OP-ED

Do We Have Any Clue How to Cut the Cost of Healthcare?

At the Society of Hospital Medicine’s annual meeting last week in Dallas, Lenny Feldman of Johns Hopkins presented the results of a neat little study. His hypothesis: physicians given information about the costs of their laboratory tests would order fewer of them.

Feldman randomized 62 tests either to be displayed per usual on the computerized order entry screen or to have the cost of the test appear next to the test’s name. Some of these were relatively inexpensive and frequently performed tests. After randomization, for example, the costs of hemoglobins ($3.46) and comprehensive metabolic panels ($15.44) were displayed, while TSHs ($24.53) and blood gases ($28.25) were not. He also randomized more expensive tests: the costs of BNPs ($49.56) were displayed, while hepatitis C genotypes ($238.62) were not.

The educational intervention was surprisingly powerful. Over the six-month study, the aggregate expenditures for each test whose costs were displayed went down by $15,692, while non-displayed tests had a mean increase of $1,718. Over the entire group of 31 tests whose costs were shown to physicians, costs fell by nearly $500,000.

Coincidentally, last week’s Archives of Surgery reported the results of an intervention aimed at decreasing lab ordering on the surgical services of Rhode Island Hospital. There, simply announcing the service’s overall expenditures on non-ICU laboratory tests for the prior week at a house staff conference led to significant savings: $55,000 over an 11-week study period.

Have we found the Holy Grail, the key to flattening the cost curve? A little physician education leads to increased awareness of the cost consequences of their choices and, voila, our economy is rescued from the brink of disaster. How nice.

Before we get too ecstatic, it’s worth reflecting on the long, sobering history of cost reduction efforts in healthcare. Luckily, Steve Schroeder, now a distinguished professor of medicine and health policy at UCSF, recently did just that in the Archives of Internal Medicine. But before I get to Schroeder’s reflections on our cost containment journey, I must digress with a personal story, since his counsel was central to my career choice.

In 1985, when I was a second year UCSF medicine resident, I made an appointment to meet with Schroeder for career advice. At that time, Steve was chief of our Division of General Internal Medicine and a national leader in academic medicine and health policy. I had an idea that I wanted a career in academic general medicine, but my interests were broad and vague. I sat in his office, intimidated. He asked me about my plans. “Well, I love general medicine, seeing patients and teaching, and I’m interested in policy, healthcare economics, epidemiology, rationing, and ethics.”

Steve took a deep breath. “That’s a disaster,” he said, his tone sympathetic but unambiguous. “To succeed in academic medicine requires focus. You’ll be competing against people who do only one thing. You can’t be a dilettante.”

I grew depressed. I knew that I was wired to be a generalist; I could no more focus exclusively on ethics or epidemiology than I could be a dermatologist or accountant. My career plans torn asunder, I thanked him for his advice and began to slink out of the office. As I reached the door, wondering whether to take the GMAT, something possessed me to stop and pose a final question to him.

“Steve, what did you focus on?”

“Oh, I completely ignored that advice,” he said with a mischievous smile, as he turned and pointed to his bookshelf, which had a clinical textbook he edited, along with books – some he had written – on health policy, ethics, epidemiology, and ethics.

“Why did you give me that advice, then?” I asked, more flabbergasted than annoyed.

“Because it is the right advice for most people,” he said. “But some people, probably like you and me, need to stay broad. I just want you to understand the risks and to be prepared. As a generalist, you’ll need to move from issue to issue, reinventing yourself every few years, and you’ll constantly need to bring together teams of experts to help you accomplish your goals.”

And that’s what I did. Some days, my eyes wander to my own office bookshelf, and I realize that it looks almost exactly like Steve Schroeder’s did that day in 1985. And I smile.

Now that I’ve established Schroeder’s bona fides as a truly wise person, let’s return to his recent article on the history of healthcare cost reduction efforts. Steve has walked this particular walk in his career, beginning as founding director of the George Washington University HMO, extending to his time as our DGIM chief, and peaking during his 12 years as president of the Robert Wood Johnson Foundation. Steve begins the article by noting that cost reduction gathered steam during the 1970s, when we were, as a nation, spending – OMG – 7.5 percent of our GDP on healthcare. While 7.5 percent seemed large, the burning platform came from projections that these costs might grow to an “unsustainable” 10 percent. (In case you’re missing the irony, healthcare now accounts for 17 percent of the GDP, projected to rise to 30 percent by 2032).

In the article, Schroeder reviewed several cost reduction strategies that have been tried over the past 40 years, ranging from reducing the “pro-technology bias” of our payment system, to training more generalists and fewer specialists, to giving physicians information about the costs of care. That’s right: in JAMA in 1984, Schroeder and colleagues reported the results of an educational intervention designed to sensitize residents to the costs of their care. Combining lectures on costs with chart audit and feedback, they found a slight reduction in the use of a few selected laboratory tests like the PTT, but no overall impact on costs. The effort was a bust.

After reviewing this history, Schroeder’s conclusion is that cost reduction efforts either didn’t work, or worked for a short while and then petered out, or led to compensatory increase in costs (the proverbial “squeezing balloons”). For example, while Medicare’s prospective payment system clearly resulted in shorter hospitalizations, the compensatory increases in high-intensity outpatient care (such as in ambulatory surgery) chewed up most of the savings. Other changes, such as changing the pro-technology payment bias or training more generalists, were countered by powerful political forces, a trend that continues today.

Schroeder’s bottom-line message is sobering. While he applauds the fact that we are now trying several new strategies (curbing fraud and abuse, using electronic health records, paying for performance) layered on top of the traditional ones, he writes, “it seems naïve to assume that these latest efforts will be any more successful than their predecessors.” He continues,

In the long run, reining in costs will require mobilizing political forces that can withstand the inevitable claims of rationing sure to come from the industries currently benefiting from the 17% of the economy spent on healthcare, and from consumers who have come to expect unlimited access to what they feel they need.

