It’s Up to Clinicians, Not the Government or Payers, to Control Health Care Costs

Behind many of the economic and political tensions of our time lurks the growing burden of health care costs. Does that claim sound inflated? Consider: when the public complains of stagnating wages, we can put our finger on health care costs as the monster that gobbles up employee compensation. When economists fret over the future burden of Social Security and Medicare (a cry echoed across the world as populations age), we have to recognize the scourge of increased health care costs. Most of the current debates over the Affordable Care Act–a recurring issue during the presidential campaign–touch explicity or implicity on health care costs.

The upward curve in costs became less of a run-away trend during the recession. Although the ACA might take a bit of the credit, most observers attribute the softening of the cost rises to belt-tightening by patients, and perhaps also to lower inflation. Inexorably, though, costs do rise. Small businesses and people on individual plans suffer most–a burden for which the ACA is not responsible, but that it brought to public attention–and the rest of us are bedeviled by rising premiums and deductibles as well. A study found spending increases across the board in 2015 by individual households, businesses, and governments alike. A number of people give up on health insurance because it’s still too expensive and does not end up covering their needs.

Insurers are suffering too, which is why even major companies such as Blue Cross and UnitedHealth are abandoning some markets.

Where Does the Initiative Lie?

Once we establish health care costs as a primary contemporary issue, we have to look at who is in a position to fix the problem. Going back before the ACA to the bipartisan HITECH act of 2009–and forward to the 1915 MACRA law and this year’s 21st Century Cures Act–the government claims it can play a role. Many people expect insurers, including government payers, to lead reform through pay-for-value policies (also known as accountable care, bundled payments, or risk sharing) and through quality ratings. Many even expect the patients to rise up and demand change–a shift of responsiblity that I have called a scam.

I believe the impact of governments and payers will be very limited. Responsibility comes back to the doctors and the institutions that employ them to create more efficient health care systems. Fee-for-value remains a critical element, and we should work on the potential represented by quality ratings, but these are crude instruments and will not replace a concerted effort by clinicians. New technologies can support the way forward, but only in the context of sincere organizational and cultural change. Tasks include:

Creating a coordinated team approach, which includes the patient. This task includes the long-resisted goal of integrating records, along with handling transitions adeptly.

Reaching out beyond the clinic’s walls to address barriers prevent patients from achieving health in their living environments.

Seeking creative solutions that don’t depend on tests and interventions that a low probability of working, and that seek alternatives to expensive or dangerous treatments such as opioids. Incorporating analytics intelligently could produce better outcomes at lower costs.

Moving records out of the clinic to the patient, which will solve many data exchange problems as well as wiping out the epidemics of duplicate records and wrong patient identification.

Note that I haven’t mentioned the great passion of clinical consultants, patient engagement. That’s because I consider campaigns to engage patients a distraction from health care reform–specifically, a distraction from giving the patient power over her care and integrating her into the clinical team. A few of the goals cited by many engagement specialists are useful, but in general their campaign isn’t succeeding. In the measured language of the respected Chilmark Research firm, “patient portals suck.” At worst, patient engagement perpetuates the destructive notion that patients can force systems to change.

Coordinated care, which is key to preventing errors and relapses in our fragmented health care system, is still seriously hampered. Consider these reports:

A survey found that health care providers share patient information just a little more than half the time. In the survey, 60 percent of patients said their primary doctor’s office had access to their hospital or emergency room records without the need to bring those records to the office. Yet just 49 percent of patients said their doctors are able to share information about their health, and know their history prior to an appointment.

In January of 2016, a majority of Accountable Care Organizations (ACOs) reported interoperability as their major barrier. Considering that coordinated care is the fundamental premise of the ACO, this revealed an embarrassing gap between aspirations and achievements.

The Centers for Disease Control report that “only 38.2% of all doctor offices sent patient information electronically to other organizations and only 38.3% electronically received such information….The number of doctor offices and group practices that have integrated their automated medical records systems with other electronic healthcare information networks, databases and portals is even less at 31%.”

Another recent report  found that only 43% of doctors ask elderly patients about treatments they’re getting from other providers.

EHR vendors are still poor at data sharing with EHRs from other vendors.

An ONC data brief, although it claimed to see progress in exchanging data during 2014 and 2015, pointed to technical barriers holding back the effective use of data.

Lack of interoperability will also hold back the much-heralded “precision medicine” initiative.

Luckily, the field is starting to make progress. The open FHIR standard, which the HL7 standards committee adopted in response to government and industry pressure, could lead to widespread interoperability. Certain more limited efforts, such as the CommonWell Health Alliance, may also overcome the resistance of vendors and providers to data exchange.

