OP-ED

Atul Gawande, ACOs, and the Myth of the Mayo Clinic’s Low Costs

This is the last of a series of imaginary lectures for President Obama. I am hoping to educate him by criticizing three people who influenced him – Peter Orszag, Atul Gawande, and Elliott Fisher and his colleagues at Dartmouth. In this last installment I focus on Gawande.

Obama was deeply impressed by Gawande’s “The Cost Conundrum,” an article published in the New Yorker in June 2009. By June 2009 Obama had already adopted the managed care diagnosis (overuse) and the latest iteration of the managed care solution (ACOs, “medical homes,” and pay-for-performance, all of which will allegedly be facilitated by electronic medical records). “The Cost Conundrum” did not convert Obama to managed care ideology, but it did strengthen his belief in it.

“The Cost Conundrum” illustrates the good and the bad effects the Dartmouth Atlas has had on American health policy and on intelligent people like Gawande and Obama. The article is about Gawande’s trip to McAllen, Texas to see why per capita Medicare spending in that small town was the highest in the country. [1] Gawande knew it was high because the Dartmouth Atlas said so. Asking why Medicare spending in McAllen was so high was a legitimate question to ask.

But Gawande went way beyond exposing problems with Medicare spending in McAllen. He told his readers that the problems he uncovered in McAllen – overuse of some Medicare services induced by fee-for-service payment – afflicted vast swaths of the medical profession and that “accountable care organizations” were the answer. He specifically singled out the Mayo Clinic in Rochester, Minnesota and an informal cartel in Grand Junction, Colorado as examples of ACOs that had allegedly already proven they could provide high-quality care at very low cost. [2]

But within a few years, research would turn Gawande’s characterization of Mayo and Grand Junction upside down. It would turn out that both the Mayo Clinic and Grand Junction are costly places to be treated when all medical spending, not just Medicare spending, is taken into account. Oops.

But before I elaborate on that mistake, I want to give Gawande credit for the good “Conundrum” did do.

Auditing outliers

What was good about “The Cost Conundrum” was that it illustrated the capacity of the Dartmouth Atlas data, crude as it is, to generate hypotheses worth investigating. According to Gawande, Dartmouth Atlas data showed that per capita Medicare spending in McAllen was “almost exactly” equal to the national average in 1992, but had gone up so much by 2006 McAllen held first place in Medicare spending. “Conundrum” presented convincing evidence that something had gone wrong in McAllen between 1992 and 2006, and substantial overuse of medical care was the result.

Gawande’s article appears to have had a good effect. Between 2008 and 2012, Medicare spending in McAllen dropped from 40 percent above the Texas average to 16 percent,   primarily due to a large reduction in the use of post-hospitalization care. (I am unaware of research that demonstrates the eliminated services were all unnecessary services, but it seems likely most were.) In a follow-up article about “an avalanche of unnecessary care” entitled “Overkill,” Gawande reported that many McAllen doctors attributed the drop in Medicare costs to the combination of simply learning they were ordering more services than other doctors plus the glare of the media. (Will Gawande ever write an article about the “avalanche of underuse”? Will it bear the title, “Underkill”?)

In Overtreated, Shannon Brownlee tells a similar story about doctors who didn’t know they were ordering services at rates much higher than colleagues elsewhere and who reacted appropriately when they saw the data. She reports that John Wennberg, the father of regional-variation research, visited five doctors in Morrisville, Vermont in the mid-1970s to show them data indicating they were doing tonsillectomies at a rate substantially above the Vermont average. Brownlee reports those doctors responded by reducing the Morrisville tonsillectomy rate by two-thirds within five years (p. 27). (Will Brownlee ever write a book entitled Undertreated?)

The McAllen and Morrisville anecdotes illustrate how the appropriate use of crude regional-variation data (sharing it with doctors, as opposed to inflicting suffocating P4P schemes like MACRA on all doctors) can lead to good outcomes.