Do the two new studies – ones in which educational interventions appeared to work – mark a new era, one in which an overall increase in cost consciousness among physicians, coupled with a new ability to provide real-time data via computerized order entry, will lead to meaningful, durable cost reductions? I’m not too hopeful. I’d bet that once the novelty of interventions such the ones used by Feldman and the Rhode Island surgeons have worn off, the cost data will become white noise and folks will revert back to their comfortable, profligate ways.

So what will work? To make a meaningful and lasting dent in healthcare expenditures, I believe we’ll need to change some or all of the following:

  1. Just like certain medications are “non-formulary” and thus far harder to order, certain laboratory tests and radiologic studies will need to be taken “off formulary” – perhaps requiring subspecialty blessing or acknowledgment that the ordering physician has read through a brief summary of the test’s accuracy, its costs, and the alternatives before being allowed to click “Order.” How to accomplish this without gumming up work flow and driving ordering physicians batty needs to be on the agenda of some very smart operations engineers and IT gurus.
  2. Physicians will be more careful about test ordering if the costs of the tests are partly coming out of their own hides. The trick here is to enact strategies that don’t provide too strong an incentive for underutilization and that have robust quality and safety protections. The hope is that Accountable Care Organizations and bundled payments will be just the ticket, though the response to Medicare’s initial ACO proposal did not exactly resemble the front entrance of WalMart on Black Friday. Hopefully, with some tweaks, doctors and hospitals will be willing to stick their toes in this integrated care/shared incentive pool.
  3. We somehow need to change the culture of medicine, and of training. This’ll be the hardest nut of all to crack, but there is hope. For a brief glimpse into how much the culture has already changed, one merely needs to look back at Schroeder’s 1984 JAMA article. In it, he notes that his research team chose to focus their interventions on the interns and sub-interns, not the attendings. Why not? “…As with many other university hospitals,” he writes, “most attending physicians had expressed little interest in modifying the costs of medical care.”That was 1984, when virtually all the attendings were subspecialists coming out of their research labs or procedural suites to attend on the wards for one month each year. While we haven’t exactly solved the cost problem, I can’t imagine someone saying the same thing about our ward attendings today, certainly not the hospitalists I work with.That’s progress.

As I noted recently, it is critical that physicians focus on cost and waste reduction with as much passion and skill as some have, thankfully, been applying of late to quality improvement. Our systems need to be structured to promote this work, and our culture must encourage thoughtful and ethical cost containment as a core value. It’s not hyperbolic to say that the future of not just healthcare but our overall economy hangs in the balance.

As we embark on this crucial journey, while studies like Feldman’s give us hope, Schroeder’s historical perspective should gird us for the hard work ahead.

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60 replies »

  1. I truly believe that the concept of a tool that allows you to supplement at the breast is amazing, and had it not been so trying and tiring to use, it may very well have saved my breastfeeding relationship.

  2. You’re welcome. Thank you as well. Although I think I should have gone with my original plan and got a job in civil engineering. The need for physicians in the US simply isn’t what it is in the developing world. In the States, 90% of my job could be done more effectively by a graduate of a 2-year business college (paperwork), for a lot less money. They would have no clue how to actually save ppl, but the paperwork would be done properly and on time!

  3. Dr. Vickstrom,

    A fellow RPCV saying thank you for being a doctor because you care and not about the money.

    I had a guest doctor come to our HS hippocratic society meeting and essentially tell the kids not to become doctors because if Obamacare becomes law, they’ll be making less money. This doctor is planning to move to Switzerland…go figure…

  4. Yes, I saw that. Apparently some docs have both hope and stones. Is Dr. Kibbe a party to this suit? This is an interesting development.

  5. Yes. I am a moron (in this context). No joke. I have the Peace Corps to thank for this.

  6. Some interesting thoughts, but cost will never go down, imho, unless these things also happen:

    1. Doctors establish relationships with pharmaceutical companies that encourage them to subscribe drugs that may not be as effective as others
    2. Healthcare industry is allowed to freely and arbitrarily indicate prices as they see fit to continue profits. So, if doctors begin to become cost conscious, what stops the providers from raising price of most commonly prescribed tests/methods? Nothing…
    3. There is true competition and bidding for like services
    4. AMA that is not interested in touching the salaries of it’s physicians, so less inclined to change the status quo
    5. politicians who are bought by special interest groups that will find ways to compensate for any cost savings to patients
    ….so this silly notions that anyone in the healthcare industry is going to voluntarily do what is best for society as opposed to their earnings….

  7. Outstanding idea, but do it at the end of the day, or get yourself invited to a surgery department meeting and discuss it with the whole department, but anonymized the data. Good Luck…Data tucked away in a silo is useless.. Perhaps you can even find a way to email individual doctors, but mention it is done as a service, not as an enforcement….many are twitchy about hospitals intervening, and control issue.

  8. Steve has walked this particular walk in his career, beginning as founding director of the George Washington University HMO, extending to his time as our DGIM chief

    Not surprising, I graduated from GWU in 1968…they produced outstanding generalists….after a one year internship I practiced independently in the US Navy and then foury years as a GP and ED director…loved general medicine. Very stimulating, a bit overwhelming at times, required constant reading and I did rely upon specialists if I was over my head. I then turned to Ophthalmology (perhaps the opposite of General Medicine, but I needed more control over my life style. ]]

    I always learn something from your posts Bob.

  9. ACOs and Actual Health Care Reform

    Fuchs and Milstein1 wonder if U. S. physicians are “sufficiently visionary, public minded, and well led” to save $640 billion in our illness care system? Judging from the failure to build on sound initiatives2,3 that should have started us down that path, the answer is no. Discouragingly, Brooks’ salient essay3, which should have become a building block to meaningful reform, is not cited in subsequent commentaries on comparative effectiveness research.

    But, enter the Accountable Care Organization (ACO). My prediction has been that the ACO movement will accomplish little except generate a lot of heat and smoke, exhaust well-meaning physicians trying to engage with the movement, and generate an industry of consultants and a society or two, complete with their own bureaucracies.

