Breakfast with Atul Gawande

Sunday, Boston Surgeon Dr. Atul Gawande spoke at the New Yorker Festival about the importance of a hospital being able to “Rescue Success from Profound Failure.”   (Long-time Health Beat readers will recognize Gawande as the author of Complications: A Surgeon’s Notes On An Imperfect ScienceThe Checklist Manifesto  and a number of brilliant New Yorker articles that I have written about in the past, including: “Letting Go: What Should Medicine Do When it Can’t Save Your Life?”,  “It Will Take Ambition It Will Take Humility,” and  “The Fight for the Soul of American Medicine”  (Hat-tip to the New Yorker for publishing so many stellar articles illuminating an extraordinarily complicated subject: healthcare and healthcare reform.)

Before Gawande’s talk began, IBM, the event’s sponsor, hosted a small breakfast where Gawande spoke informally to a group of doctors, health plan executives, hospital administrators and people from IBM who are in the vanguard of healthcare reform. The New Yorker was kind enough to invite me to attend the breakfast and blog about the conversation.

                              Less Expensive Medical Care Can Mean Better Care   

At Sunday’s breakfast Gawande began by observing that “in just the past four or five years we have seen a huge shift in the national conservation about health care.” Since 2007 or 2008 many have come to realize that when it comes to medical care in the U.S., “there is no direct relationship between the amount of money spent and positive results.”  In other words, although we spend twice as much as many other developed countries on health care, medical care in the U.S. is not twice as good. In some ways it is worse.

Yet this epiphany is not as discouraging at it sounds. As Gawande pointed out, “Recognizing that expensive care does not necessarily equal top-quality care has enabled a decoupling of the two issues in the public mind, and opened up the possibility for real beneficial change in the system. The Affordable Care Act’s goal” of securing high quality care for everyone is, in fact, affordable. “We don’t have to ration care.”

For more than two decades, the researchers at Dartmouth have been telling us that when it comes to healthcare, higher quality and lower costs go hand in hand. And for years, both doctors and patients have resisted the counter-intuitive message that “more care” and more “expensive, intensive care” is not necessarily “better care.” Nevertheless, Dartmouth’s studies offer hard evidence: at our best hospitals outcomes are better because doctors practice what some call “lean medicine.” The Mayo Clinic in Rochester Minnesota illustrates how an efficient healthcare delivery system works: care is coordinated; caregivers communicate with each other. As a result,  patients see fewer specialists; they undergo fewer unnecessary tests and procedures;  diagnoses doesn’t take as long; there are fewer preventable errors; patients spend fewer days in the hospital and are less likely to be readmitted. Outcomes are better; both patient and physician satisfaction is higher, and the final bill is lower.

But Gawande points out: most Americans are not lucky enough to receive integrated care. “Many people of advanced age can have as many as eight specialists, none of whom talk to each other, resulting in duplication of effort (multiple and redundant testing, for example) and tremendous expense.” Under reform, he explained, this will change.  “The doctor” will be replaced by a “medical team” that diagnoses and treats “the whole person” working together, “advising a course of treatment and monitoring results.”  From the audience, a representative of the Veterans Administration spoke up to say that already, the VA has begun to change how the organization treats patients, “with primary care teams reviewing caseloads instead of single physicians.” This is the collaborative care that we need.

                                              Rethinking the Goals of a Hospital

Toda, the idea that there is too much waste in our health care system has not “filtered down to day-to-day practice,” Gawande acknowledged. Even at Brigham and Women’s Hospital, where he practices, administrators are distressed when their operating rooms are not full.  If physicians perform fewer operations, profits fall.  Of course fewer surgeries may mean that doctors are advising patients to try medications or a change of diet before going under the knife. As Gawande and others have explained, too many U.S. patients undergo unnecessary procedures that put them at risk– without benefit.

Yet most hospital CEO’s still believe that it is their job to grow revenues.  Reformers point out that these administrators need to stop thinking of a hospital as a “revenue center,” and instead recognize that in the larger scheme of things,hospitals are “cost centers.” As a society, we do not want our hospital industry to be a growth industry: this we cannot afford.