But Gawande did not see the Dartmouth Atlas as a mere generator of hypotheses. He saw it, rather, as the great arbiter of high- and low-cost regions and hospitals. “Medicare expenditures [are] our best approximation of overall spending patterns,” he wrote in “Conundrum.” If Elliott Fisher concluded, on the basis of Atlas data, that the Mayo Clinic was a shining example of an ACO that provides superior care at a very low price, that was good enough for Gawande. He would stake his credibility on it. “[T]he Mayo Clinic … is among the highest-quality, lowest-cost health-care systems in the country,” he wrote in “Conundrum.”

That was a mistake. Within a year, researchers began to inquire whether McAllen really was as expensive, and Mayo and Grand Junction really were as inexpensive, as Gawande said they were. That research would show that McAllen was nowhere near as expensive as Gawande said it was, and that the Mayo Clinic and Grand Junction were very expensive. Because Gawande exalted Mayo more than any other clinic or system, I’ll focus on the research that destroyed the myth that the Mayo Clinic is unusually efficient.

The ascendance of the Mayo myth

By the early 1990s managed care advocates were constantly repeating the myth that Mayo Clinic provides medical care at very low costs. (I am calling the claim that Mayo is unusually inexpensive a myth. I am not questioning Mayo’s reputation for excellent medical care.) Hillary Clinton mentioned the Mayo Clinic and Minnesota so often in her 1993 testimony  before the Senate Finance Committee that Senator Dave Durenberger (R-MN), a member of the committee, thanked her for “mentioning Minnesota with some frequency.” (p. 32) As we saw in my second post  in this series, Clinton could not explain to the committee what Mayo was doing to stop all the alleged overuse, but she was sure Mayo was doing something right because Medicare data assembled by John Wennberg at Dartmouth told her so.

The Mayo myth was solidified in 2008 by a study by Wennberg et al. which claimed that the Mayo Clinic’s St. Mary’s hospital in Rochester was half as expensive as Cedars-Sinai in LA and NYU Medical Center. [3] This study suffered from the three defects I discussed in post number three   in this series, namely, it was limited to Medicare expenditures, it used the “they all died” method of adjusting for differences in patient health, and it assumed all spending on a particular patient can be attributed to one hospital. Nevertheless, the 2008 Dartmouth study set off another wave of hype about Mayo’s costs. [4]

The destruction of the Mayo myth

But just as 2009-2010 were the peak years of the credibility of the Dartmouth Atlas, so 2009-2010 were the peak years of the Mayo myth. By 2009 the criticism that the Dartmouth Atlas failed to take account of factors outside hospital control (primarily patient health status) was becoming more common, and that took a toll on the Mayo myth because what little evidence there was for the myth came from the Atlas.

The Washington Post was among the first to poke a stick at the myth. In a 2009 article  , the Post noted that Mayo Clinic patients “are wealthier, healthier and less racially diverse than those elsewhere in the country,”  in part because the local population is healthier, and in part because Mayo cherry-picks its Medicare and Medicaid patients. [5] But it was the release of data on prices charged by Minnesota providers in 2011 and the opening of MNSure, Minnesota’s Obamacare exchange, in October 2013 that finished off the Mayo myth.

In 2011 an organization set up by Minnesota insurance companies called Minnesota Community Measurement released data on prices paid by the four largest Minnesota insurance companies to Minnesota hospitals. Using price data for 69 of the procedures listed in the report, the American Experiment, a conservative think tank, concluded : “Mayo costs far more than other Minnesota providers. Of the 69 procedures, Mayo’s price is the highest for 11 and among the top five highest for 48.  On average, Mayo’s price was 220 percent higher than HealthEast [a relatively low-cost system] and 180 percent higher than Park Nicollet [a relatively high-cost system].”

In October 2013, Obamacare exchanges, including MNSure, opened for business across the country. In an October 30, 2013 article , the Minneapolis Star Tribune reported that MNSure shoppers in the Rochester area were facing very high premiums and had no choice of insurer, thanks to “the Mayo effect.”  “The lack of choice is particularly stark for residents with a Rochester ZIP code,” the article reported. “There is just one health plan offered on MNsure – a single silver-level plan from Blue Cross and Blue Shield of Minnesota. It costs a 40-year old nonsmoker $326 a month, with a $3,000 deductible. A comparable option for a Twin Cities resident would cost an average $154.” The article went on to quote an exasperated Rochester broker saying, “No other carrier wants to work in this area partly because the Mayo Clinic is becoming too expensive.”