The limitations of risk sharing

Risk sharing is a great policy, and has managed to pick off some low-hanging fruit, such as an early experiment in cost sharing by Blue Cross Blue Shield of Massachusetts. The Medicare focus on hospital readmissions (the famous 30-day rule) has led to a small but important reduction in those readmissions. But we’ll hit bumps in the road as accountable care moves forward.

As mentioned earlier, ACOs have suffered the same difficulties as other health care centers when trying to share data. In August, Forbes reported that ACOs aren’t ready for prime time, although employers are trying to adopt useful accountability practices. ACOs also need to use more analytics–and we need larger and more detailed data sets to support those analytics.

Analytics are also needed to improve quality measures. I laid out some problems with measuring quality in an earlier article. This past October, the Office of the National Coordinator today recognized that quality ratings are inadequate and tried to introduce more transparency into the system.

The Centers for Medicare & Medicaid Services keeps adding new quality measures, such as on complications during treatment and rehab and long-term care facilities. These look valuable, but keep institutions on a treadmill of continually increasing measures and reporting requirements. A CMS survey in June found that eCQM quality data is hard for hospitals to collect.

I question whether doctors and hospitals are capable of creating chain of events required to make accountable care work, as assumed by Medicare’s new rules for covering cardiac care and hop fractures.

Health care is eerily similar to education in many of its traits, as well as the challenges it faces. One such challenge is quality measurement. An excellent critique of testing in the field of education appears in Cathy O’Neil’s popular and well-written book, Weapons of Math Destruction. Quality measurement is a good idea in theory, but requires clear links between the things being measured and the ultimate goal of the organization (in education, a well-adjusted and inquisitive child; in health care, a good life). O’Neil points out what goes wrong when quality measures are seriously flawed. I’m afraid that our measurements in health care are still inadequate.

Quality measures in health care, like educational testing, also create perverse incentives, such as denying care to avoid risky procedures, even when patients could benefit, or simply refusing very sick patients.

Another limitation of payment incentives is the time lag that chronic disease introduces between medical interventions and results. The ACA brought some 20 million new people into the health care system, a prospect initially welcomed by clinicians and insurers alike. (The American Medical Association and American Hospital Association still want these benefits maintained.) But many of these people came with untreated conditions, including multiple chronic conditions known charmingly in the field as “comorbidities.” The needs of these people far exceeded what anybody expected. And it turns out that young people are not so “invincible” as they have been made out to be–in particular, many suffer from untreated mental illness.

Finally, there’s no guarantee that improved outcomes will be accompanied by lower costs.

Even were the medical field prepared with all the tasks I listed at the beginning of this article, years would pass before we could reap the cost benefits of treating chronic illness. As currently constituted, the clinicians are ill-equipped to help people with chronic illnesses on top of social and economic deficits.

Thus, the carrots and sticks held out by payers and governments don’t hit their marks with enough accuracy to change organizational and cultural inertia. It will have to be the clinical settings themselves that take the lead.

What other options do we have in reform efforts?

Outside of the risk-sharing efforts, most efforts to reduce health care costs come down to reducing the use of health care. One can see this in many forms across the industry and its regulators, such as:

  • Increases in deductibles and co-pays.
  • Suggestions that insurers be permitted to offer low-quality insurance plans with important gaps (including Republican suggestions to enable sales across state lines), leaving patients uncovered at the most vulnerable moments in their lives.
  • Refusals by payers to cover expensive drugs, often justified by blurring the important distinctions between similar drugs that have different costs.

This trend is risky in itself. Patients who are discouraged from seeking health care get sicker and end up more expensive to treat when they finally get desperate enough to go to the doctor. Health is worsening in the United States among all except the highest income bracket.

Already, one third of US adults forego necessary health care (although the percentage has improved recently). Even given the ACA’s expansion of insurance and provision of free preventative services, half of the patients using the ACA’s exchanges forego care. The problem is high deductibles. Turning Medicare into a subsidy program, a regularly aired policy proposal, would accentuate this trend.

Eliminating the “individual mandate” that encourages healthy people to buy insurance would make the problem worse, as many observers point out. Many people currently buying insurance will drop it, then pick up insurance again or merely flood the emergency rooms when they have a serious, costly illness.

Cost cutting also tends to involve the elimination of patient choice in providers, especially on the health exchanges set up by the ACA, and even in seemingly creative approaches such as direct contracting between an employer and a health care provider. Many health care reformers don’t seem to notice that the policy of restricting patient choice runs head on against one of their shibboleths, which is that patients will reduce costs when given responsibility for choosing their providers.

