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McAllen, TX As Outlier? Why Not Houston?

Or Lubbock? Or Oklahoma City? Or New Orleans? Or any of a dozen major and minor metro areas throughout the South? According to the Medicare Payments Advisory Commission, all of them have significantly higher usage rates and costs per Medicare enrollee than McAllen, which was high-cost locale ground zero for Atul Gawande’s famous New Yorker article, “The Cost Conundrum,” which has become, to use the New York Times‘ formulation, “must reading in the White House.”

Gawande grounded his analysis on per-patient Medicare claims data compiled annually by researchers at Dartmouth Medical School. “The explosive trend in medical costs seems to have occurred here in an especially intense form,” Gawande wrote after the Dartmouth Atlas of Health showed McAllen as the highest spending region in the country outside Miami, where Medicare fraud is an especially virulent problem. Not so, MedPAC said. Adjust for prices and McAllen’s outlier status compared to the rest of Texas and large parts of the South all but disappears.

Don’t believe me? Check out the appendix to the report. Medicare service utilization rates compared to the national average: McAllen – 118%; Houston – 122%; Dallas – 117%. Other areas: Oklahoma City – 120%; New Orleans – 125%; Pascagoula, Gulfport or Biloxi, Miss. – 124%.

In other words, Texas and large parts of the South have a problem — not just McAllen. I’ll return to that in a moment.

Why am I writing about this issue today, since I wrote about it last December when the MedPAC report came out? Gawande will be the featured speaker at the National Governors Association meeting that convenes in Washington tomorrow morning. It appears that the Harvard surgeon has not only become must reading in the White House, but is also something of a rock star on the public policy circuit. If he stays on script, he’ll tell the governors that 30 percent of health care costs could be wrung out of the system if all the McAllens were magically transformed to be more like Iowa and Minnesota, where health care costs average 80 to 85 percent of the national average.

Unfortunately, Gawande still hasn’t publicly recognized the flaws in his presentation, at least according to his reaction yesterday on the New Yorker website, where he responded to a brief New York Times report this week questioning the Darmouth analysis. (Ironically, his spokeswoman passed along a “refused to comment” to Times reporter Gardiner Harris. GoozNews asks with Yiddishkeit inflection: “Reporters have spokeswomen?”)

The Times story was based on a commentary in the New England Journal of Medicine by Peter Bach of Sloan Kettering Memorial Cancer Center (a frequent source for my own writing, I should reveal), who argued adjusting the data for illness severity and outcomes — a measure of quality and efficiency — eliminates most of the differentials, at least at the hospital-provider network level.

A rejoinder by Dartmouth’s Jonathan Skinner, Douglas Staiger and Elliot Fisher rejected that conclusion. They said the cost differentials remain quite large even after quality and illness adjustments. But they do include an admission that regional variation is less significant than some interpreters (i.e. Gawande) claim:

The implication of these results is that excessive health care costs arise at the level of the hospital-provider network. Thus, incentives that are designed to reduce costs should be targeted to specific networks, rather than regions or states.

Now let’s return to what Gawande wrote yesterday in response to the Times, and presumably after reading the dueling commentaries:

The patterns of Medicare spending I found showed that McAllen’s medical community and culture simply did more-more surgery, more imaging, more specialist visits, more home-nursing visits-without clear benefit. . .There remains fierce disagreement about how much of the marked differences in spending between communities is the result of health differences between populations and how much is the result of differences in the care their clinicians provide to them. But it remains clear that there are substantial variations in the cost of care for people of similar health depending on which institutions they go to. . . Even if health reform disappears, these fundamental problems will not. The cost conundrum persists.

Note how he switches horses midstream. He starts by defending his work on regions, and concludes by claiming the problem is individual institutions.

Now back to the South. The most recent Medicare cost data revealed an interesting national phenomenon during this recession. Medicare costs soared while private health expenditures stagnated. As I wrote at the time, the most logical explanation for this trend is that local medical institutions made up for charity care given the newly unemployed and uninsured by soaking their best-paying customers: those on public programs like Medicare and Medicaid.

We’re seeing the same thing happen in the individual insurance market, where soaring rates are making headlines. In economically hard-hit California, Detroit and other troubled labor markets, the insurance companies are blaming rising rates on the declining number of workers buying policies. There’s less healthy people paying for the care of those who get sick.

But this is a phenomenon that doesn’t necessarily depend on recessionary levels of unemployment. The South, where there’s no legacy of unionization, decent wages or decent benefits, has the lowest rates of insurance coverage in the nation, with Texas the worst state in that regard. Less than three-quarters of its population has health insurance.

The Dartmouth Atlas of Health looks only at Medicare claims. Isn’t it possible that the huge outlier status for most Texas cities is, in effect, a major cost shifting from the uninsured, who still show up on institutions’ doorsteps for care, to Medicare and Medicaid, which at least pay their bills?

But wait, you say. Even utilization rates are substantially higher in Texas. Agreed. But here’s where I leave data and logic behind and resort to anecdote. In my mother’s last years (in Maryland), she was incapacitated in a nursing home where the doctor would show up about once a week to make his rounds. He would stop in every room for a few minutes, check the chart and move along. He could usually cover a dozen rooms in about an hour. Since most of the patients were in the final stages of severe dementia, there wasn’t much to discuss. Sometimes there was a family member in the room. Those visits took longer.

My point is that utilization can be an imprecise metric. Hospitals and physician offices do what they do and bill whom they can. Overutilization is endemic throughout the health care system, regardless of region. Some institutions — those that are primarily fee-for-service medicine — are more prone to overutilization compared to those that operate with salaried physicians and have incentives to hold down costs. The Dartmouth Atlas of Health’s insights into that phenomenon are spot-on and enduring. But the differences it highlights can be found anywhere.