Keep in mind that Minnesota has one of the most expensive health care systems  in the country.

The Star Tribune confirmed Mayo’s high price a year later  with data from the Minnesota Hospital Association. The national-level studies I discussed in installment three in this series that debunked the Atlas data were nails in the coffin of the Mayo myth. 

To paraphrase Gawande’s comment about McAllen (see footnote 1), the Mayo Clinic appears to be the most expensive provider of medical care in one of the most expensive states in the US, the nation with highest per capita health care costs in the world.

“Accountability” buffs should be held accountable

Once the Mayo myth was refuted, Gawande had a choice: He could either notify his New Yorker readers he was wrong to call Mayo an example of an ACO, or he could notify them he was wrong to claim that ACOs cut costs. He has done neither. He has simply gone quiet about Mayo’s costs. Nor has he stopped promoting ACOs and gigantic hospital-clinic chains. He even has the chutzpah to tell us the Cheesecake Factory  should be the model for the hospital-clinic cartels that have formed over the last three decades.

In this six-part series I have severely criticized President Obama and three of his advisors for serious defects in their thinking about how to reduce US health care inflation. All four men – Obama, Fisher, Orszag  and Gawande – illustrate what is wrong with the culture of the managed care movement. That culture celebrates a cavalier attitude toward evidence.

How does Obama get away with telling us in August 2016 the ACA deserves credit for the 2008-2013 inflation lull and not telling us the lull is over? How does Elliot Fisher get away with telling us that all human beings become equally sick once we enter the last six or 24 months of life and therefore hospital expenditure data does not need to be adjusted to reflect differences in patient health? How could Peter Orszag oversee research at the CBO showing that ACOs and other managed care fads won’t save money, and then tell Obama and Congress they would? How does Gawande get away with promoting the Mayo myth, and when the myth is destroyed, failing to issue a retraction?

There is a double standard at work within the US health policy establishment. That “standard” insists, on the one hand, that doctors and hospital staff should be “accountable” to society via ACOs, “medical homes,” and P4P schemes, but on the other hand those who promote ACOs etc. have no accountability to anyone. Because of this double standard, those who preach accountability for providers are free to promote the overuse myth in the face of evidence that underuse is far more common; they are free to promote solutions to the alleged overuse that have little or no evidence to support them; and, when evidence arises contradicting their diagnoses and prescriptions, they are allowed to pretend they didn’t commit a serious error.

This has to change. President Obama is both a victim and a promoter of this double standard. He placed his trust in advisors who subscribed to the double standard and who told him the managed care fads contained in the ACA would cut costs. I urge Obama to acknowledge those facts, and to use his influence after he leaves office to demolish the double standard as well as the myth that the ACA is “bending the cost curve.” At that point, we as a country might at long last have an honest debate about how to reduce the enormous waste in our health care system and thereby make universal health insurance affordable.

[1] Gawande said in “Conundrum” that McAllen was both the most expensive and the second-most expensive city in America. In the second paragraph, he wrote: “McAllen … is one of the most expensive health-care markets in the country. Only Miami – which has much higher labor and living costs – spends more per person on health care.” But two paragraphs later he wrote, “McAllen, Texas, [is] the most expensive town in the most expensive country for health care in the world….” A few paragraphs after that, in describing a dinner he had with six McAllen doctors, he said, “Some were dubious when I told them that McAllen was the country’s most expensive place for health care.”  

[2] Gawande repeated his praise of the Mayo Clinic and Grand Junction in a follow-up article http://www.newyorker.com/news/news-desk/atul-gawande-the-cost-conundrum-redux in the New Yorker three weeks later.