Before bringing this article to a close, I should acknowledge that many other factors complicate health care costs.

  • The most important way we could improve health would be to improve environmental factors, which are mostly tied to income and the discrimination against certain populations. But improving the patient’s life situation is a huge task. Clinicians need to identify the factors they can reasonably address. Even when crippled (almost literally) by social, emotional, and financial constraints, patients can make better use of the health care system when key strategic needs are met, such as transportation to clinical visits and logistical support from case managers.
  • Drug prices involve many facets. Although medication costs creep up for many reasons, most drugs with spectacular costs are aimed at small populations who previously had inadequate treatments or no hope of treatment at all. Suppressing the use of these drugs–or imposing price caps that reduce the pharma companies’ incentives to develop these drugs–is just another form of cutting costs by cutting care. Ideally, pharma companies would reduce the costs of drug development, which a Forbes article lists as four billion dollars on average per medication, with a high of eleven billion. New technologies may streamline drug trials. So far, a survey by Validic (a company that connects medical and fitness devices to health apps and records) found that pharma companies made very limited use of digital data, focusing on medication adherence during trials and detecting early problems with those trials. So there is room for a more sophisticated use of data and devices.
  • Another consideration is industry consolidation, such as the purchase of rural practices and individual physician practices by larger health care institutions. This again puts the onus on the clinical institution itself to control costs, rather than simply exploiting a monopoly or oligopoly.
  • The complexity of billing certainly adds significantly to health care costs, especially since the industry keeps finding new ways to add intermediaries. Still, value-based reimbursement and all the measurement it entails will be complex too.

I return, then, to my thesis that the main solution to health care costs lies in clinicians attacking the tasks mentioned at the beginning of the article. Coordinate care, address environmental factors, look for creative solutions, and give the patients their records. Although poor external regulations and payment systems have reinforced toxic organizational cultures, the reform must come from within.

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25 replies »

  1. Andy, say your job is to fix peoples’ automobiles. Your customers never pay themselves, but rather take your bill and send it to an insurer who has a market capitalization of 250 billion dollars….or you send your own bill to this outside payer because you don’t want to bother the customer. Your money always comes from this huge profitable financial firm in the top 500 of corporations in the country. Would you have any motivation to try to be cost effective and reasonable in your bill? Why? Would your customer care? If you had to order parts from an outside supplier, would that firm care about its charges to you? After all, it knows you are well off and reliably being paid by this god-like insurance castle in the East.

    Who cares? Everyone wants to have lots of money going through them or their firm. Every entity wants to grow big and be rich. Why skimp?

    ,,,,except [surprise!],maybe the few patients who don’t have this connection with God and the taxpayers whose government allowed this enterprise and who back up problems if something goes wrong.

  2. A large percentage of healthcare costs are related to preventable conditions; it’s up to all entities noted to get behind curbing obesity and its associated complications of diabetes, hypertension and heart disease and continue the anti-smoking efforts.
    Having a high deductible plan myself, I have shopped around for the best deal, such as with imaging costs. There is a huge range of pricing in the greater Boston area say from $350 to $2300 for an MRI. However, with the expansion of hospital networks I fear there will be fewer choices in the near future, driving prices up. I have also had trouble finding out how much a test or procedure will cost me. It often takes multiple phone calls and 2-3 days before I get a response.

    • It’s really crazy that a person trying to reduce her own costs and thereby the costs of society is thwarted by big government that incentivizes consolidation and therefore higher prices. We need less government not more.

      • So the prices at Walmart are higher? Consolidation per se does not guarantee higher or lower costs. In fact, we know that costs are higher in countries that have more market based health care. Remember what happened in Singapore when they tried to become market based? Nearly every country with first world medicine has lower costs than we do, and much more government involvement. It may be possible to have lower costs with less govt intrusion into health care, but no one has figured out how to do it.


        • Steve, re “no one has figured out how to do it.”
          How about a multi state study by a non partisan think tank that involved a sample of 800,000 families?

          ….the large Rand study. Here is a quote from Rand: “Studying more than 800,000 families from across the United States, researchers found that when people shifted into health insurance plans with high deductibles, their health spending dropped an average of 14 percent when compared to families in health plans with lower deductibles.”
          Here is the link:

          • “Here is a quote from Rand: “Studying more than 800,000 families from across the United States, researchers found that when people shifted into health insurance plans with high deductibles, their health spending dropped an average of 14 percent ”

            Paul, you earlier opposed those oppressive high deductibles in the ACA.
            So now you’re in favor if it’s not the ACA?