No doubt some regions have more institutions and physician practices that engage in inefficient and poor quality care. But when it comes to gross outliers — whether Miami, McAllen, Houston or New Orleans — I suspect the differences have more to do with exogenous factors like fraud or the uninsured than a local culture of medicine that encourages overuse. That, my reporting tells me, exists everywhere.

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jamesearphone philipsDoseofRealityMcAllenLisa Lindell Recent comment authors
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james
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james

I have witnessed too often physicians who take advantage of this population, admitting people they know will not question why they need to be in the hospital. These predatory practioners are not hard to find. We just need the political balls to get it done.

earphone philips
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I used to be very pleased to find this internet-site.I wished to thanks in your time for this wonderful learn!! I positively enjoying each little bit of it and I have you bookmarked to check out new stuff you blog post.

DoseofReality
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DoseofReality

No one has mentioned anything about the fact that that thousands of illegals are treated with taxpayer dollars in McAllen area hospitals every year. In a metropolitan area that isn’t all that big, that alone would exponentially increase the cost per patient, especially when you consider that they almost exclusively use the emergency room as their primary “doctors office”.

McAllen
Guest

That is strange to see this town do that!

Lisa Lindell
Guest

If “Texas doesn’t take care of it’s poor” and we (Texans) don’t like to provide health care to poor people, as Maggie likes to state repeatedly, then we wouldn’t be spending so much money giving the poor people of McAllen Texas health care.

d'cm
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d'cm

In regards to Margalit’s comment “For example, there seems to be some correlation between high utilization and poverty and lower education and urban density and cultural aspects.” I have witnessed too often physicians who take advantage of this population, admitting people they know will not question why they need to be in the hospital. These predatory practioners are not hard to find. We just need the political balls to get it done.

maggiemahar
Guest

Merrill– Usually, I agree with you, but here, I can’t. I’m wonder if you interviewed the folks at Dartmouth–or Gawande. Please see my recent post on that Times story– it’s filled with errors, and totally misquotes Ellliot Fisher. You’ll find my post here on HealthBeat: http://www.healthbeatblog.com/2010/02/the-new-york-times-garbles-the-fact-about-the-dartmouth-research–.html I have been talking to the people at Dartmouth and have spent weeks (literally) looking at attacks on the DArtmouth reserach that began last spring when some people became nervous that the DArtmouth reserach will be used to reduce overtreatment and over-spending by rewarding more efficient hospitals and penalizing those that overtreat. Others are… Read more »

Upset Tax Payer
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Upset Tax Payer

The problem in McAllen , Texas is too many are people are receiving Kickbacks and Bribes. Overutilization of services is largely attributed to ordering more services because it is profitable. Health care shouldn’t be for profit.

Tim
Guest
Tim

It must be true that regional variation in health costs is explained as “supply-induced demand”, because, well, the left has invested entire careers in it being true. (Cue chorus: “The science is settled.”) Also, the health system in America is about to be re-engineered based on Dartmouth research so IT MUST BE TRUE. As the progressive pundits like to remind us: it is hard to get someone to see something when their paycheck depends on them not seeing it. In their world this only applies, of course, to evil insurance executives, not to “health care journalists”, who are the pure… Read more »

Peter
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Peter

“Actually, Peter, the price per pill is lower with wider utilization.”
Well we might both be partly wrong according to this study published by the the Archives of Internal Medicine.
http://archinte.ama-assn.org/cgi/content/abstract/169/21/1969?maxtoshow=&hits=10&RESULTFORMAT=&fulltext=drug+advertising&searchid=1&FIRSTINDEX=0&resourcetype=HWCIT
I don’t think drug companies advertise to break even on the advertising costs.
“The total cost is higher, which is exactly my point.”
Your point being that demand IS provider driven, not patient driven?

Gary Lampman
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Gary Lampman

Pharmaceutical’s has No Business in advertising their Drugs on Television.I’m feed up with their boner commercials and prefer a ban on all Pharma Commercials. They are only driving cost up and manipulating Patients to “Ask Your Doctor.”Hell! Pharma has put some of these ideas in your patients heads that never were conceived until now. Does the AMA object to these methods? I doubt it. The system drives itself and when it exploits and manipulates behaviors. The system is at fault and not the Patient. “We treat anxiety with cardiac caths and MRI’s.” I have anxiety and I have never had… Read more »

MD as HELL
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MD as HELL

Actually, Peter, the price per pill is lower with wider utilization. The total cost is higher, which is exactly my point. Glad we finally agreed on something.

Peter
Guest
Peter

“The demand for care determines the size of the system and the “fixed” costs in it.”
like the demand generated by drug advertising that boosted the price of drugs about 30%?

MD as HELL
Guest
MD as HELL

The demand for care determines the size of the system and the “fixed” costs in it. There is too much demand for unnecessary care. Patients will not take “no” for an answer any more. They are entitled to receive all the care they want; just ask them.

Gary Lampman
Guest
Gary Lampman

So consumption of the product or service is what drives costs? So why seek Patients or advertise medical services? However, I disagree that cost are zero as if there are no obligations. Such as tuition expenses, Utilities,staffing,furniture,licensing fees,credit card machines,loans,benefits etc. The rate of return to cover your fixed costs are directly associated to the Cost of providing care. I can only assume that the rates are fixed to a targeted amount to cover all of this and maintain a projected profit ratio. Interestingly enough; the Consumer(patient)is not zero either. The absence of medical attention is costing them as well.… Read more »