[3] You can see data from the 2008 Dartmouth study for Mayo’s St. Mary’s hospital and four other hospitals midway through this comment  by Maggie Mahar, an ardent fan of Gawande and the Dartmouth Atlas.

[4] For example, two days after Wennberg et al. released their data the New York Times editorial board, a leading managed care proponent, declared,  “Medicare could save tens of billions of dollars annually – without reducing the quality of care – if all hospitals mirrored the practice patterns of the Mayo Clinic.”    

[5] Here is how the Washington Post described Mayo’s cherry-picking strategy: “Its Rochester flagship accepts Medicare patients from outside Minnesota only if they are willing to pay a personal premium beyond normal Medicare coverage, a practice that screens out some who cannot afford to pay more. Even in Rochester, a city of 85,000, Mayo serves a higher-income echelon than the town’s other hospital, Olmsted Medical Center. Just 5 percent of Mayo’s hospital patients receive Medicaid, an exceptionally low figure, compared with 29 percent at Olmsted….”

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albertklausevitsBobbyGvegasBarry CarolPaul @ Pivot ConsultingLLCWilliam Palmer MD Recent comment authors
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albertklausevits
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albertklausevits

A couple of months ago, I took advantage of the company’s services on the analysis of my website and was very pleased. Surprisingly the company pays a lot of attention to medicine. I tried this one. thr results are rather good. The company has offered a wide range of services and I couldn’t imagine that everything would be done so fast and qualitatively. They regularly sent me reports and I could control the process online. The speed of information exchange is almost instantaneous and it pleases a lot. https://clever-solution.com/seo-smm-ppc-for-plastic-surgery-clinic-digital-marketing-development

Allan
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Allan

The elitist left is intellectually dishonest and they are never made to pay for their mistakes or their lack of honesty. That makes them unsuitable to run programs that require money and effort. They believe the default variable to explain the unexplainable is to blame the doctor.

Great series.

William Palmer MD
Member
William Palmer MD

Do you think, Allan, that several big Kaiser-like firms could be the picture of the final landscape in healthcare? There is something terribly wrong with having all these insurers. But there is something horribly wrong in having the government run it. Terribly vs horribly. There must be a sweet spot. Do you think there is any way to _not_ have insurers and to run health care as a public good by counties or districts or states? The bureaucracy of the insurers is the same Byzantine tangled mess as the bureaucracy of the government, but I fear the government much more,… Read more »

William Palmer MD
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William Palmer MD

Following all these progressive ideas for 40 tears has been like taking a drunken walk.

Peter
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Peter

“We really need competition too, all the way down from the plans and insurers to the docs–with procedures–and administrators and pharmacy benefit managers….and maybe even nurses.” Competition on the insurance side is difficult unless they can drive down prices – which they don’t do as they are competing for providers. Cheaper insurance will be less coverage as the premiums are set mostly by actuaries. Obamacare dictates 85% of premiums be spent on care. If we throw pre-existing under the bus that will lower prices – do you want that? If we allow buffet style plans with less insured in each… Read more »

Allan
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Allan

1) “The reason the exchanges are seeing these increases is weak enforcement of the young and healthy to buy insurance and that the exchange plans are their own group.” 2) “who is hit hard are the people who don’t qualify for a subsidy.” The young are not stupid. they see that their premiums are far higher than they should be and they are being forced to buy a lot that they do not need. Thus they pay an extraordinary bill whose value is low In the following sentence #2, I note how you worry about the hard hit that don’t… Read more »

Peter
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Peter

The subsidies need reform. Everyone who meets qualifications gets a subsidy, even the young. But young people feel they’ll live forever and don’t need insurance at any price, even when it’s cheap because of their age and health status. The young are in a group, so the premium is based on the group – insurance 101.

Mostly everyone in this country gets a subsidy, maybe even you Allan.

