Dr. Atul Gawande on the “Fight for the Soul of American Medicine”

McAllen, Texas likes to think of itself as the Square Dance Capital of the World. McAllen doesn’t like to think of itself as the home of the most over-priced health care in the U.S..

Yet it is, as surgeon/author Dr. Atul Gawande reports in the June 1, issue of The New Yorker. (Thanks to reader Jim Jaffe for calling my attention to the article when it first hit the blogosphere)

McAllen seems an unlikely spot for Gold-Coast Medicine.  “Lonesome Dove was set around here,” Gawande writes.  “McAllen is in Hidalgo County, which has the lowest household income in the country.”  Nevertheless, if you have the patience to pore over nationwide Medicare data, you’ll discover that “only Miami—which has much higher labor and living costs—spends more [than McAllen] per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average,” Gawande notes. “The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns.”

And it’s not just Medicare. Research shows that in regions where Medicare spends more, private insurers also have been shelling out more and more each year. Indeed, nationwide, reimbursements from private insurers have been climbing by an average of roughly 8% a year. (See figure 1 here)

The Mystery of Health Care in McAllen

Gawande, who is both a surgeon at the Brigham and Women's Hospital in Boston and an assistant professor at the Harvard School of Public Health, begins by emphasizing that runaway health care inflation is leading the nation toward an economic Armageddon. He quotes President Obama: “The greatest threat to America’s fiscal health is not Social Security. It’s not the investments that we’ve made to rescue our economy during this crisis. By a wide margin, the biggest threat to our nation’s balance sheet is the skyrocketing cost of health care. It’s not even close.”

“The question we’re now frantically grappling with is how this came to be, and what can be done about it,” Gawande observes. “McAllen, Texas, the most expensive town in the most expensive country for health care in the world, seemed a good place to look for some answers.” 

What Gawande found in McAllen will shock some—though it shouldn’t surprise anyone who has read Money-Driven Medicine: The Real Reason Health Care Costs So Much. “Here, along the banks of the Rio Grande, in the Square Dance Capital of the World,” Gawande reports, “a medical community has come to treat patients the way subprime-mortgage lenders treated home buyers: as profit centers.

When Gawande began asking local doctors and hospital administrators why health care in McAllen cost so much than in other places, at first, many expressed surprise: “Really, are you sure?” 

Disbelief gave way to many of the usual rationalizations for the high cost of care in the U.S.  First, blame the patients—particularly Fat People: “Just look around,” said one McAllen resident who Gawande met at McDonald’s.  “People are not healthy here.”

At first glance, this seems to make sense.  “McAllen, with its high poverty rate, has an incidence of heavy drinking sixty per cent higher than the national average,” Gawande notes. “And the Tex-Mex diet has contributed to a thirty-eight-per-cent obesity rate.”  When he meets a local heart surgeon, he learns that business is brisk: this physicians explains that in the past twenty years, he has done some eight thousand heart operations, “which exhausts me just thinking about it,” Gawande comments.
But when Gawande studied local public-health statistics, he discovered “that cardiovascular-disease rates in the county are actually lower than average, probably because its smoking rates are quite low. Rates of asthma, H.I.V., infant mortality, cancer, and injury are lower, too. El Paso County, eight hundred miles up the border, has essentially the same demographics. Both counties have a population of roughly seven hundred thousand, similar public-health statistics, and similar percentages of non-English speakers, illegal immigrants, and the unemployed. Yet in 2006 Medicare expenditures (our best approximation of over-all spending patterns) in El Paso were $7,504 per enrollee—half as much as in McAllen.

“An unhealthy population couldn’t possibly be the reason that McAllen’s health-care costs are so high. (Or the reason that America’s are. We may be more obese than any other industrialized nation, but we have among the lowest rates of smoking and alcoholism, and we are in the middle of the range for cardiovascular disease and diabetes.)”

Searching for another answer, Gawande asked himself, “Was the explanation, that McAllen was providing unusually good health care? He took a walk through Doctors Hospital at Renaissance,  a physician-owned hospital in the McAllen metropolitan area,  and was impressed by what he saw: “the sixteen operating rooms, the laparoscopy suite, with its flat-screen video monitors, the hybrid operating room with built-in imaging equipment, the surgical robot for minimally invasive robotic surgery . . . virtually everything you’d find at Harvard and Stanford and the Mayo Clinic.”

And yet, and yet . . ..  Gawande acknowledges  there’s no evidence that the treatments and technologies available at McAllen are better than those found elsewhere in the country. The annual reports that hospitals file with Medicare show that those in McAllen and El Paso offer comparable technologies—neonatal intensive-care units, advanced cardiac services, PET scans, and so on. Public statistics show no difference in the supply of doctors. Hidalgo County actually has fewer specialists than the national average.

“Nor does the care given in McAllen stand out for its quality. Medicare ranks hospitals on twenty-five metrics of care. On all but two of these, McAllen’s five largest hospitals performed worse, on average, than El Paso’s. McAllen costs Medicare seven thousand dollars more per person each year than does the average city in America. But not, so far as one can tell, because it’s delivering better health care.”