Nevertheless, when hospitals do less, they lose money.  If reform is going to work, we will need to find creative ways to reimburse them so that efficiency doesn’t leave them in the red.

                                      In Massachusetts, “We’re Early Adapters” 

In fact, that this is already beginning to happen at Brigham & Women’s, Gawande announced. His hospital’s newest contracts with Medicare, BlueCross, BlueShield and others link financial reward to clinical performance. Rather than being paid for volume (fee-for-service) they are paid for value (better outcomes at a lower cost.) This means that providers are taking on some of the risks that are built  nto medical care—an uncertain science shot through with ambiguities. . 

As Gawande observed in his most recent New Yorker essay, “Historically doctors have been paid for services, not results. In the eighteenth century B.C. Hammurabi’s code instructed that a surgeon should be paid ten shekels of silver every time he performed a procedure for a patrician—opening an abscess or treating a cataract with his bronze lancet. It also instructed that if the patient should die or lose an eye, the surgeon’s hands be cut off.” But, “apparently the Mesopotamian surgeon’s lobby got this results clause dropped,” Gawande writes. “Since then, we’ve generally been paid for what we do, whatever happens.” 

At Sunday’s breakfast he explained that, today, reform aims to “reshape that system.”  Under Brigham & Women’s new contracts with insurers, if the hospital “exceeds its cost-reduction and quality-improvement targets” (in other words, if it manages to deliver better care for less), it will share in the savings. But “if it misses the targets, it will lose tens of millions of dollars.”  Today “70 percent of our revenues depend on accepting risk,” Gawande confided. “This is a radical shift.”

When it comes to health care reform, Massachusetts is six years ahead of the rest of the country. “We’re early adapters,” Gawande said, smiling. He recognizes that health care reform will require enormous upheaval, and that many will resist change. Nevertheless he seemed delighted  to be on the frontlines of a revolution. Indeed, he reported that when one of his colleagues gives talks out-of-state, he begins my telling the audience: “’Hi, I’m from Massachusetts, and I’m from the Future!” (Here, Gawande grins.)

                                          Doctors Begin to Talk About Costs

In the past, doctors rarely focused on the cost of medical treatments. Their mandate was to do the best they could for the patient in front of them. How much that might cost society was not their concern. They were not economists. They were not politicians. They were physicians.

 So when Massachusetts’ Attorney General released reports in 2010 and again in 2011, revealing enormous disparities in how much the state’s hospitals charge even for simple procedures “we were surprised,” Gawande told his breakfast audience.  http://www.healthbeatblog.com/2012/09/the-third-rail-of-payment-reform-tackling-wide-variations-in-how-much-providers-charge/ Gawande and his colleagues knew little about hopsital pricing. They had no idea that insurers were paying their medical center far more than other, less well known hospitals, simply because Brigham had a brand name, and thus, enjoyed market clout..

 (Even before the AG’s reports came out,  a Boston Globe investigation revealed that when Dr. James D. Alderman opens a patient’s clogged arteries at MetroWest Medical Center in Framingham, insurers pay the hospital $17,000—not counting the physician’s fee. But when Alderman performs the same angioplasty at Brigham, the hospital receives $24,5000—44 percent more —even though the patient is receiving the same care from the same interventional cardiologist.)  

 Now, under reform, physicians are being forced to think about the cost of care.. If they don’t, Brigham won’t receive bonuses from insurers for “exceeding its cost-reduction and quality-improvement targets.” 

Not long ago “we had a meeting at the hospital to talk about costs,” Gawande reported, adding that this was a first.

There was a reason for the meeting. Recently, the state issued a distrubing report about health care inflation. As I explained not long ago,  Massachusetts health care spending per patient rose by 13% in 2008 and 2009, and outlays for physicians and other professional services jumped by 21 percent. Insurers’ total reimbursements rose in part because patients were using more services, but the report noted, “higher prices explained 77 percent of the growth in spending from 2007 to 2008, and 88 percent of the increase from 2008 to 2009.” 