Barry Carol
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Barry Carol

This society is willing to accept 15% or so of the adult population not carrying car insurance. It’s also acceptable for low income renters to not carry insurance on their belongings and it’s acceptable for people with few or no assets to not carry umbrella liability insurance. We want people to have health insurance, at least for catastrophic events so the rest of us don’t get stuck paying their bills when they get sick. Since we’re not going to just let them die on the floor of the ER, they should have insurance even if they’re young and healthy. Cap… Read more »

Allan
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Allan

Peter, what you forget is that in the ACA you are advocating a much higher price for the young than the value they are getting. Would you pay $30 for an ice cream popsicle worth only $6 without even getting the flavor you want? Of course not. In fact when BC/BS didn’t provide you service in the way you thought it should be provided you went bare and traveled outside of the US.

Peter
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Peter

“you are advocating a much higher price for the young than the value they are getting.”

What “value” ar they not getting?

Allan
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Allan

“What “value” ar they not getting?”

They are being told to buy a product, insurance, at a much higher cost than they should be paying and they are not even getting what they want.

Peter
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Peter

“They are being told to buy a product, insurance, at a much higher cost than they should be paying and they are not even getting what they want.”

What “should” they be paying? Full price without a subsidy? Pre-exist premiums? $2 per month?

Allan
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Allan

“What “should” they be paying? Full price without a subsidy? Pre-exist premiums? $2 per month?”

Maybe it would be better to ask what shouldn’t they be paying. The young shouldn’t be paying a higher premium to see to it that an older person more likely to have greater wealth can save money on his premiums.

The socialist inclined genius’s that figured out the payment system are ignorant of economics. That is why you now have a death spiral.

You are entitled to your dreams, but don’t expect them to be related to reality.

Paul @ Pivot ConsultingLLC
Member

Peter, re your statement “Competition on the insurance side is difficult unless they can drive down [provider] prices”….there is another factor/ way: When I first joined the Board of a non-profit insurer with 60% market share I was proud of the organization in that it only took 7% of premiums to run its operation….while I recall the national average was somewhere between 12 and 15%. After I had moved on a new CEO took over the non profit and the “take” was increased to near the national average….and the execs began to use a private plane to fly around the… Read more »

Peter
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Peter

“The “non profits” have large administrative bloat as well as lots of feel good community programs of little real value.” I’m no fan of BCBS. Their “non-profit” status is a joke. Here in NC they send profits to executive bonuses in the millions while constantly raising our rates. Insurance is rewarded for doing the wrong things. Shopping across state lines is a race to the bottom. Insurance will congregate to states with the least patient protections and mandates. Premium payers will buy just on price while leaving those with serious insurance requirements with much higher bills. The good thing about… Read more »

Barry Carol
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Barry Carol

Even at the national average of 12%-15% for administration and profit, 85%-88% of premiums are used to pay for medical claims. That’s where the money is. Each one percentage point we could remove from the cost of delivering actual care would be the equivalent of cutting administrative costs roughly in half in terms of the impact on insurance premiums. The single payer approach would have somewhat lower administrative expense but probably considerably more fraud and less control of healthcare utilization than the current system. Dictated prices would cause other problems including probable rationing of services. I would rather move toward… Read more »

Peter
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Peter

“……but probably considerably more fraud and less control of healthcare utilization than the current system.”

That’s not what I observe in single-pay systems. Where do you get those assumptions? How are other systems doing it for about half – because of more fraud and less utilization control?

Barry Carol
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Barry Carol

First, they’re not doing it for half as much. As a percentage of GDP, it’s about one-third less. Second, Canada, UK, Australia, etc. all have lots of rationing in the form of long waits for procedures that are not immediately life threatening. Third, cultures are different. Out litigation culture would not be any different under a single payer system so there would still be loads of defensive medicine disguised euphemistically as the standard of care. Fourth, there is more of a fraud culture in the U.S. when there are opportunities to steal government (taxpayer) money with a low probability of… Read more »

Peter
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Peter

“…they’re not doing it for half as much.”

I said about half. CA=10.4, UK=9.1,AU=9.4 U.S.=17.1 per World Bank GDP

Peter
Member
Peter

“let CO try it first and prove it to the rest of us in the real world or fall flat on its face and fail.”