Granted, we’re still learning out to measure quality of care. But with bills so much higher in McAllen, you would expect to find at least one of the five hospitals to show superior performance in some areas.

The Doctors Let Down Their Hair 

Next Gawande went out to dinner with a group of doctors.“All were busy, full-time, private-practice doctors who work from seven in the morning to seven at night and sometimes later, their waiting rooms teeming and their desks stacked with medical charts to review,” Gawande explains.

“Some were dubious when I told them that McAllen was the country’s most expensive place for health care. I gave them the spending data from Medicare.”  But Gawande showed them how health care bill in McAllen had soared in the past 17 years. “In 1992, in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. But since then, year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person.

“’Maybe the service is better here,’ the cardiologist suggested. ‘People can be seen faster and get their tests more readily,’ he said.

“Others were skeptical. ‘I don’t think that explains the costs he’s talking about,’ the general surgeon said.”

Then, inevitably, one doctor hit upon the explanation that so many physicians cling to:
“’It’s malpractice,’ a family physician who had practiced here for thirty-three years said.

“’McAllen is legal hell,’ the cardiologist agreed. ‘Doctors order unnecessary tests just to protect themselves,’ he said. Everyone thought the lawyers here were worse than elsewhere.

“That explanation puzzled me,” Gawande notes. “Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn’t lawsuits go down?”

“’Practically to zero,’ the cardiologist admitted.

Then, someone broke the white-coat version of the “blue wall of silence” that we associate with policeman who don’t share their guild’s secrets with the public.

 “’Come on,’ the general surgeon finally said. ‘We all know these arguments are bullshit. There is over utilization here, pure and simple.’ Doctors, he said, were racking up charges with extra tests, services, and procedures.

“The surgeon came to McAllen in the mid-nineties,” Gawande explains.  Since then, this surgeon told him, “‘the way to practice medicine has changed completely. Before, it was about how to do a good job. Now it is about ‘How much will you [the doctor] benefit?’

“Everyone agreed that something fundamental had changed since the days when health-care costs in McAllen were the same as those in El Paso and elsewhere. Yes, they had more technology. ‘But young doctors don’t think anymore,’ the family physician said.”

The surgeon offered an example.  General surgeons are frequently asked to see patients suffering with pain caused by gallstones. If there aren’t any complications, the pain goes away on its own or with pain medication. After switching to a lower-fat diet, most patients have no further problems. Only those who suffer recurrent episodes need surgery. .

“But increasingly,” Gawande was told, “in McAllen surgeons simply operate. The patient wasn’t going to moderate her diet [anyway], they tell themselves. The pain was just going to come back. And by operating they happen to make an extra seven hundred dollars.”

Gawande offered the doctors another scenario: “A forty-year-old woman comes in with chest pain after a fight with her husband. An EKG is normal. The chest pain goes away. She has no family history of heart disease. What did McAllen doctors do fifteen years ago?

“Send her home, they said. Maybe get a stress test to confirm that there’s no issue, but even that might be overkill.

“And today? Today, the cardiologist said, ‘she would get a stress test, an echocardiogram, a mobile Holter monitor, and maybe even a cardiac catheterization.’

“Oh, she’s definitely getting a cath,’ the internist said, laughing grimly.”

The Numbers Support the Stories.

To determine whether overtreatment was truly the problem in McAllen, Gawande sought information from three sources:  Jonathan Skinner, an economist at Dartmouth’s Institute for Health Policy and Clinical Practice, which has three decades of expertise in examining regional patterns in Medicare payment data; and two private firms that digest data from private insures,  D2Hawkeye, an independent company, and Ingenix, UnitedHealthcare’s data-analysis company—to analyze commercial insurance data for McAllen. “The answer was yes,” Gawande reports. “Compared with patients in El Paso and nationwide, patients in McAllen got more of pretty much everything—more diagnostic testing, more hospital treatment, more surgery, more home care.”

For example “Between 2001 and 2005, critically ill Medicare patients received almost fifty per cent more specialist visits in McAllen than in El Paso, and were two-thirds more likely to see ten or more specialists in a six-month period.”  Keep in mind that demographics are very similar in McAllen and in El Paso. “ In 2005 and 2006, patients in McAllen received twenty per cent more abdominal ultrasounds, thirty per cent more bone-density studies, sixty per cent more stress tests with echocardiography, two hundred per cent more nerve-conduction studies to diagnose carpal-tunnel syndrome, and fie hundred and fifty per cent more urine-flow studies to diagnose prostate troubles. “

“They received one-fifth to two-thirds more gallbladder operations, knee replacements, breast biopsies, and bladder scopes. They also received two to three times as many pacemakers, implantable defibrillators, cardiac-bypass operations, carotid endarterectomies, and coronary-artery stents. And Medicare paid for five times as many home-nurse visits.”

  Gawande’s conclusion: “The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine.”

The Culture of Money

But Gawande still hadn’t solved the mystery of McAllen. Why do doctors in McAllen practice medicine so very differently from doctors in El Paso?