    But it occurs to me that ACOs, incentivised by shared savings, could be the catalyst to true reform. ACOs could band together under an umbrella organization and transform the American illness care system by: 1) acknowledging the regional variability in frequency of services provided without outcomes advantage4; 2) insisting that every specialty society produce their own “Top Five List5” and incorporate these best practices into their ACO. (the model theorized for oncology6 is inspiring); 3) insisting that insurance companies standardize to save another $200 billion1,7; 4) agreeing with my7 et al 1 essays, to insist that physicians use absolute risk reduction in describing to patients the effectiveness of alternative treatment programs, thus revealing that often there are only marginal clinical outcome differences between approaches, but orders of magnitude differences in cost; 5) adopting the “Great Expectation7” that the patient is expected to take responsibility for their own health, citing but one example, of how through life style modifications, the diabetic glacier which is sweeping the country into bankruptcy could be tamed . The AMA could fight marginalization in regard to health care reform, seize the moment and be that umbrella organization to midwife the above, actually transforming our illness care system into a viable, effective health care system.

    1. The $640 Billion Dollar Question —Why Does Cost-Effective Care Diffuse So Slowly? Fuchs, Victor R., PhD and Arnold Milstein, M.D., M.P.H., N Engl J Med 2011; 364: 1985 – 1987.

    2. Cost Shifting Does Not Reduce the Cost of Health Care Victor R. Fuchs, PhD JAMA. 2009; 302(9): 999-1000.

    3.Assessing the Appropriateness of Care—Its Time Has Come. Robert H. Brook, MD, ScD. JAMA. 2009;302(9):997-998.

    4. Gawande, Atul. The Cost Conundrum What a Texas town can teach us about health care. The New Yorker, June 1, 2009.

    5. Medicine’s Ethical Responsibility for Health Care Reform — The Top Five List
    Brody, Howard, M.D., PhD, N Engl J Med 2011; 362: 283 – 285 .

    6. Bending the Cost Curve in Cancer Care, Smith, Thomas J., M.D. and Hillner, Bruce E., M.D. N Engl J Med 2011; 364: 2060 – 2065.

    7. Great Expectations: How to Actually Transform the American Health Care System and Avoid Squandering a Trillion Dollars, Hirons, Larry W., M.D., personal communication, Jan 2010.

  10. I’m hearing some insightful things here, but also some not so…

    Please correct me if i’m off, but if there’s anyone who is telling me or anyone else that my wife who has stage iv breast cancer (not her choice), at the age of 40-something, and has been in and out of the hospital for the last 4-years is a liability (chronic). I have a couple of things I would like to explicatively say, but won’t.

    What I have discovered about our healthcare system:

    1. Our doctors get paid 4-5Xs more than contemporaries in other industrialized countries. Why?
    2. Possible response for #1: Because it costs so much to educate/train doctors? Compared to other countries, why?
    3. Public, and especially, private insurance companies are incredibly inefficient. (many personal experiences from private company opened my eyes to some ghastly flaws)
    4. Healthcare industry dictate prices, not the non-existent “free-market.” And we, the people, pay whatever they ask w/o asking why?
    5. Our politicians and policy makers are not tackling the core of our healthcare problems- THE HIGH COST of services, goods, products.
    6. Let’s have comprehensive PREVENTATIVE CARE! That will save billions!
    7. Two medically related organizations essentially determine how many doctors and medical schools should be trained/built. WHY? Shortage of doctors, specialists? Let’s ask these organizations why they are not allowing the schools determine how many physicians to be trained? Why not allow the “free market” to determine…
    8. Medical suppliers get tax credits for difference. If company A wants to charge insurance company B 5K and insurance B only will pay for 2K, company A can write off the 3K difference as a business loss! So, the people, AGAIN, pay!

    Man, I have so much more to say. People just don’t have any idea of the difficulties of dealing with medical issues until they are in the middle of it! I am especially scornful of those who want to deny, deny, blame the person who is afflicted with a disease he/she did not ask for.

  11. Matt is right that the culture can certainly trump strategies on cost-cutting, as has occurred in the past. But there is underway a certain culture shift in which doctors and hospitals (with a little help from PPACA and other pressures) are coming to realize that cost does and should matter to them.

    If neither doctors nor patients pay any attention to cost and relative effectiveness, is it any wonder we have the highest health care tab in the world? Apparently, it takes financial incentives for hospitals to do things like cut wasteful (and cruel) readmissions.

    The culture shift is here, and we should seize this moment to make lasting change that will affect the affordability and quality of care.

  12. YES it CAN be very costly how ever, if you do everything accurately, you can actually pay half of what your paying now by getting better services with a different provider.

  13. As an operating room director, I have shared cost of supplies and services with surgeons over the years, usually met with surprise and concern. I have been able to influence some to make changes, and some not. Unfortunately, they are still asking for the latest and greatest “thing” without asking much about the price.

    The staff RN’s in the O.R. use an electronic clinical documentation program which shows the hospital’s cost of each item selected when used for charging purposes.

    I’ve been toying with the idea of providing the surgeons with the total saved (or spent) on each procedure, similar to the “savings” realized by the clerk at the supermarket checkout. Dr. Smith, you saved $1000.00 today, thank you for operating with us today!

  14. @Maggie Mahar,

    Oh please, the PPACA was written by the AHIP, AHA, ATLA and Pharma. The docs on the panel were their stooges.

  15. I would just like to add that the people who shaped the Affordable Care Act ARE physicians–not govt’ bureaucrats.

    Physicians are in the vanguard of refrom– as they should be.

    The ACA si filled with the ideas of Drs. Don Berwick, Atul Gawande, Elliot Fisher, Jack Wennberg, Bob Wachter, George Lundberg, Zeke
    Emmanuel, Nortin Hadler, Diane Meier, and a great many other physicians who have written many articles about reform for peer-reviewed journals such as Health Affairs, JAMA and NEJM. They are widely respected among their peers in the medical profession. And by and large,they tend to agree on what needs to be done. It’s not a mystery.