Responding to levitating medical bills, last month, Massachusetts became the first state in the nation to pass legislation that aims to cap overall healthcare spending so that it grows no faster than the state’s economy.  The target for 2013 is just 3.6 percent. (Nationwide, economists are predicting annual increases of 6.5% over the next few years. ) 

The law also created an independent Health Policy Commission that is charged with monitoring provider organizations with revenues of $25 million or more. If they are exceeding the targets they will be required to “submit plans for corrective action.”  Or, as Gawande put it, “a toothless Commission can wag its finger at us.”

Though, in fact, the law goes a little further than that:  the Commission may refer cases to the attorney general if commissioners determine that an organization “has abused its market power.”  Meanwhile the tension between providers receiving higher payments and those receiving much less for similar services continues. Clearlyl, the issue has not been laid to rest.

Presumably Brigham called the meeting to open a discussion about becoming more cost-conscious. Physicians were shown charts revealing how much spending on hosipital care has risen in recent years —and how much it is projected to rise unless health care providers “break the curve” of medical inflation  Gawande indicated that physicians were less than enthusiastic about reining in healthcare spending.

Twice, he referred to “the Anger in the Room.”  Some doctors pointed out that U.S. patients are getting older; this, suggests they will need more care, not less. How can doctors possiblly be expected to put a lid on medical bills? Others argued that new medical technologies always are more expensive: should they be expected to ignore life-saving innovations?  From what Gawande said, this seemed to be the tenor of the discussion. The doctors were not embracing the mandate to squeeze some of the waste out of hte system. Nevertheless, he suggested, it was a beginning.

In the past most physicians have insisted that cost just isn’t their problem. Now, however, as we move from payment systems that reward health care providers for volume, to new rules that offer bonuses only if providers can achieve better outcomes for less, both physicians and hospitals will have to think about ways to trim how much it costs to deliver care so that the bills that send to patients and insurers recieve don’t continue to climb. .

Still, one can understand why medical professionals would be upset by the idea of putting the nation’s health care system on a budget. After all, many doctors ask, what is more important than our health? Shouldn’t the wealthiest nation on earth be able to spend whatever a doctor believes is necessary in order to provide the best care possible?

Clearly, Gawande does not agree. He understands that we are health care inflation is out of control: we about to hit a wall.  But he did not stand up and pound on the table.

 Instead, he quietly made the point that health care is not our only priority. Because we spend so much on medical care we are left with less to invest in other, equally important, areas. Consider education: “Because healthcare is so expensive, we have 35 kids in a classroom,” he noted.

(Two years ago Gawande told an interviewer a story about attending a parent-teacher conference at his son’s school. “I was interested in meeting the new school superintendent and asking him what he was working on. I thought he’d say educational reform, how to restructure the educational system. But what he spends his time on, he said, is healthcare. As a result of property tax reform in Massachusetts, his budget for teachers has been slashed. At the same time, the cost of medical benefits for teachers has risen by 9 percent. What is he to do? . . .

“A little later I was talking to my son’s math teacher. He couldn’t quite remember where my son was. With 35 students in the class and one teacher, my son was disappearing somewhere in the middle.”                                                            

                                  Clinicians Need to Become Engineers  

Throughout his talk, Gawande emphasized that if we want affordable, higher quality care “we need better systems, and people doing clinical work need to become part of inventing and engineering the systems. Otherwise, it will be done by a software guy.”               

“The biggest hurdle is to get people to work together to coordinate car.” .In our fragmented system, many doctors practice solo or in small groups. Working in separate silos, Gagwande noted, they  wind up “chasing each other’s faxes.

 ”What other industry besides medicine still uses fax machines?” he  asked. “Doctors on average received 1100 faxes a month.”  As every patient knows, many are lost. “But there is no coordinated push for changing inputs,” said Gawande. “ Acceptance of sub-par systems is the biggest problem.

“Doctors have been slow to grasp that the fact that transforming the flow of information can be more lifesaving than any vaccine,” he added. But “there are signs (such as at Cleveland Clinic and in the state of Massachusetts) that doctors are seeing the value of improving information flows.

 “Transparency” also is essential Gawande explained. This means making prices transparent—and striving to make infomartion about quality public. Today, he noted, hospitals compete for maternity patients by advertising that they have Jacuzzis. Under reform, a hospital’s infection rates will be published.

