D. and pass your boards shouldn’t give you carte blanche to endlessly practice medicine until you retire.

  42. Jeff: Excellent piece. As one who saw first-hand the evolution of McAllen-style medical practice (see Return to McAllen: A Father-Son Interview https://thehealthcareblog.com/the_health_care_blog/2009/07/return-to-mcallen-a-fatherson-interview.html) I agree with you this has become a national problem, not simply one that is local. The only solution is to hold these providers (and their patients) accountable for quality and cost, but this is going to take several generations to effect. Unless, of course, the health economy collapses, something that I think may happen, and I know you don’t.
    You’re right, too, to put it out there that the real scandal is what is legal and protected against change.
    Kind regards, DCK

  43. I like Heidi’s suggestion – lets get Jeff appointed to be the Healthcare Czar!
    Thanks Jeff for your common sense and willingness to call a spade a spade!

  44. Interesting article and very well written. But you are missing one main point; someone has to own the PET scan and MRI machine, why not the docs? Would you rather corporations, who didn’t have to sign up for the hippocratic oath, profit from these procedures? The costs don’t go away they just move to another entity.

  45. If the Obama administration would name Jeff Goldsmith the Czar of Healthcare Reform, we would actually have some reform that makes sense. Yes, Virginia, the real scandal about Medicare fraud and abuse is what IS legal. While our government spends our taxpayer money on fraud and abuse investigators to bust up our home care agencies for giving out homemade cookies to thank our referral sources, the loopholes in the Stark Laws remain wide enough to drive a truck (or a couple of PET scanners) through.