He considered the possibility that the doctors in McAllen were trained differently. Another blind alley: “There was no sign, that McAllen’s doctors as a group were trained any differently from El Paso’s.”
Could  the difference have something to do with the fact that one of McAllen’s hospitals is for-profit, while a second is physician-owned?  The hospital that is owned by doctors “has a reputation (which it disclaims) for aggressively recruiting high-volume physicians to become investors and send patients there,” Gawande writes. “Physicians who do so receive not only their fee for whatever service they provide but also a percentage of the hospital’s profits from the tests, surgery, or other care patients are given. (In 2007, its profits totaled thirty-four million dollars.)”  Some argued that this gives physicians “an unholy temptation to over order.”

“Such an arrangement can make physician investors rich,” Gawande concedes. “But it can’t be the whole explanation. The hospital gets barely a sixth of the patients in the region; its margins are no bigger than the other hospitals’—whether for profit or not for profit—and it didn’t have much of a presence until 2004 at the earliest, a full decade after the cost explosion in McAllen began.”

But one morning, Gawande reports, he met with “a hospital administrator who had extensive experience managing for-profit hospitals along the border” and he offered a broader explanation of why doctors in McAllen practicing differently than those in El Paso: the culture of money.

“’In El Paso, if you took a random doctor and looked at his tax returns eighty-five per cent of his income would come from the usual practice of medicine,’” he told Gawande.  “But in McAllen, the administrator thought, that percentage would be a lot less.

“He knew of doctors who owned strip malls, orange groves, apartment complexes—or imaging centers, surgery centers, or another part of the hospital they directed patients to. They had ‘entrepreneurial spirit,’ he said. They were innovative and aggressive in finding ways to increase revenues from patient care. ‘There’s no lack of work ethic,’” he added. “But he had often seen financial considerations drive the decisions doctors made for patients—the tests they ordered, the doctors and hospitals they recommended—and it bothered him. Several doctors who were unhappy about the direction medicine had taken in McAllen told me the same thing,” Gawande confides. “‘It’s a machine, my friend,’ one surgeon explained.

“No one teaches you how to think about money in medical school or residency,” Gawande adds. “Yet, from the moment you start practicing, you must think about it. You must consider what is covered for a patient and what is not. You must pay attention to insurance rejections and government-reimbursement rules. You must think about having enough money for the secretary and the nurse and the rent and the malpractice insurance.”

But while many doctors think about finances only when they must, others are intoxicated by the smell of freshly-printed green paper. These “are the physicians who see their practice primarily as a revenue stream,” Gawande writes. “They instruct their secretary to have patients who call with follow-up questions schedule an appointment, because insurers don’t pay for phone calls, only office visits. They consider providing Botox injections for cash. They take a Doppler ultrasound course, buy a machine, and start doing their patients’ scans themselves, so that the insurance payments go to them rather than to the hospital. They figure out ways to increase their high-margin work and decrease their low-margin work. This is a business, after all.”

“In every community, you’ll find a mixture of these views among physicians, but one or another tends to predominate. McAllen seems simply to be the community at one extreme,” Gawande explains. In other words, a focus on money has become part of the “signature” of clinical care in McAllen. In some communities it is acceptable for doctors to talk openly about money. In others it is not.
   .
In McCallen, Gawande reports, one “hospital executive told me, he’d seen the behavior cross over into what seemed like outright fraud. ‘I’ve had doctors here come up to me and say, ‘You want me to admit patients to your hospital, you’re going to have to pay me.’ ”

“How much?” Gawande asked.

“’The amounts—all of them were over a hundred thousand dollars per year,’ he said ,The doctors were specific. The most he was asked for was five hundred thousand dollars per year.”

“He didn’t pay any of them, he said: ‘I mean, I gotta sleep at night.’ And he emphasized that these were just a handful of doctors. But he had never been asked for a kickback before coming to McAllen.”

In part 2 of this post, I’ll talk about how physicians in different communities view medicine differently. This isn’t to say that money isn’t an obsession for some doctors in Boston, where Gawande practices. Because there are so many doctors and hospitals in that city, competition is fierce, which tends to lift prices as hospitals and some doctors invest in the most expensive equipment and the most luxurious amenities available while vying for affluent well-insured patients. In order to pay for the equipment, they use it –and overuse it—research shows, padding medical bills.

But in various parts of the country there are communities where doctors are fighting for what Gawande calls “the soul of medicine.”  These doctors are setting up “accountable care organizations,” he reports “in which doctors collaborate to increase prevention and the quality of care, while discouraging overtreatment, undertreatment, and sheer profiteering.” 

This, Gawande says, is why it doesn’t make a difference who pays for healthcare, whether it is a for-profit insurer or the government. Ultimately, he argues doctors and hospitals in local medical communities must be willing to band together to put people before profits. Health care providers must hold themselves accountable for containing costs and lifting quality. Thus, “it doesn’t matter who is paying health care bills. . . . Activists and policymakers spend an inordinate amount of time arguing about whether the solution to high medical costs is to have government or private insurance companies write the checks. . . . These arguments miss the main issue. When it comes to making care better and cheaper, changing who pays the doctor will make no  . . . difference.”