 At present, “even a doctor doesn’t have much to go on when choosing a hospital,” Gawande recently admitted when writing about  picking out a medical center where his mother would have a knee-replacement operation. “A place may have a great reputation, but it’s hard to know about actual quality of care.  

“ Unlike some countries, the United States doesn’t a  have a monitoring system that tracks joint-replacement statistics. Even within an institution, I found, surgeons take striking different approaches. They use different makes of artificial joints, different kinds of anesthesia, different regimens for post-surgical pain control and physical therapy.”

                 Standardizing Medicine and the Need for “Hard-Hitting Oversight”

If we want to control both cost and quality, this will have to change, Gawande wrote in the August 13th & 20th issue of the New Yorker. Doctor’s druthers must give way to what we know about what works best. This, means “studying what the best people are doing” (defining “best” in terms of best outcomes) figuring out how to standardize it, and then trying to get everyone to follow suit.”

 For his mother, he found a program that had developed a single, default way of doing knee replacements. Not only was his mother’s operation a success, her recovery was extraordinary. “Three days after her operation, she was getting in and out of bed on her own. She was on virtually no narcotic medication. She was starting to climb stairs.”

At the very end of his talk, Gawande declared that if we want better, safer, more affordable care, we are going to need “hard-hitting oversight.” At that point, to my great disappointment, the breakfast ended. It was time for Gawande go across the street and deliver his  talk on how hospitals can “Rescue Success from Failure” to the Festival’s larger audience.

But his most recent New Yorker article, “Big Med,” he fleshes out what he meant by “oversight.”

“Essentially,” Gawande wrties, “we’re moving from a Jeffersonian ideal of small guilds and independent craftsmen to a Hamiltonian recognition of the advantages that size and centralized control can bring.  . . . For the changes to live up to our hopes –lower costs and better care for everyone—liberals will have to accept the growth of Big Medicine, and conservatives will have to accept the growth of strong public oversight.”  He makes it clear that government will have to require “transparency about performance and costs, and enact rules and limitation to protect the ordinary citizen.

“Those of us who work in healthcare . . . will have to contend with new protocols and technology rollouts every six months, supervisors and project managers, and detailed metrics on our performance. Patients won’t just look for the best specialist anymore; they’ll look for the best system. Nurses and doctors will have to get used to delivering care in which our own convenience counts for less and the patients’ experience counts for more. “

Coming from a soft-spoken man, these are tough words.  Gawande is never strident .He doesn’t raise his voice.  But as he puts it, “change is long overdue, and many people recognize that.”  He is certain that on the ground, a revolution has begun. There is no turning back.

Gawande ends his essay: “Some will see danger in this. Many will see hope. And that’s probably the way it should be.”

 

19 thoughts on “Breakfast with Atul Gawande

  1. Thanks for this article, Maggie, and thanks to Dr. Gawande for his ongoing crusade to improve cost and effectiveness in American health care.

    It is impossible to emphasize how important this concept is, since, as has been made clear by the evolving politics in this upcoming election, we are fast approaching a watershed in American health care. We can choose the route suggested here, or we can choose to accept cuts in the quality of insurance from both private insurers and Medicare that will drastically increase the out of pocket expense and consequently decrease access for hundreds of millions of Americans, including low income, middle class, working people, and retirees.

    As you indicate in this article, there are three ways we can cause physicians to develop more rational practice patterns: direct control, as is practiced by health systems in most developed countries as well as in some systems in the US, including the VA and most closed panel HMO’s; capitation, making health systems and doctors responsible for meeting health care budgets by delivering care that is both effective and cost effective; and culture, which is what drives places like the Mayo Clinic, the Cleveland Clinic, InterMountain Health Care, and other systems outstanding for their mix of lower costs and better results.

    The recent Institute of Medicine study that indicated that US health care wastes $750 billion a year — nearly 30% of US health care spending — also noted that if every state had both the cost and the quality of the best performing state 70,000 lives a year would be saved while costs would be reduced by over 20%. While the existence of capitated systems account for some of that difference, it is the medical culture in that state — Minnesota — that is the most important driver.