    The Medicare Payment Advisory Commission (MedPAC ) absorbed many of their ideas, and in recent yeaars, MedPAC’s lengthy and brilliant reports, as well as its testimony before Congressional committees, inluenced legilstaors (and staff) able and willing to actually study health care’s problems. People like Sen. Jary Rockefeller understood what MedPac was saying and led the tought battle for reform.

  16. Agree completely with this great post – thanks Dr. Wachter. I do agree the increased cost-consciousness alone will not be sufficient, but absolutely think it is a necessary first step.

    It is also important to point out the costs in the cited studies are somewhat arbitrary. The cost to the hospital is different than the billed amount which is different than what the patient pays. Because physicians are trained to take care of the patient in front of them rather than assume responsibility for the “population” – I would argue that the cost to the patient is likely to be most important to the clinician at the bedside. This is often difficult to determine, but believe that a focus on this aspect of the cost equation places the price transparency problem within the doctor-patient relationship, right where it belongs.

  17. Define “healthcare” first. A whole lot of spending is not on healthcare, by any definition.

    Once you define it, then what is not healthcare gets labeled “political pay-off”.

    Scooters, lift chairs, home health. Ring any bells?

  18. Patients are not motivated to prevent disease unless you are going to scare them to death for not participating. Fear is the most important thing to avoid when caring for someone.

  19. ” That which gets rewarded, gets done”… Invert the pyramid, pay primary care twice as much and focus on doing everything we can to find the asymptomatically ill, the at risk and the chronically unstable. Create incentives for compliance and rewards for population health management.

    Pass All Payer Legislation to even out the contracted rate disparities and even the playing field for new entrants against the payer oligopoly. Part of the reason why large hospital systems are reticent to form ACOs is the same reason why retailers did not want to embrace eBusiness — cannibalization of one’s business. Financial rewards can do wonders and reimbursement reform, not reimbursement rationing can drive market based reforms.

    To quote or perhaps paraphrase Mssr Berwick, “My vision of health reform is empty hospital beds.” Our incentives must change to reward chronic illness prevention, not its treatment. Read Shannon Brownlee’s ” Overtreated”. Consumerism can only go so far. A person is a “consumer” when they are accessing the system standing up. They are a consumer when they are on their back. Could go on and on.

  20. And what kind of thinking might that be?
    This one: “primary care is untouched, and preferably significantly increased”?
    Or this one: “sub-specialty services and hospital services get reduced reimbursement”?

  21. Kiss your doctor good-by. Doctors are already squeezed between costs rising and reimbursements falling. That is why there is no reason for an intelligent person to enter primary care. Only a moron with a vow of poverty will go into primary care if this kind of thinking prevails.

    The patient must have a reason not to go to the doctor for frivolous and trivial anxieties and insecurities; both fostered by this environment.

  22. “Granted I am not an economist, but instead of sacrificing consumers, why can’t we fix the amount that insurers are allowed to charge for a fixed set of benefits? They can charge less if they wish, and they can charge more for more benefits, but they will be required to provide the “standard issue” for that fixed price. Wouldn’t this create an incentive for insurers to actually negotiate prices seriously? Aren’t they in a much better position to force providers (hospitals mainly) to stop charging astronomic figures for services?”

    Margalit –

    The insurers are negotiating as hard as they can. They recognize that affordability is a huge issue for their employer and individual customers. The big name hospital systems perceive, often correctly, that the insurers need them in their network because employers and their employees want them in their network. At the same time, they claim that Medicare and Medicaid are both underpaying them so they need to cost shift to the commercial insurers. The insurers with the smaller local market shares pay higher prices than the dominant insurer in the market, often one of the Blues.

    As a practical matter, in addition to disclosure of actual contract rates, the best ways to create countervailing power against the large and / or big name hospital systems are tiering and narrow or limited networks. Many of these big hospital systems also try to get away with refusing to sign contracts that allow insurers to impose higher copayments on their members who want to use those systems instead of less expensive local competitors. That’s an issue that can and should be addressed by state regulators or legislators if necessary.

    To cite one specific example, the CFO of a famous health system in a southern state told a group of investors recently that it was able to charge a large national insurer with a relatively low market share in the state twice as much per procedure on average as it got from the dominant local Blue. At the same time, their cost per adjusted admission is only going up 2%-3% per year but they have been getting annual price increases of several times that. I say again that it’s the hospitals that are killing us. When they’re not killing us with infections and other avoidable harm, they’re killing us financially.

  23. I took a quick look at your blog. I see I have much to learn from you. I added you to my blogroll.
    ___

    “So long as the US tax structure encourages employees to prefer tax-subsidized health care benefits to cash, the real cost of insurance will not be apparent to most individuals”
    ___

    Is that not chimerical anyway? e.g., is not the “tax benefit” I get from mortgage interest & taxes deductions really reflected market value of my house, even though I don’t think of it that way? Similarly, might it be that the tax “subsidy” of health benefits gets factored in to costs? A zero-sum game in the aggregate?

  24. Perhaps I am wrong, but putting lots and lots of consumers in front of the tanks in the hopes that they will bring prices down somehow, seems unrealistic to me. A more likely scenario is that consumers will reduce utilization if they had fixed subsidies, but costs per unit service will not change (they may even increase to make up for lost volume). This may indeed reduce overall expenditure, but let’s not kid ourselves that quality will improve at the same time.

    Granted I am not an economist, but instead of sacrificing consumers, why can’t we fix the amount that insurers are allowed to charge for a fixed set of benefits? They can charge less if they wish, and they can charge more for more benefits, but they will be required to provide the “standard issue” for that fixed price. Wouldn’t this create an incentive for insurers to actually negotiate prices seriously? Aren’t they in a much better position to force providers (hospitals mainly) to stop charging astronomic figures for services? It also wouldn’t hurt if we broke those large health systems down to pre-90s size…

  25. I see little reason for optimism in controlling health care system costs until the present perverse incentives are changed.