In part 2, I will explain why I disagree with Gawande on this critical point. I completely agree that local health care providers must be in the front lines of reform. But I believe that physicians who recognize the problem of over treatment in our system need help, both from government and from non-profit insurers who share their goals.  We need organized medicine.  And I would argue that, in the course of telling his story, Dr. Gawande himself illustrates how non-profit insurers have helped create health care delivery systems that allow doctors and hospitals to collaborate in providing patient-centered, accountable for care. 

That said, I also believe that nothing will happen unless physicians themselves want to fight for the soul of medicine. External carrots and sticks are not sufficient. We’ll have true health care reform only if physicians face up to the fact that the current course is unsustainable. If over-use of advance medical technologies continues to drive health care inflation, and the cost of care continues to climb by 8 percent a year, our medical bills will double in just nine years. That is not going to happen: What can’t happen, won’t. Instead, the system will hit a wall and crash-- splitting in half. At that point, we will find ourselves living in a third-world health care system that over-treats our wealthiest citizens while under-treating everyone else. In that scenario, there will be no winners except those who profit from over treatment. Even the wealthy will die of a thousand cuts and a thousand burns

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Comments

[GodPharmacy]

Since most of the docs I work with are not salaried this is not about the "greedy, private practitioner" vs. the "noble, team oriented, salaried doc" but instead about; training, habit and fear of malpractice.

Good luck getting the "young-uns" to stop ordering so many tests - especially without significant tort reform.

[lasix]

Since most of the docs I work with are not salaried this is not about the "greedy, private practitioner" vs. the "noble, team oriented, salaried doc" but instead about; training, habit and fear of malpractice.

[lasix]

If insueres were rquied to disclose this information , this might encourage more people to question why healthcare is so expensive!

[lasix]

Nowhere in his article does he address the "Winter Texan" aspect of Healthcare provision in McAllen, nor how this fact skews the Medicare data upon which he bases his over simplified analysis.

[viagra]

nice info

[sildenafil citrate]

In general, Medicare rates are supposed to reflect cost of living, which is of course most strongly effected by real estate prices. Therefore they are lowest in Appalachia, rural areas, and so on, and lower in the Midwest, true Deep South, and the big square states in the mountain west. However, there are some strong anomalies.

[sildenafil citrate]

In general, Medicare rates are supposed to reflect cost of living, which is of course most strongly effected by real estate prices. Therefore they are lowest in Appalachia, rural areas, and so on, and lower in the Midwest, true Deep South, and the big square states in the mountain west. However, there are some strong anomalies.

[Bob]

This could have been a wonderful insightful article on issues surrounding healthcare related costs.

What "surgeon/author Dr. Atul Gawande" provides however is an inaccurate, non-scientific diatribe based upon misleading data. His primary hypothesis centers on the following statement: "Nevertheless, if you have the patience to pore over nationwide Medicare data...In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average,” Gawande notes. “The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns.”

AND THIS IS EXACTLY WHERE Dr. Gawande is misled, and carries forth with a cacophony of error.

Nowhere in his article does he address the "Winter Texan" aspect of Healthcare provision in McAllen, nor how this fact skews the Medicare data upon which he bases his over simplified analysis. The fact that each winter McAllen sees a near doubling of its Medicare age population certainly accounts for this differential. Maybe in his next analysis, he could understand the data before jumping to his predetermined conclusions.

It is no wonder that Dr. Gawande seems to favor the non-scientific literature, and "Imperfect Sciences".

He also failed to disclose his conflicts of interest relating to his personal bias for Clinton Era socialized healthcare.

[Maggie Mahar]

Barry

I totally agree that it would be very helpful for insurers try make it clear to each of us how much they have paid out in reimburesments for each of us each year--and to spell out how much they have paid out in reimburemtns for the average (median) customer during the year

They also should disclose, on the same statements, what percent of our premiums they have kept to cover their own expenses. profis, etc.

If insueres were rquied to disclose this information , this might encourage more people to question why healthcare is so expensive---and to pay more attention to the many examples of ovetreatment that we are beginning to hear about in the mainstream media.

[Barry Carol]

On the issue of tracking healthcare utilization at the individual level, every time I get an Explanation of Benefits (EOB) form from my insurer, there is a line toward the end of it that shows how much the insurer has paid out in claims on my behalf since I’ve had the policy. There is also the standard information about how much I have paid toward my deductible and my out of pocket (OOP) maximum for the year. There is no reason why every insurer including Medicare can’t include information about aggregate claims paid since the inception of the policy. By the same token, I think every employer should provide each employee with comprehensive information about not only how much the employer paid for health insurance on the employee’s behalf but information about the cost of all other benefits for which the employer pays cash or accrues an obligation, like pension benefits, that can be quantified.