    It has proven extremely hard to transplant culture of that sort from one place to another, but I am hopeful that if we use elements of both control and of capitation, we will eventually develop physicians and administrators whose culture will begin to bring our costs and our results into line with those of the rest of the developed world. We really have little choice if we place any value on the right of our people to get quality care.

  2. Pat S.–

    Very good to hear from you.

    Yes, I agree, our medical culture lies at the heart of the problem–and the solution.

    But our medical culture is changing. The kids going to med school today are different from those who went to med school in the early 1980s. Today, most med students realize that heatlh care is changing. They will not be free agents, able to practice medicine however they see fit. Most will be working for larger organizations, where someone will be looking over their shoulder.. And the free flow of money going into medical care will no longer be there.

    Meanwhile, more and more women are going into medicine, and by and large, they are much more open to working in teams, and collaborating in delivering coordinated care. (I don’t mean to sound sexist. But women and men in our culture still are conditioned very differently.
    Boys are taught to compete. Girls are taught to be popular; they want their peers to like them.)

    Meanwhile, over the next decade, many of the doctors opposed to health care reform will be retiring.

    Going forward, 10 years from now, I believe that a different mix of doctors will make it much easier to achieve reform’s goals.

    Finally, we will need a change in the patient culture. But partients a e beginning to read more about the dangers of overtreatment, the risks of preventable medical errors in our hospitals . . .

    And most patients will follow their doctors’ advice. If physicians begin to lead the reform revolution, patients will follow.

  3. Off base once again.

    This blog so likes to blame doctors for all the woes of the cost of care.

    Whaat either you fail to realize, or maybe prefer to not discuss is that the issue is price controls by insurers and government. Price controls do not work.

    If you want costs to come down and care to improve, then open up the free market, have some means tested individual responsibility, and stop shilling for big insurers and big technology corporations.

    If you ask patients how to improve access, quality and cost of care, I do not think anyone would say, “Hey, let’s ask IBM or Harvard!”

    The answer is simple.

    Put the power of the healthcare dollar back in the individuals hand. Patient’s are better at weeding out inferior doctors and hospitals than any government bureaucrat.

    Governments role is to set up rules and regs that apply to everyone. The role of government is not to artificially disrupt the market by picking winners and losers. When they do, we are all losers!

    • DrSH lives in a different universe than I do. I, as a patient, have no way to evaluate the cost-effectiveness of any doctor’s decision, other than the fact that I am still alive. In an emergency, I will have neither the time nor the information to evaluate competing proposals in a “free market” situation. In fact, it is nearly impossible to even get cost quotes for a procedure or the price of alternative medicines before the doctor decides what is to be done or what prescription is to be written. We are totally at the mercy of whichever medical professional or group of medical professionals deigns to give us an appointment. The role of government is to evaluate the actions and results of these licensed professionals after the fact and to create and enforce appropriate regulations to protect the patients. I simply cannot trust the medical system to do this internally, especially in a manner to control costs. Dr SH’s cavalier attitude toward his responsibility for cost control of his actions is the greatest part of the problems we have.

  4. Doctor SH-
    Thanks for your comment.
    Always good to hear an alternative view– but, on this
    blog, we try to provide factual evidence for positions. (Everyone learns more that way.)
    For example, you assert: “Price regulation does not work.”
    But the fact is that both Japan and every country in Western Europe use price regulation to keep a lid on healthcare spending. The result is that their total health care bill is much lower than ours while quality is as good or better. (I’m talking about quality measured by outcomes, patient satisfaction, physician satisfaction and longevity of the population.). Even if you only focus on white Americans, and compare them to white Europeans, you find that they live longer, there are fewer maternal deaths during childbirth, and overall they are healtheir (despite the fact that many more smoke and in some countries alcoholism is a major problem.)