    So long as insurers continue to pay for whatever services are performed, busy physicians wanting to keep their patients happy (and provide good medical care) will continue to order teats and medications with little regard for their costs.

    So long as the US tax structure encourages employees to prefer tax-subsidized health care benefits to cash, the real cost of insurance will not be apparent to most individuals.

    So long as most employers continue to choose insurers on the basis of minimizing employee dissatisfaction (by picking insurers with the most popular hospitals and physicians in their networks), more cost-effective insurers and providers will remain at a disadvantage.

    So long as most employees (and also most Medicare beneficiaries) have a percentage (up to 100 percent) of their coverage costs paid by their employers (or the government), they will have less reason to choose lower-cost coverage than if their subsidies were fixed dollar amounts.

  26. I agree with Matthew and with Bob that there is much wisdom here. Of course, like Steve Schroeder, I’m a historian of this area. (Disclosure: Thanks, in large part, to a grant from RWJF when Steve Schroeder ran it.)

    Health care is not a simple marketplace, as even the writings of Adam Smith and Milton Friedman make clear if you look closely. In fact, health care is not a simple anything. Hence the wisdom of Bob’s suggestions.

  27. @Margalit,

    “…while the more common and much cheaper primary care is untouched, and preferably significantly increased.”

    Ah, but you forget about this little thing called “delay in diagnosis” and “pain and suffering.” Time used to be on the side of primary care. See the patient, if nothing pops up on exam or history that is worrisome, see them back in a month and see how they are. 90% of all medical complaints get better with time alone. But right now, if we cannot strain the real cases from the pseudocases immedicately, our posteriors are sued. So it’s specialty referral immediately. And so there goes the money….

    “I commend your understanding of the “the argument of the capitalist camp”, but I am afraid I cannot go that far.”

    It’s really quite simple. He who has the gold lives. He who does not dies. Rationing by the marketplace. What could be simpler? The capitalists wish to hide from this truth, why I don’t know. They should be proud and embrace their principles. But for some reason, they don’t….

  28. There are 2 sides to this equation, the overusing doctors and the overusing patients. What we need is transparency to see what these people are doing and that is why I advocate publishing the cost per patient per year for all providers paid out of the public purse. This should be listed on the internet perhaps by zip code to make the numbers a bit more digestible then let the media loose to sort out who is doing what to whom and why.

  29. Dr. Vickstrom, Barry,
    Somehow it seems to me that the only logical rationing, if any, must be directed to those 5% that seem to be burning through most of the resources. I tend to agree with Barry here that there is a very good chance that a large portion of that 50% is either wasteful or incredibly overpriced. Perhaps we should consider “rationing” payments (instead of care) for these things and see how low can we go without rationing care. This would translate into targeted payment reform where sub-specialty services and hospital services get reduced reimbursement, while the more common and much cheaper primary care is untouched, and preferably significantly increased.

    I commend your understanding of the “the argument of the capitalist camp”, but I am afraid I cannot go that far.

  30. Only should not treat it yourself because that’s where subsequent problems. Not order without prescription medicines because their side effects more complicated disease. There are many people taking simple pain vicodin and this is dangerous.

    Stwart Jenssen
    Findrxonline blog

  31. @Margalit

    Ah, but the 50% of ppl who use 3% of resources are not the ones who are coming to see me, and so are not the ones demanding the tests. Rationing resources with respect to ppl who do not use resources will not help much. We don’t need to bend the cost curve for all patients, just the ones who access medical care. So there is stampede to get tests, procedures, etc., just not across all patient populations.

    Look, we already ration health care, we just ration it by social and economic class. The richest and the poorest of us get the lion’s share. Those of us in the middle get the least. Our problem is our mixed capitalist/socialist system. I believe we need to chose our home and stay with it. Either go completely capitalist and ration resources by who has the money to pay, or go socialist with medicine being civil service and resources rationed by need. I am in the socialist camp myself, but I can see the argument of the capitalist camp.

  32. Margalit –

    I think there may be lots of room for doctors to consider how they manage very sick, expensive to treat patients. For example, it’s not uncommon for frail elderly patients with congestive heart failure to average one hospitalization per month. Indeed, a friend’s parent who also has Alzheimer’s and failing kidneys as well as CHF, has already been hospitalized seven times so far this year alone. Such hospitalizations don’t need to be in academic medical centers when community hospitals can treat these patients just as well. Maybe doctors don’t need to order as many tests each time if they already know the patient’s history. Knowing the cost of care could lead to more cost-effective treatment decisions without affecting the ultimate outcome. I wonder how the Europeans and Canadians mange patients with Alzheimer’s, dementia, cancer, CHF, ESRD. Moreover, quite a few of the sickest patients are in nursing homes, which in NYC and its surrounding suburbs can easily cost more than $100K per year. Nursing homes are also notorious for providing services that drive revenue for the home but are unlikely to benefit the patient. Better supervision by PCP’s could mitigate that but Medicaid doesn’t pay them enough to do it. While I agree that HSA’s are irrelevant to this population, much more cost-effective management is possible if doctors knew the cost of treatment options including the cost of the same options at different hospitals and if they had an economic incentive to care about cost. Right now, they generally don’t.

  33. They can’t spend what they do not have. Some people will do without certain items that they get now. But they and not the government will decide what those things are. I doubt too many scooters and lift chairs will be bought. I doubt that a lot of feeding tubes will be bought.

  34. Dr. Vickstrom,
    I don’t doubt your impressions of patients being demanding, but the numbers don’t support this. As Steve said 50% of people use about 3% of resources and 20% use 80%, and 5% use almost 50% of all resources. This is not indicative of a wide stampede on tests and procedures.

  35. @Barry Carroll

    “It’s been a pet peeve of mine for some time that doctors historically didn’t consider it part of their job to know or to care about the cost of services, tests, procedures and drugs that they order or recommend.”