If all employees had this information, they might better understand why their wages have stagnated in recent years as well as how much the employer pays them in total compensation as opposed to just wages. For those of us who have incurred significant healthcare expenses over the years, we will have a better understanding of the reality of high healthcare costs and the need to take action to reduce them. Since this information can be provided for minimal cost, we should provide it. What have we got to lose?

I also note that the Social Security Administration has, for years, provided each of us with an annual statement that shows our covered earnings history as well as the Social Security taxes paid by both the employee and the employer along with the projected benefit payable upon retirement. Medicare should adopt a similar approach.

[Pat S]

Maggie --

I have seen discussions of some plans to encourage some doctors to join in groups. In addition to the Medicare project, some states,including my own, are working on that concept.

However, for now the plans for reform are to continue paying for health care as it is paid now -- to health care systems or to small groups or to individual providers.

I do believe that the wind is blowing toward doctors consolidating in groups, for a number of reasons including the ones that you point out, a trend already in motion. But for now, that is not a primary goal of reform.

[Pat S]

Legacy Flyer --

Maryland is in the waning phases of an unusual expiriment with insurance. I am not sure of the details off the top of my head without looking them up, but I am aware that they have some unusual results. It may be true that for many specialties payments in Maryland are lower. In MA, however, payments are quite a bit higher than in most of the Midwest. As I have said, overall incomes tend to be lower there because of cutting the work up among many more doctors. Incomes in private practice are generally reflected in the salary payments of health care systems where doctors are employees, and are generally lower on the coasts than most of the Midwest.

Generally, Medicare pays less than private insurance, but as you say, not always. On average it pays about 10% less. The gap for hospitals is a little more because of losses by hospitals on outliers hurting them when they are paid a lump sum.

Medicare rates are set a county at a time. Payments vary a great deal even within states, but in general are higher on the Coasts. Medicare is an important driver of private insurance payments, usually set partly based on Medicare rates.

One notable exception to these rules are very large health care systems with very strong market penetration. They are often in a position to force private insurers to negotiate prices, and do so. The latest big example is the Partners group in Boston, which made headlines by demanding significant premiums in payments from private insurers. However, in my state an insurance company exec told me that one of the big systems was demanding a payment of 250% of Medicare. In Wisconsin a few years ago one large system lost an antitrust judgement because of their forcing payers to pay higher rates in areas where they controlled health care. Of course, these systems rarely feel inclined to pass this on as higher salaries for their doctors.

Medicare does not negotiate with providers, but they are pressured by lobbyists and by congress people. In general, Medicare rates are supposed to reflect cost of living, which is of course most strongly effected by real estate prices. Therefore they are lowest in Appalachia, rural areas, and so on, and lower in the Midwest, true Deep South, and the big square states in the mountain west. However, there are some strong anomalies. For example, the highest payment rates are in South Florida, which is clearly less costlly than NYC, SF, and some other places to live, but which gets very strong support from its congressional delegation, regardless of party, since if they want to keep their jobs they need to be very interested in Medicare rates. Another interesting anomally is in NYC, where the last time I saw the data Medicare paid a higher rate in the Bronx than in Manhatten, even though cost of living and of operating medical services was clearly higher in Manhatten.

[Maggie Mahar]

NG--

All of the research shows that patient demand drives a relatively small percentage of health care spending.

Patients tend to ask for small-ticket items (an MRI when they don't really need one.)

Very few patients ask to die in an ICU. The hospital tells them they are being transferred to an ICU.

Few ask for heart surgery. The doctor tells them they need heart surgery.

Few ask to stay longer in the hospital. The doctor tells them they need to stay longer.

Even in the case of cancer patients--who are very frightened--they may ask "isn't there something you can do? What about a different type of chemo?"

If the doctor is very honest and says, "I am very sorry, but there is nothing we can do. Another stab at chemo would only make you weaker--it won't help you"--oncologists tell me that most patients accept this.

There are some who will try another doctor and another --and if those doctors are honest and tell they I can't help you----a very few will fly to Mexico where someone will tell them that tranfusing their blood will save them.

But these patients are the exceptions.

Most people believe what doctors tell them, especially if they seek a second opinion, and that doctor says the same thing.

We just need to get doctors looking at guidelines and realizing that they're hurting patients,not helping them, when they provide care without benefit.

One way that you can tell that over-treament is driven by providers, not patients: in areas where there are more doctors and more hospital beds, patients spend more timein the hopsital and undergo many mnore tests and treatments.

And--here's the kicker-- if many patients leave that town--say a military base closes-- the hospital beds continue to be filled and doctors keep their appointment books fulling, doing surgeries, tests and other procedures.

As for Taiwan--what the government considers "excessive" utilization you and I would consider normal and necessary care.

In Taiwain, the govt goes into people's homes and intimidates and shames them if they are using more care than their neighbors.

That wouldn't fly here. .