    You also call for “market competition”– without giving examples of it working to assure better quality and lower prices in the health care market.” Please see my recent post explaining why competition doesn’t work for healthcare. .
    Finally, if patients were able to “weed out” the inferior doctors we wouldn’t have so many cases of serious malpractice. Relatively few doctors are involved, but patients continue to go to them. (Ideally physicians would weed them out by blowing the whistle on them.)
    P.S. I realize you think that this blog is particularly hard on doctors. But in fact, I believe that everyone (drug-makers, device-makers, lobbyists, patients themselves) has played a role in creating our over-priced, inefficient health care system. (See my book).
    It’s worth noting that in this post, I’m quoting a doctor–Atul Gawande. The first reader commenting on the post (Pat S.) also is a physician. Do you believe that they, took, are simply eager to blame doctors for everything?

  5. DrSH –

    I agree with Maggie, and I have been a physician in private practice for over 30 years. Suggesting that physicians should adopt more rational practice patterns is not an attack on physicians, any more than suggesting that physicians should adopt the ALLHAT study guidelines for management of hypertension is an attack on physicians. The essence of the science of health care is the rational scientific evaluation of the effectiveness of all health care procedures and practices, both in themselves and in comparison with other alternatives, and the alteration of practice patterns to conform with the best evidence. The ideas that Dr Gawande espouses are a very clear cut implementation of those principles.

    Also, the notion that “market forces” can deal with US health care problems with access, cost, and effectiveness flies in the face of all real world experience. Private market insurance and health care plans have consistently failed to control costs as well as Medicare, and certainly have failed as compared with foreign medical systems in all measures of market effectiveness. Health care is a classic failed market, as Nobel Economics laureate Kenneth Arrow demonstrated years ago and as more recent economic research has verified.

    For a short time, there was considerable discussion suggesting that the fact that Medicare Part D had cost less than originally estimated was a triumph for private market forces. However, closer examination demonstrated that much of that was due to two factors: the failure of Part D to attain the predicted levels of enrollment and the fortuitous appearance of generic alternatives to many widely used drugs that were not accounted for in the original estimates. That effect has now disappeared, and Part D expenses are rising much faster than any other sector of private or public health insurance. In addition, government run programs such as the VA prescription programs and drug purchases through regular Medicare have always risen more slowly than Part D costs.

    It is critical to evaluate political and economic ideas against real world experience. In health care, “market forces” have had only one noticeable effect historically: forcing larger and larger numbers of people out of access to health care.

  6. I was very encouraged by an article in today’s New York Times about cancer care at Memorial Sloan Kettering. Specifically, the experts there decided that they will not give patients with colorectal cancer a new drug called Zaltrap which was approved by the FDA and which Medicare is required to pay for. The reason is its cost of over $11,000 per month or more than twice as much as the older drug, Avastin (about $5,000 per month). Both drugs are roughly equal in efficacy according to MSK.

    Memorial Sloan Kettering, despite its culture of aggressive treatment of cancer, is increasingly sensitive to the high cost of certain treatments, a meaningful portion of which must be paid by Medicare patients in the form of very high co-pays, at least until they move into the catastrophic coverage zone under Part D. The co-pays are simply unaffordable for patients with modest incomes.

    While this move, by itself, will not have a significant impact on total cancer treatment costs, even within MSK, it’s an important step in the right direction, in my opinion. MSK’s stature in the cancer field could and should, I think, exert a positive influence on the need for cost consciousness throughout the cancer treatment community.

  7. Great article, thanks.

    Two small points, and then we can get back to the good debate that you have going.

    1. As someone who handles health claims, let me state that the Mayo Clinic price is NOT always lower. That is somewhat of an urban legend in health studies.

    2. The disparity in Massachusetts hospital pricing could end in about 6 months when insurers start to adopt reference pricing across the board. If the insured has to pay the extra charges in cash, they would decide that one operating room is not 33% safer or better than another.

    Medicare does have kinks like that too, where it pays more to hospitals which are located in high-wage cities.

    I of course would prefer a system which openly subsidized public hospitals, rather than smuggling the subsidies into the amounts that are paid for identical procedures.

    • “the Mayo Clinic price is NOT always lower”

      That is definitely true in two ways.

      In the first place, the famous Mayo vs. MGH study showed that the individual charges for individual services were actually higher at Mayo on average. Mayo’s total cost was lower because of lower utilization of service per patient.

      Second, what we are talking about here are statistical aggregates, not individual incidents. In any statistical aggregate it is almost always true that individual incidents can be found that contradict the overall result, but that does not change or call into question the overall result.