          • Peter,
            The Rand study involved corporate plans. In most corporate plans the employer makes a payment into an Health Savings Account to cover much or all of the high deductible….and the employee/patient keeps the funds in an investment account that is portable (and inheritable).

            Such a program could be used in non corporate plans….such as an ACA replacement…..for the low income folks the government would make a payment into a Health Savings Account. Much better than the government paying the insurer.
            And it creates the same dynamic of patients looking for value and partnering with their docs to find high value care….and avoiding many of the useless/low value/harmful care too often provided and accepted by patients because it is “free”….and they have no financial benefit from prudent use of services.

            Some argue that most patients are not able or willing to shop/partner/question their provider. True! But service system providers respond when as few as 10% of patients do this…..because it is very visible and hurtful when that many patients walk away….economics.

          • “Much better than the government paying the insurer.”

            So would low income also get premium subsidies with deductible contribution?

            What if a person got major illness that required all of the deductible but did not have the saved up funds to pay?

          • Re major illness: the corporate plans are linked to a comprehensive catastrophic plan usually with no out of pocket once over the deductible…..the same would apply to a similar ACA replacement.

            For premiums for low income I think it would work fine if the govt. paid the insurer…so perhaps this would retain an element of the ACA…..probably somewhat better if patients could buy and pay from their HSA funds.

            And since I am designing an ACA replacement, I think it would be VERY important if they had the ability to buy a national plan (with minimum coverage standards) that opt out of the morass of state mandates….or at least ensure the state mandated services that are utilized have to be paid out of the Health Savings Accounts. (major slow down in health care inflation ensues).

          • Sure, high deductibles may in the short term cut costs some (we don’t know about the long term), but we already have that option with the ACA if we want. There remains no large economy that has done this and successfully cut costs for the country as a whole. (Yes, I always worry about selection bias.)

            Allan-Nice duck on the fact that Walmart consolidation has reduced costs. Also, US outcomes are not superior. Wish it were true so I could justify a higher salary. The US having more amenities is irrelevant. The fact remains that when it comes to health care you are talking theory. In reality, the only proven way to lower costs while maintaining quality is with more govt involvement.


          • “high deductibles may in the short term cut costs some”

            HDs cut usage, they don’t cut costs, nor will they in the long run either.

          • Peter, I don’t want to interfere with your discussion with Paul because based upon his actual statements I believe him to be an expert.

            However, since we seem to butt heads all the time and we both want essentially the same end product I want to clarify some of the rhetoric thrown around.

            I believe in free market’s, Hayek style. You believe in government largesse for healthcare. The two views are not totally incompatible.

            Hayek relies upon the rule of law and contracts. He also relies upon free markets, but, as we both admit, we are a rich nation that can afford more for those that might need help. The only question is how that help should be provided.

            I think Hayek would recognize that healthcare will offer the most innovation, best outcomes and best prices if it functions in a free market. Therefore, he would likely say that instead of socializing it let it be in the free market while providing aid that least interferes in the free market.

            If however, you are ideologically based and socialism is what you believe in then there is no meeting of the mind for your primary purpose is not to solve the healthcare problem, rather it is to promote a cause, socialism, where the central government has almost total control.

          • Steve, what did I duck? Your comment had nothing to do with what I objected to. Maybe you don’t understand the nuances involved when government incentivizes consolidation (or is in bed with corporations) rather than the free market.

            Apparently you don’t understand a bunch of other nuances as well. The fact that we spend more on household amenities makes our spending more on healthcare consistent with American buying practices.

            As far as outcomes you are wrong. You probably get your information from third party opinion pieces that try to promote an ideology. If you think what I say is inaccurate provide us with a real study that proves your point.

            I’ll start off with one international study well accepted by the experts. Take note. International studies of high value are relatively rare. Go to the CONCORD study.

        • “So the prices at Walmart are higher? ”

          First read and then type. I didn’t mention Walmart. The discussion involved healthcare corporations which are incentivized by government to consolidate. Now you can make whatever comment you wish.

          “Nearly every country with first world medicine has lower costs than we do,”

          The citizens of those countries have less household amenities than US homes. We spend more on almost everything, healthcare included. That is not necessarily good, but more accurate in portraying the differences between these countries. There are also outcome considerations. US outcomes are superior.

          “It may be possible to have lower costs with less govt intrusion into health care, but no one has figured out how to do it.”

          Right off the bat Paul proves you wrong with a study by rand. There are many plans that have been suggested that would lower costs.