[NG]

Barry said:

"Partly for this reason, I think we should copy the Taiwan approach of giving every person a smart card that would track his or her utilization with the potential for intervention if and when a given individual’s utilization is deemed excessive relative to his or her overall health status."
--------
Good point and one we don't hear enough about. The question is what do you/the system do about over utilizing patients, especially since fear is likely the driving motivation in these folks. Up until now, I believe the system has actually encouraged this kind of behavior because it made money for providers. In a future system with global budgets which is practice guideline drive, such over utilization demands by frightened patients will pose a real problem for providers. I do believe this to be a very large problem in our system right now.

[Maggie Mahar]

Barry--

Yes, it's a typo. I meant 1.23 times-- which is 123% as much.

You write " The consensus among private insurers is that they pay hospitals about 30% more than Medicare and physicians 20% more than Medicare."

Unfortunate what private insurers say about how much they pay out is usually an exaggeration-- PR designed to make customers feel that they really aren't keeping that much of your premiums--they are paying docs and hospitals so much money!

The fact is that nationwide, they pay about 23 percent more, on average. And in some cases Medicare actually pays more for certain services in certain places.

More importantly, for-profit insurers make virtually No Effort to figure out whether what they are paying for actually benefits patients.

The best non-profit insurers do this, and Medicare is making increased effrots to do this.

Even when they were trying to "manage care" in the 1990s, for-profit insurers made little effort to investigate whether the care would help patients. That's why they were just as likely to deny necessary effective care as they were to deny ineffective, unneeded care.

As for for-profit insurers setting up "efficient networks"-- the same problem crops up. They look at how much the doctors bill--and avoid those that tend to bill more--without looking at whether this means that they are doing a better job (spending more time actually try to manage a chronic disease) or whether they are over-treating.

By the same token for-profit insurers put doctors in their networks who bill less--Even if this is because they are Skimping on Patient Care.

I once had a primary doctor become very angry with me because I had set up an appointment for a bone-density test and for a
gynecological exam. (I had reached an age where bone-density is appropriate to set a baseline.)

He indicated that the insurer watched how many referrals he did, and that it wasn't up to me to decide that I needed these referrals. (He was in a fo-profit network that was considered very good, but he himself was not impressive. His office was dirty. I never went to him again. Still, he'll stay in the network as long as he keeps the referrals and billing down.
I called the insurer who was not at all concerned that the doctor was discouraging gynecological exams and bone-density tests.

J Rossi--
Individual anecdotes from docs don't tell us much about quality of care at Kaiser.

The Dartmouth research does. Kaiser Northern California has very high ratings for outcomes and efficiency.

I said that small practices are going to disappear because, in many places, they are not economically sustainable.

Overhead (real estate, utilities, etc.) is too high, and eventually patients are going to expect every doc to have healthcare IT.
Small practices won't be able to afford it.
The fact that are healthcare system is so fragmented is one of the problems that makes it so expensive. We need economies of scale. And we need the collaboration Gawande describes at Mayo.

On producitity-- We have over two decades of evidence showing that, among Medicare patients and paitnets with comprehensive insurance, undertreatment is rarely a problem in this country.

Overtreatment is a huge problem.

ON balance, lower productivity would be better for those patients.
Patients living in regions where they undergo fewer tests and procedures fare better.

Underinsured, uninsured and Medicaid patients on the other hand are regularly undertreated. That's where we need doctors doing "more." But unfortunately, they won't make much money "doing more" for those patients . . .

[Barry Carol]

“On Medicare payments to doctors: nationwide, commercial insurers pay an average of 1.23% more than Medicare . . .”

Maggie,

I think this may be a typo. Charlie Baker, CEO of Harvard-Pilgrim Healthcare, has said in the past that his health plan pays, on average, 120%-135% of Medicare rates and even more for certain procedures. The consensus among private insurers is that they pay hospitals about 30% more than Medicare and physicians 20% more than Medicare. This accounts for why, in part, there is so much opposition to a public insurance option that would pay Medicare rates or even slightly more and require providers to accept the public plan if they want to continue to do business with Medicare. If the payment gap between Medicare and private insurers were really only 1.23%, the public insurance option concept wouldn’t be anywhere near as controversial as it is. For certain procedures in some locations, private insurers pay less than Medicare, but that is likely the exception and not the rule.

[Barry Carol]

Insurers that attempt to form efficient provider networks include up to 80% of practitioners and try to avoid about 20%. The reason for avoiding the doctors in the bottom 20% is not incompetence. It’s that they are high utilizers either because they are too money driven or practice excessive defensive medicine or both. Salaried doctors can fall into that category almost as easily as doctors paid on a fee for service basis if bonus compensation is determined, at least in part, by revenue and profit generation for the practice or hospital.

From a patient’s perspective, I think it’s useful to know whether a given doctor is a high utilizer or not even irrespective of outcomes which often cannot be adequately measured due to a combination of a too small patient panel and inadequate risk adjustment capabilities. In this context, we are talking mainly about PCP’s and doctors who manage a lot of chronic disease like diabetes, heart disease, asthma, COPD, etc. where there is lots of discretion in how often to order tests and how frequently the patient should come in for routine monitoring. Surgeons probably need to be evaluated differently. Interestingly, there are quite a few patients who equate high utilization with thoroughness. These patients may see the high utilizers as the best doctors and prefer to go to them rather than a doctor who scores better on cost-effectiveness metrics. It could well be that the patient and his expectations is the bigger problem than the doctor. Partly for this reason, I think we should copy the Taiwan approach of giving every person a smart card that would track his or her utilization with the potential for intervention if and when a given individual’s utilization is deemed excessive relative to his or her overall health status.