      For an easy example of point two: in general men are taller than women. Discovering a man who is 5’2″ and a woman who is 6’6″ does nothing to disprove that fact.

      It is also important to note that this is not a “black swan” situation. “Black swans” disprove only assertions that state that something is always true, not that it is true much more often than not. Mayo generally is more cost efficient, but not always.

      Also, it will be very interesting to see how reference pricing works in Massachusetts. Reference pricing is definitely the new flavor of the month in health cost control, but is relatively untested. Past flavors of the month have suffered as they were more generally evaluated. Reference pricing definitely suffers from one feature that has proven a problem in the past: patients have a great deal of difficulty making informed point of service decisions, and reference pricing requires them to do just that.

  8. Bob, Barry, Pat S. & Harry

    Bob– The idea that the final bill is lower at Mayo comes from Dartmouth studies compariing very similar Medicare patients (suffering from the same disease) who are treated at different hospitals. Dartmouth adjusts for age, demographics, and severity of illness, then compares the total cost. It also looks at the number of specialists seen, number of tests and procedures, number of days the patient is in the hospital, patient satisfaction and physician satisfaction.

    While the amount that a patient may pay for a particular procedure may be higher at Mayo when compared to a hospital such as UCLA the final bill is lower because patients see fewer specialists, undergo fewer tests etc.

    Care is extremley way co-ordinated at Mayo, and the medical center has top-down control because the doctors are employed by Mayo. AT UCLA a great many doctors in private practice have “privileges” there and making sure that
    care at UCLA is efficient imay not be their first priority.

    As someone who sees insurance claims coming and going, you’re not in a position to make the carefully adjusted “apples-to-apples” comparisons that Dartmouth has, comparing hundreds of hosptials . . (Mayo is not the only one that scores very well for efficiency.)
    I wrote about this reserach here– http://www.healthbeatblog.com/2008/04/health-care-ref-3/ (search for the word Mayo.) Also, see the post about a doctor who was at Mayo for a number of years, left to take a position at a very good hosptial in Manhattan– and then, after 7 years, went back to Mayo– and Why http://www.healthbeatblog.com/2008/10/what-makes-minn/

    That said, the Dartmouth research is looking at Medicare patients only. It’s quite possible that private insurers pay Mayo far more than UCLA (or whoever) and that therefore, the final bill for private patients is not lower.

    But insofar as insurance payments are based on “brand-name,” “and public perception” rather than quality it is quite likely that UCLA fetches equally high payments.

    What we know is that the Citiy of Los Angeles recently picked an insurer for its city employees that does not include UCLA’s doctors in its network because the city. thought that insurers were paying too much for UCLA’s docs simply because they had market leverage.. (See my recent post on
    Variations in what Hospitals Charge: “The Third Rail of Payment Reform” http://www.healthbeatblog.com/2012/09/the-third-rail-of-payment-reform-tackling-wide-variations-in-how-much-providers-charge/

    Barry–
    I totally agree, the fact that Sloan Kettering decided not to use the newer, more expensive drug because it is no more effective is very good news.
    It suggests that the carrots and sticks in the Affordable Care Act already are having an effect insofar as they make hospitals and doctors begin to talk and think about cost and quality. As Gawande says, more and more people are acknowlednging that newer & more expensive often isn’t better. We have to look at medical evidence about effectiveness.

    The fact that Sloan Kettering did this should make many oncologists stop and think.
    It is telling that Medicare is forced to pay for this more expensive drug.
    This, of course, is because drug industry lobbyists have great power in Congress. And up until now Congress has been Medicare’s board of directors. If Medicare did something that the lobbyists didn’t like Medicare’s funding could be cut, a govt agency that measured effectiveness(AHRQ) could find it’s funding slashed (this has happened in the past.)
    T’here are also powerful “cancer” lobbies, and unfortunately, too often they are not lobbying with the interests of patients in mind– they are tied up with powerful corporate contributors. (Here, I’m thinking of the “pink ribbon” folks.)
    But under the Affordable Care Act this will change.
    A great many sentences in the legislation begin “The Secretary of HHS may . . . ” For instance she can recommend that Medicare pay less for certain “overvalued” products and services, or pay more for certain “undervalued” products and services (net/net there would be a savings.)
    And she will not have to go through Congress for approval!