    Your tears nourish me. There is every incentive not to know, and every disincentive to caring about resource use. Want to change behavior? Change incentive. Right now, physicians are held to the standard of care of knowing as God would. Fix that.

    “In addition to lots of price and quality transparency, I think we need a resetting of patient expectations along with safe harbor protection for doctors who follow evidence based guidelines where they exist.”

    Good one. That was actually intelligent. I commend you, sir.

    @Cindy WIlliams

    “…but physicians are the most influential element in health care. The public’s trust in them makes physicians the only plausible catalyst of policies to accelerate diffusion of cost-effective care.”

    Is it joke time now? Ppl trust Oprah or their Aunt Myrtle, not stupid things like physicians and scientific evidence.

    @Deron

    “Sorry to burst the bubble of this discussion (and this blog for that matter), but we have societal problems, not healthcare problems.”

    Go Deron! You hit it out of the park. Bonzer!

    @Matthew Holt

    “…and using the result of that to be a mini-global budget that is devolved down to providers (as happens in Holland).”

    Not a bad idea, but we will need Holland’s civil litigation laws to do it.

    @MD as Hell

    “There is no free lunch.”

    True words have not been said, even to a social democrat such as myself. We don’t need to take this any more.

    @Steve,

    “For the 50% of people who account for 3% of our health care spending, HSAs make sense, but they make little difference in overall health spending.”

    Wow. More revelation. Applause, sir.

    @Margalit

    “As to the “skin” portion, who exactly has more “skin” in this “game” than patients do? There may be folks suffering from hypochondria who get a kick out of unlimited medical care, but if you offer, say, free stents in May, how many people do you think will be lining up to get those? Medical care is not like a brunch buffet.”

    Ahem. I see lots of them. Every day. Never a test or procedure they didn’t like or didn’t want. More care = good care to the Oprah-following mouth-breathers. Doc’s judgment that they are probably OK means nothing to them. Surety they crave, but life gives none.

    “Any way you look at it somebody will have to take a financial hit, and anything you want to call it, it translates into patients taking that hit because citizens seem to have no lobbyists.”

    Wrong. They do. It’s called ATLA.

    @pcp,

    “Wait a minute.
    So when CMS rubber-stamps the fantastical valuations put on procedures by the RUV, when insurers pay some providers 3x as much as others for no better care, when they pay for unwarranted bariatric surgery (and its complications) for marketing reasons, it’s my responsibility to save the system by ordering a few less CBCs?
    I think not.”

    Would you stop making sense? You’re going to hurt somebody’s fee-fees.

    @rbaer

    “To put it to the point, the proceduralists defend their extraordinary incomes with rationing fear mongering, at the cost of society, on the backs of those who no longer can afford insurance.”

    Good one.

    @Dr. Posen

    “Serious cost control would require challenging the people who make the most money from health care, who are largely people who do not directly provide health care. Think of bureaucrats, managers, public relations people, marketers, and executives.”

    More truth. Very incisive, sir.

  36. @John Graham
    “For example, what if PBMs had prices of different drugs right there on the e-prescribing platform?”

    They already do. And it includes suggestions for cheaper alternative too. I don’t know if utilization was significantly affected, but I can tell you that prescribing now is at least two clicks more complicated.
    And to top this, pharma has those copay programs where they will pick up the higher brand name copay on behalf of the patient and force the insurer to pay the rest. So there you go.

    As to “other people’s money” and “skin in the game”, aren’t these platitudes getting a bit overused? As Dr. Poses wrote, the money in play in this “game” is coming exclusively from people, whether in premiums, in lieu of wages, out of pocket or taxation. Perhaps we are a bit uncomfortable with this group ownership of money, and would prefer to keep strict accounts of what each person put in and took out, but that wouldn’t really be insurance, would it?

    As to the “skin” portion, who exactly has more “skin” in this “game” than patients do? There may be folks suffering from hypochondria who get a kick out of unlimited medical care, but if you offer, say, free stents in May, how many people do you think will be lining up to get those? Medical care is not like a brunch buffet.

    If we are serious about cutting costs, why are we not cutting actual costs, or prices? Is it because it is always easier to dump the responsibility on patients, instead of picking a fight with corporations?
    I also don’t see what global payments will accomplish if people are forced to pay the same high prices for every services (bundled or not).
    Any way you look at it somebody will have to take a financial hit, and anything you want to call it, it translates into patients taking that hit because citizens seem to have no lobbyists.

  37. Matthew nails it on the problem side. Most medical spending is done by the chronically ill, or those with a major acute illness/trauma. HSAs and CDHPs are unlikely to make much of a difference for these two groups. They are going to spend way over their HSA or deductible limit. They may be quality sensitive, but not cost sensitive. For the 50% of people who account for 3% of our health care spending, HSAs make sense, but they make little difference in overall health spending.

    Steve

  38. The only way to spend less on healthcare is to lower demand.

    The only way to lower demand is to have the patient be the payor.

    The only way for the patient to be the payor is to shift power away from government and payors and social engineers.

    Even poor people can be given HSA money and told they can buy healthcare or spend it, down to a minimum residual.

    But nobody here wants to give up power, so it will be a bad idea. But it is the only one that will work.

    There is no free lunch

  39. Richard L. Reece, MD –

    I think price transparency can make a positive difference, but where we need it most is for hospital based care. Some hospitals are paid far more than others for the same work because of their local or regional market power, not their care quality. At the same time, they hide behind confidentiality agreements to preclude price disclosure and they try to prevent insurers from even requiring their members to pay higher copayments to use the more expensive facilities. Doctors need to be able to incorporate those large price differences into their referral decisions and recommendations but they need access to the price information in order to do that.

    Matthew –

    Even global budgets need to be negotiated, at least by commercial insurers. The largest multi-specialty group practices in Massachusetts have been paid on a capitated basis for a decade now, but the global payment is so high, again due to market power, that overall medical costs can be higher than they would be under fee for service. Capitation should work OK for primary care if the patient population is high enough and there are provisions to accommodate expensive outliers and non-compliant patients because PCP’s are selling mainly their time and expertise. It’s pretty hard for hospitals to estimate their costs a year in advance when there can be such a huge variance in the cost to treat patients walking through the door.