[jrossi]

Fee-for-service leads to overtreatment:true.
Capitation leads to undertreatment:true.
Salaries lead to the proper amount of treatment:not necessarily true, as several docs have indicated. Salaries sometimes lead to an increased interest in coffee breaks and getting out at 5 pm. Now maybe that's because those are bad greedy docs, and the good dedicated docs at Mayo and Geisinger would never act that way. But maybe that's because docs are human beings, and human beings, over time, inexorably respond to incentives and to their social environment. We shall see.My experience at Kaiser when I was there from 1989 to 1996: Different docs acted differently: some stayed late and risked burnout. Some docs left at 5 pm come hell or high water, and quite a few took the admin cure, not that they were good at admin, but it got them off the 15-minute per pt treadmill, which is what they wanted. Quite a few became hospitalists.
I was talking to a friend who is a hospitalist at Kaiser recently. He complained bitterly about the lazy outpt docs. The more things change....
The point is clear: Putting docs on salary might decrease productivity. Would a productivity decrease be good or bad? It depends, as you all know, on whether increased productivity results in better pt care. I suspect we might find that sometimes a productivity decrease would not increase suffering and death and sometimes it would. We'll know only after the experiments have been done in each individual practice setting.
Maggie writes that fee-for-service and solo and small groups will get rarer in the future because of reformers' efforts. No doubt. I also think they will get rarer in primary care because primary care docs will get rarer.

[Maggie Mahar]

Just a few comments on facts:

On Medicare payments to doctors: nationwide, commercial insurers pay an average of 1.23% more than Medicare . . .

But Pat is right, in some areas, Medicare actually pays more for certain services. When I was writing the book I interviewed docs who told me that Medicare actually paid better than private insurers in their area. (A lot depends on how much clout the private insurer has in a particular area. As they consolidated, they grew stronger.)

Primary care salaries in Boston are low. Specialists salaries in Boston are all over the place--depending on who your patients are and where you work.
But in many cases, specialists income is very high--as it is in Manhattan.

The notion that incomes are lower in more desirable cities is not borne out by research--

Reserach shows that in medicine, competition does not lead to lower prices.

Legacy Flyer--

Thanks for the conciliatory words. (Mean as a snake was originally a phrase used by slaves to refer to owners. But most recently, it has been used repeated to apply to Pelosi. )
Most of my encounters with hospital administrators have been in interviews, not at conferences.

And frequently, when I have interviewed hospital administrators, they have become quite upset. I'm a journalist, so I ask the questions you are not supposed to ask.

There was, for instance, the CEO at Cedar Sinai in L.A. who really didn't want to talk about how much money they lost when they were forced to junk their entire HIT system . . .

Then there was the CEO of a Manhattan hospital who appeared ready to lunge across the dinner table and strangle me (this was a working dinner for health care experts in NY) when I suggested that these days, patients really need a patient advocate with them in the hospital--at all times if possible--to watch out for medication mix-ups, etc.
(I cited Dr. Don Berwick's experience when his wife was in the hospital.)

"Not in my hospital," he shouted. "We don't make mistakes!" (Mental note: warn friends never to go to his hospital).

I could go on, but my experiences with hospital administrators are varied, and, on the whole, I fear that hospital administrators are all too likely to see medicine as a "business" rather than as a "mission"

I would send you a book--but I don't have any. I gave away the last book a long time ago. But you can purchase a "like new"used copy on Amazon for a few dollars.

Pat-- There are actually plans to encourage (but not force) doctors to become part of groups (accountable care organizations) and often that means being on salary. It definitely means moving away from fee-for-service.
I'll be talking about a Medicare demonstratoin project in part 2 of this post.
Medicare pilot projects will offer physicians an opportunity (but not a guarantee) to earn more if they join one of these groups. (As part of the group they will be eligible for bonsues --if the groups' outcomes approach a benchmark for quality and efficiency.)
Medicare reform is going to pave the way for natoinal health reform. If a Medicare pilot project works--and Medicare adopts it--you can be all but certain that it will become part of natoinal health reform by the end of the President's first term (when he hopes to achieve universal coverage.)
So keep your eye on what Medicare is doing. It will tell you where we are headed.
Over time, fee-for-service is likely to disappear (private insuers will follow Medicare). Virtually all reformers talk about the "perverse incentives" of fee-for-service.
Most likely, some doctors will receive capitated payment, some will receive bundled payment per episode of care (bundled with other docs and a hospital); some will be on salary.
The self-employed doctor in a solo or small practice is likely to disappear (over a period of years) because the overhead (including Health IT) is so expensive.