As I’ve said before, for SP to work it needs to be national. It will be nearly impossible for CO to make this work alone because either the providers or insurance or citizens can flee to other states.

Allan
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Allan

“It will be nearly impossible for CO to make this work alone because either the providers or insurance or citizens can flee to other states.”

People flee from the bad to the good.

Peter
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Peter

Obviously Allan you’re not grasping the idea of common good and shared responsibility. Yes, people can act only in their own selfish interests, but in health care it’ll take a commitment to community betterment to solve the cost/access problem – the concept we’re all in the same boat. You are not interested in solving anything, just blind ideology.

Allan
Member
Allan

Peter: Oh, I certainly understand the common good, but that is not what we are dealing with here. Preventing your heart attack has nothing to do with the common good. What is my ideology? The free marketplace. Is that a blind ideology or is it an economic theory that has led to reduced world suffering helping all of mankind and bringing the third world into a more modern world. No other form of political economics has done so much good for the world.The blind ideals of the socialist have destroyed nations and people. In the 20th century over 100 million… Read more »

Paul @ Pivot ConsultingLLC
Member

Peter, that is easy to fix: just pass a law making it illegal to flee/relocate to another state without permission of the government. Fixed!

Allan
Member
Allan

There is a sweet spot, but that is known as a free marketplace with subsidies run at the state level, but there are too many socialists running around with big dreams and no understanding of economics. They are aided by many Democrats and Republicans that know very little except how to keep their jobs and increase their bank accounts. We need innovation to bring the costs down but that is not something one gets with social engineering and things like Obamacare. I look at all our technology that is available to the common man. If Obamacare controlled such technology we… Read more »

BobbyGvegas
Member

“We really need competition too”

Trump “Libertarian” Peter Thiel didn’t get the Memo.

Peter
Member
Peter

I guess the conclusion should be that the only way to reduce health care spending is single-pay government control pricing – just like most of the rest of the industrial world.

pjnelson
Member
pjnelson

Sometimes, its useful to use concepts new to healthcare reform. So, here’s one. Our nation’s agriculture industry produces more food with the resources applied than any other world-wide nation, and by a wide margin. Unfortunately, our nation’s healthcare industry is the LEAST efficient among the developed nation’s of the world-wide community and, unfortunately, also by a very wide margin. I’d be interested to see who’s brave enough to offer an explanation. I’ll return tomorrow to give my own. If there are no opinions offered, I’ll assume that no one really cares about the impending disaster represented by the next recession… Read more »

Peter
Member
Peter

American agriculture receives about $20 billion per year in subsidies. Does that represent “efficiency”?

Agriculture produces large quantities of food at cheap prices – should we produce large quantities of health care delivery at cheap prices?

pjnelson
Member
pjnelson

Last year the federal government paid 40% for our nation’s healthcare through medicare and medicaid. I think that the issue is really that the students who leave a Land Grant agricultural college are trained to do their job from the moment they leave school. Primary Physicians are not. Remember that the Cooperative Extension service, county by county, has existed for 100 years as created by the Smith Lever Act of 1914. Most importantly, it provides a daily means for the Ag schools to understand the problems at the front lines of farming, community by community. There is no similar process… Read more »

Peter
Member
Peter

pjnelson, it’s ironic that you tout the success of American agriculture compared to health care when the agriculture industrial complex is the root cause of most of our health care problems. Highly processed, high sugar, high fat, high cholesterol and high calorie food causes most of our health needs.

We subsidize corn (which subsidizes beef) but not fresh fruits and vegetables.

realdoctor
Member
realdoctor

“There is a double standard at work within the US health policy establishment. That “standard” insists, on the one hand, that doctors and hospital staff should be “accountable” to society via ACOs, “medical homes,” and P4P schemes, but on the other hand those who promote ACOs etc. have no accountability to anyone. Because of this double standard, those who preach accountability for providers are free to promote the overuse myth in the face of evidence that underuse is far more common; they are free to promote solutions to the alleged overuse that have little or no evidence to support them;… Read more »

pjnelson
Member
pjnelson

Well said!