    In addition to lots of price and quality transparency, I think we need a resetting of patient expectations along with safe harbor protection for doctors who follow evidence based guidelines where they exist.

  40. Everyone in this thread, including Bob AND John Goodman and John Graham is delusional. This can NOT be fixed on a macro level because either (as Bob & Steve Schroeder point out) the providers will figure out a way around the restrictions OR as the two John’s will not admit, most expensive care happens beyond any rational ability for most people to cost share.

    The only rational way to reduce costs is to reduce total money into the system. Either by means of a global budget the way it’s done in most countries OR to take the Enthoven approach of making health care insurance a bundled inclusive product that is matched apples to apples by marginal dollars with other things the consumer might buy, and using the result of that to be a mini-global budget that is devolved down to providers (as happens in Holland). Asking for cost containment by micro decisions at the point of care–as many here are suggesting–will by definition fail.

  41. So far, I haven’t heard anything new. You are all acting like high healthcare costs are a problem, when they are merely a symptom. I didn’t think doctors were supposed to treat symptoms. The real issues are much deeper, and go well beyond the healthcare system. Do a search on the seven deadly sins and you’ll get the real answers. Healthcare is just one subset of society and is really not much different from the financial services industry. Sorry to burst the bubble of this discussion (and this blog for that matter), but we have societal problems, not healthcare problems.

  42. Great post..

    Simply “counting” can raise awareness among doctors.

    In the summer of 2009 I attended a conference titled “How Did They Do That?” which described how ten U.S. communities had managed to do what progressives claim health care reform can do: change how care is delivered so that it is both less expensive and more effective.

    Jim Levett, a cardiac surgeon and the head of a large physician group in Cedar Rapids, Iowa spoke at the conference. He explained that doctors and hospital leaders in Cedar Rapids began their reform project by counting how many CAT scans they were doing, only to find that in just one year 52,000 scans were done in a community of 300,000 people. “I was embarrassed for us,” confided Levett,. It’s just not likely that 1/6 of the population needed a CAT scan in a given year.:” (For context, See http://www.healthbeatblog.com/2009/08/proof-that-american-physicians-and-hospitals-can-lift-quality-and-reduce-costs.html)

    Moreover, as the conference’s sponsors (Gawande,McClellan, Berwick, and Fisher ) pointed out in a NYT Op-ed , these unnecessary tests may have actually harmed patients: “CAT scans have about 1,000 times as much radiation exposure as a chest X-ray.” (You can find the Op-ed here:
    http://www.nytimes.com/2009/08/13/opinion/13gawande.html?pagewanted=1&_r=1&hp

    The stories of how these communities reformed their health care systems vary, but common themes emerge. The first is that most moved away from fee-for-service which encourages “more tests.” which, in turn, lead to more procedures–even if the test result was a false positive.

    John Goodman is mistaken. The Affordable Care Act does not call on “impersonal bureaucrats” to reform health care. It rewards
    doctors and thoughtful hospital administrators willing to “count” and implement the lessons learned in forward-looking communities.

  43. Aside from deductibles and copays, I wonder whether there may be a time at which a 3rd party payor decides to only cover highly beneficial care (and it is possible to weed out a lot of ineffective care, like HMOs did in the 90s). Many individuals incl John Goodman may choose that plan if the premiums are less since we are already at a point where insurance becomes unaffordable for the middle class. Well, and for those who don’t, there is still the premium plan (or supplemental insurance). Better solution than curbing cost with deductibles/copay, which cut both beneficial and unreasonable care.

  44. Asking questions and knowing costs of procedures, lab tests and drugs can benefit all of us. Not only should the doctor know these things, but the patient should be able to get the information quickly as well. I found this video helpful: http://tinyurl.com/4odprtz

  45. I am a great believer in the philosophy “If you have a nail to hit, hit it on the head.”

    Accordingly, I would:

    1) Develop an automated online program that lists the costs of drugs, lab tests, imaging and other tests at the point of care for both physician and patient to see.

    2) Use the approach of Jerry Reeves, MD, chief medical officer of Hotel Employees and Restaurant International Union (H.E.R.E. I.U) who confronts physician cost and care outliers with data comparing them to colleagues in same market. My interview with Jerry appeared in this Health Care Blog and in medinnovation blog in April 2010,

    3( Encourage patients employers, employees, and patients to join health savings accounts with high deductibles, in which patients have “skin in the game” and show them the costs at the point of care and on physician websites.

    These are the most simple, direct , and personal approaches to reducing health costs that I know of .

    Richard L. Reece, MD

  46. It’s amazing what a little cost-awareness can achieve. Carriers have traditionally tried to hide prices from patients and providers but this is changing. I wonder if carriers will be posting prices on their physician-facing software? For example, what if PBMs had prices of different drugs right there on the e-prescribing platform?

    Dr. Poses notes that doctors have taken an oath and want to do the right things for their patients. This means that they have to know the prices of different options, because today patients are more biased to say “I can’t afford it” and the doctor has to aid them in making the right choice.

  47. Mr Goodman –
    Other peoples’ money? – You have no co-pays or deductibles on your policy? Your employer pays the entire cost of your policy, and still gives you the salary that he/she would have paid had you no health insurance?
    Unlimited amounts? – Ask your doctor to allot you 2 office visits in the same day, and then bill for them, and see what happens. Ask him or her to order an imaging test that is totally unrelated to your medical issues, and see if insurance pays for it. Ask him to prescribe a very expensive brand-name medicine which is similar to some generics, and which you don’t need, and see if your insurance pays for it.

    There are plenty of limits set by bureaucrats on what private insurance will pay (and what Medicare will pay). They may not be rational, or the limits you might suggest, but they exist.