[Legacy Flyer]

Pat S,

You may have better data that I do. I can tell you that private payors where we are (Baltimore) are paying on average about 80% of Medicare. It is my understanding that in many areas of the South and Midwest payors are paying at 120% of Medicare and above.

Payment rates generally relate to HMO penetration - hence are lower in the Minneapolis area and other major metro area in the South and Midwest.

Do you have good data on what commercial insurance is paying in various areas of the country?

I am aware of the Medicare practice costs adjustment.

[Pat S]

In this discussion about doctors incomes, there are two points that people seem to be missing.

The first is that no one is arguing that doctors will not tend to do more work under fee for service than salary. However, as Gawande observes, based on data from Dartmouth and other sources, doctors doing more work is often a problem, not a benefit.

Second, there are no real-world reform proposals that envision changing most US doctors to salaries. Proposals from Obama's to Emmanuel's to Single Payer all propose that the current system for medical payments to doctors largely be continued as is. Various changes in the health care financial environment are pushing more and more doctors into salaried positions, but that is related to market situations, not to reform proposals.

[Pat S]

Legacy Flyer --

Since we are both radiologists, I would be very interested in seeing data that supports your contention that the individual fees for individual services paid to radiologists in the Midwest by third party payers are higher than on the coasts. Every report I have ever seen shows the opposite. I know that Medicare payments are higher on the coasts.

Payments in Chicago and Detroit may be higher than in Utica, but payments in Utica are higher than in Duluth and payments in NYC higher than Chicago. Metric for metric, payments are lower in the Midwest.

Radiologists in the Midwest do make more in total. That is based entirely on higher volumes, in turn based on lower numbers of providers per population. Salaried radiologists also make more in the Midwest, because of market considerations due to competing with fee for service settings in the region.

As I pointed out, the term the "South" is a little problematic. Miami, Atlanta, Dallas, and Houston are all in the South, and have very high payment rates. However, much of the rest of the South has low rates.

[Legacy Flyer]

Christopher George is correct with respect to the ordering practices of older vs. younger docs. The younger ones order a lot more tests and have a lower "hit rate" than the older ones.

Since most of the docs I work with are not salaried this is not about the "greedy, private practitioner" vs. the "noble, team oriented, salaried doc" but instead about; training, habit and fear of malpractice.

Good luck getting the "young-uns" to stop ordering so many tests - especially without significant tort reform.

[Legacy Flyer]

Maggie,

Frankly, I didn't know that "mean as a snake" was reserved for Nancy Pelosi. The term has been around a long time and I have used it in the past -not in association with Nancy Pelosi. I don't feel strongly one way or the other about Nancy Pelosi - any more than I feel strongly about Steny Hoyer or Harry Reid.

I am also sure that you know quite a bit about healthcare - I never intended to imply that you didn't. Also, I never suggested that you didn't know what you were saying because you weren't a doctor. I know that doctors don't have all the answers or posess magical understanding that others don't.

I am sure that you have met many hospital administrators, and lectured at many conferences attended by hospital administrators. You have probably met them in situations where they were all dressed up and acting sweet. I on the other hand have met them (over the course of almost 30 years) during times when we had to make a budget, make cuts in spending and fire employees (as well as get rid of physicians). The sweet and lovely ladies and gentlemen you meet at lectures and conferences can look and act differently in the cold hard light of dawn. I do believe that I have a better understanding of (the reality of) hospital administrators than you do.

To make an analogy - you used to teach/work at a college. I believe that gives you a better perspective about college administrators than I have. I think you would think me naive if I said: "I think Chemistry Professors make the best college administrators and I would like to interview college administrators who were Chemistry Professors".

I like Health Beat and wouldn't waste my time if I didn't. You deal with important and interesting issues, although I will say that sometimes Health Beat gets off on tangents that could decrease its impact.

As to your book, I may take the time to read it some day. Especially if it were sent to me for free (hint, hint)

[Christopher George]

I don't mean to rant.

At one of our hospitals the vast majority of doctors are on salary, and they do not practice medicine that is "leaner" than the fee for service ones. The younger ones practice in an expensive way, on salary or not.

I think JRossi pointed out earlier, many doctors don't want to be corporate drones. This is independant of how much you decide you want to pay them.

Malpractice fear is going to have a long hangover effect. This is just my opinion.

I can speak for Boston. Specialists salaries are not high, but there is a huge supply of people who want to live there. The real problem is going to be in the small cities where higher income tended to balance an undesirable location.

Productivity falls dramatically on a salaried model. This will dramatically increase the number doctors required. This won't be a problem in NYC, but it will be in many other places.

I think the idea that doctor greed as the primary problem in American medicine is incomplete. As far as doctor pay is concerned, I think you are going to get your wish...pay is falling and work hours increasing, at least in our neck of the woods. ( I don't think doctor income will ever be low enough to suit some people.)Total healthcare costs are going to continue to spiral out of control without iron clad tort protection, as they have in Europe, and dramatic patient demand reductions, as they have in (Enlightened) Europe.