          We haven’t had a true free marketplace since at least WW2. That is the way to lower costs. That doesn’t mean that charity or even government ‘charity’ cannot help those in need. The marketplace has made your computer at a relatively low price. If we used the ACA method you probably would have a terminal and wait your chance to get your message out on the one large computer that services all equally bad.

          • “The discussion involved healthcare corporations which are incentivized by government to consolidate.”

            Most all corporations can be incentivized to consolidate – government or not. It depends on the maturity of the market and competitive forces. Even with companies selling different products they are frequently under the umbrella of one corporation. That’s why we have anti-trust laws – or is that too much government for you as well?

          • Peter, there is a difference between a business consolidating because of market forces and business consolidating because of government rules and regulations that destroy a free marketplace.

            You clearly belong in the socialist camp. That is OK with me, but that means your economics leave a lot to be desired along with the lessons of history.

          • So you’re against government oversight of corporate consolidation that restricts competition?

          • Where did I say that?

            Have you ever read Hayek? Government is necessary. It just has to be limited and permit the free market to function. Our Constitution adds a bit more, so we have to consider it as well.

  3. Sadly the larger healthcare systems get, the less chance there is for practicing docs to control any conversation in healthcare

    • Partially (largely) because physicians have abdicated their involvement. So many docs just want to work and make money. They don’t want to take the time and make the effort to be involved in anything that does not directly generate revenue for them. I would note that in our network, granted it is not huge so maybe if we get bigger this changes, physicians have major involvement in everything, and are leading the efforts to both control costs and to improve quality. It is a cultural thing, and it is difficult to transplant culture, but when I meet with other physician leaders I often leave depressed after hearing about how much physicians are at odds with their administrators rather than working with them and leading.

  4. Without commenting on the post I just want to say that sometimes headlines are ridiculous and there to push an ideology rather than to advance truth. “A Third of US Adults Skip Health Care Due to Cost” is such a headline.

    I am not saying cost isn’t a factor, but it is a factor in everything we do including what we eat, where we sleep and what clothes we wear. These things are rationed by ordinary citizens and many times are more impiortant than the health care that is skipped. Such headlines are meaningless.

    We also have to look a bit deeper into human behavior than these articles would suggest. For instance, a number of years ago a study was done to compare the use of pap smears and mammograms in Canada and the US. It was found that more of these early diagnosis procedures were done in the US. Some might want to look hard and see why that occurs since Canada has single payer and so called universal care and the US doesn’t. But, even more surprising was that the Canadian numbers equalled the numbers of those Americans that had no insurance. Why, without healthcare costs, didn’t Canadians perform more of these procedures than the Americans that actually had to pay for them?

  5. While I agree with much in the post, doctors/clinicians/hospitals are not the answer to cost control. Don’t get me wrong….it would be nice if that were the case. But, there are far too many conflicts of interest and too much history of standard recommended practices driving UP cost while providing little benefit and even harm (reference Hadler M.D. on interventional cardiology and Needed to Treat stats on statins etc…the list goes on and on). Patients have to be in the drivers seat through having the ability to financially benefit from prudent use of health care and prudent skepticism of the health care system.
    (Footnote: the development of Direct Primary Care is a step in the right direction as DPC docs are more likely to be aligned with patient interests and needs.)

    • Read Merrill Goozner’s piece on Tom Price. We have way too many proceduralists who have a direct financial interest in the devices they are implanting. Oh heck, not to air too much dirty laundry, but just sit and talk with any admin assistant in any good sized hospital. Ask them about they incentivize physician behavior. Very informative.

      Putting the patients in a position where they make this work? That will take a major change in culture. I rarely have a patient ask about costs. Even the very famous, nationally syndicated libertarian author whose wife I cared for didn’t ask about costs. People worry about the costs of their premiums and deductibles/co-pays. AFAICT, they seldom actually worry about the costs of what they have done. They just don’t see the linkage. If anything, I sometimes think patients are more likely to see healthcare as Veblen good than anything.

  6. Two observations might apply. The slowly increasing portion of our nation’s economy devoted to HEALTHCARE conforms to Parkinson’s Law since @1960-65: 3% increase annually, compounded (from 6.0% to now 18.3% of the GDP). Summarized, the Law says that in complex institutions, work expands to use the resources available. Secondly, our nation’s healthcare industry suffers from Paradigm Paralysis as reflected in the inability of the dominant forces within the industry to cooperatively promote reform to control its cost and improve its quality. With our national politics in a shambles, nothing is likely to change without some major disaster. Remember that recessions recur, on average, every 8 years. We are soon 9 years since the beginning of the last one. AND, the Medicare eligible population is in the process of doubling between 2000 and 2030.

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