  48. Let’s see. My physician and I get to spend virtually unlimited amounts of other people’s money on my health care and Dr. Wachter wonders why various cost control strategies don’t work. Isn’t the answer obvious?

    My doctor and I are smarter, more clever and more determined than the impersonal bureaucracies, shuffling paper far away from the place where the services are delivered. Doh!

  49. One person’s cost is another person’s profit (or salary).

    Serious cost control would require challenging the people who make the most money from health care, who are largely people who do not directly provide health care. Think of bureaucrats, managers, public relations people, marketers, and executives.

    But they have a lot of money, which can buy a lot of influence. They are not distracted by having to actually provide health care, so can focus on preserving their pay and self-interest. They have not sworn oaths to put patients first, much less to save society’s resources. They are savvy in politics, opinion manipulation, and disinformation.

    Challenging them would be a real battle. But sooner or later, the costs of health care will become completely unsustainable, and the challenge will no longer be avoidable.

  50. I think advance directives are crucial to this conversation in both improving the quality of care and reducing costs across health systems. Very interesting read Dr. Watcher, I love your focus on ethics, it’s refreshing.

  51. With respect to expensive imaging and other diagnostic testing, doctors probably feel the need to adhere to the standard of care in their community in order to avoid potential litigation. Even if they think an MRI, for example, is not necessary in a given circumstance, if everyone else is ordering it, they need to order it too in order to avoid potential litigation if the patient happens to be the one that actually has the serious condition that the MRI would find. Besides, at least for the most part, insurance is paying anyway. They are not going to put themselves at financial risk in order to help improve someone else’s bottom line unless and until they have robust safe harbor protection from lawsuits if they follow evidence based guidelines where they exist regardless of what other doctors do or don’t do in the community or elsewhere.

    Separately, to the extent that we can identify services, tests, procedures or drugs that either don’t work or cost more than they’re worth, Medicare and commercial insurers should not pay for them. Or, at the very least, put them in a no-preferred tier and make patients pay a higher share of the cost if they really want them.

  52. “Other changes, such as changing the pro-technology payment bias or training more generalists, were countered by powerful political forces, a trend that continues today.”
    To my understanding, this hasn’t been seriously tried as of yet. I believe that this is one of the major driving forces. To put it to the point, the proceduralists defend their extraordinary incomes with rationing fear mongering, at the cost of society, on the backs of those who no longer can afford insurance.

  53. Wait a minute.

    So when CMS rubber-stamps the fantastical valuations put on procedures by the RUV, when insurers pay some providers 3x as much as others for no better care, when they pay for unwarranted bariatric surgery (and its complications) for marketing reasons, it’s my responsibility to save the system by ordering a few less CBCs?

    I think not.

  54. A recent study published in the Archives of Surgery shows almost $55,000 in savings after only 11 weeks. By “simply knowing the costs helps these providers be more judicious about their test ordering behavior,” said Dr. Elizabeth Stuebing, of the University of Miami, one of the researchers in the groundbreaking study.

    Doctors must consider and be aware of the cost of these proceeding they recommend or order. Regardless, being aware of how much each test costs, and how much each patient will ultimately for the test, whether or not they are insured, will have some influence on the suggestions the doctor makes the patient. Doctors need to take a lot of things into consideration when developing a treatment course with a patient or suggesting a particular test.

  55. I think the key here is data. If docs know what stuff costs, and if they have good cost effectiveness data, I think that they will largely do the right thing. Reinforcing that with ACOs or some risk for physicians should help to make it last. Perhaps the key role for dcos will be to take an active part in cost control. I think that needs to start in med school and continue through residency.

    Steve

  56. In previous post, the quote from NEJM should end with “…$640 billion question.” My comment continues with ‘Because of all….”

  57. I was reading Victor Fuchs, PhD, and Arnold Milstein’s (MD, MPH) post in NEJM’s Health Policy and Reform section today, “The $640 Billion Question — Why Does Cost-Effective Care Diffuse So Slowly?” (baseball cap tip to Glenn Laffel). In their conclusion, they commented:

    The Physician Charter, a modern version of the Hippocratic Oath, has been adopted by physicians’ organizations that include a majority of U.S. physicians. It ethically commits physicians to working toward “the wise and cost-effective management of limited clinical resources.” There is not much that physicians can do directly to change the behavior of insurance companies, employers, or other stakeholders, but physicians are the most influential element in health care. The public’s trust in them makes physicians the only plausible catalyst of policies to accelerate diffusion of cost-effective care. Are U.S. physicians sufficiently visionary, public-minded, and well led to respond to this national fiscal and ethical imperative? It’s a $640 billion question.
    Because of all the different pricing structures, like patients trying to find the cost of a procedure or blood test, it’s almost impossible for physicians to know the “true” cost of what they order. However, it is possible for them to know a general cost-range for each test, procedure, etc., and could be entered into an EHR system for convenience.

  58. It’s been a pet peeve of mine for some time that doctors historically didn’t consider it part of their job to know or to care about the cost of services, tests, procedures and drugs that they order or recommend. That needs to change, but, in fairness to them, we also need robust, user friendly price and quality transparency tools to help them.

    Moreover, as standards of care evolve locally and regionally, their key objectives seem to be (1) avoid litigation and (2) give patients what they want even if the doctor doesn’t think it’s medically necessary but is unlikely to cause any harm. As patients are subject to higher deductibles and co-payments and more have high deductible plans, they are starting to care more about costs as well. Even when insurance is paying, patients need to understand that they are paying all or most of the employer’s premium cost as well in the form of lower wages than would otherwise be paid. Even seniors, with Medicare funded mainly by taxpayers, should be increasingly concerned about the federal debt that their children and grandchildren will have to pay for. Perhaps more sensible approaches to end of life care can also contribute to the mitigation of healthcare cost growth. Interestingly, for the first seven months of the current fiscal year (through 4/30), net Medicare spending is up by less than 3%, a surprisingly low amount. Maybe there’s hope.

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