    Already, Medicare has begun to cut what it pays for some testing done in doctors offices. (When doctors rent or buy the testting equipment, they tend, quite naturally to do many more tests–some unnecessary. It’s just so easy if the equipment is there, and of course, they need to use it in order to pay for it.

    Of course lobbyists will try to lobby HHS — but the Secretary of HHS doesn’t run for office. She doesn’t need campaign
    contributions!

    Pat S.
    Yes, science should determine what we pay for.
    And you’re entirely right about Part D. Once again, we are seeing that turning health care over to the private sector does not make it less expensive.

    Harry–
    Thank you for your comment.
    As you say, the patient is not a savvy consumer who is in a position to comparison-shop and figure out how to get the
    best value for his money.
    First the “patient” is, by definition who is sick, often in pain, sometimes frightened and elderly. We spend the bulk of our healthcare dollars when we are very sick.
    Secondly, and most importantly, he hasn’t been to medical school. He’s not a medical reseracher. While he can compare the quality of two refrigerators, he is not in a position to compare the quality of treatments that doctors propose for very complicated diseases.
    This is why we need comparative effectiveness reserach, done by people who have no financial interest in the outcome, and overseen by the government. The Affordable Care ACt provides funding for more such research, and gives the Secretary of HHS the power to lower Medicare payments for services and products that are “overvalued.”

    When Medicare pays less, private insurers follow. (We have seen this with testing.)

    The Preventive Services Task Force also has done a good job of warning about the risks as well as possible benefits of PSA testing. This is another example of the government
    protecting patients.

    Finally, when it comes to choosing a hospital, all a patient knows is what he can see: is the lobby beautiful? Are the rooms spacious? The views? What he cannot measure is the infection rate in the hosptial. (The fact that it looks clean means little.) How many surgical patients run into complications? Are the surgical teams trained to “rescue” them? How many maternity patients are pressured into have a C-section that they don’t want?
    Under the ACA the government will be publishing stats on infection rates in hospitals, and Medicare will be refusing to pay for preventable errors . . .
    Protecting us in situations where we cannot protect ourselves–this is the government’s job.

  9. Pat S.
    Yes, the cost of a particular treatment may well be higher at Mayo.
    But as you indicate, what is important is the final bill. This is what drives health care spending.
    Patients at Mayo are using fewer services not because they choose to use fewer services but because physicians, working collaboratively, are able to arrive at a diagnosis and
    treat the patient more efficiently. (Mayo also has outstanding IT)
    I, too am concerned about “reference pricing”–or any system that asks patients evaluate the value of a treatment at point of service.
    It strikes me that this may work with drugs: there is enough evidence to suggest that generics are almost always as good as the brand-name for most patients. So giving patients the chance to “choose’ the generic makes sense.
    He has a rule-of-thumb to follow. Always try the generic first.
    But if he is trying to compare two forms of chemo, he just doesn’t have the knoweldge to decide that one is overpriced because it is more than he would expect to pay.

  10. Paul-
    Thanks for the link to your commentary. I urge other readers to take a look at it.
    As you say, Gawande is extremely honest, and so I believe him when he said that he and most of his colleagues had no idea how much more Brigham was paid, even for simple procedures.
    The fact that physicians at Brigham are employees of the hospital and paid a salary no matter how much insurers reimburse the hospital for particular procedures is one reason why they wouldn’t be aware of variations in insurance payments. (I believe that the flat salary applies to their first three years at the hospital)
    You are right, of course,those salaries are higher than the total incomes of physicians practicing at hospitals that are not “brand names,” but there is so much mystery surrounding how much physicians’ make at most medical centers that it’s likely that wouldn’t know how much other doctors earn.
    See Gawande’s essay titled “Piecework.” http://www.newyorker.com/archive/2005/04/04/050404fa_fact
    There, he describes how, when he came to Brigham he was asked how much he thought he should earn for the next three years. In other words he didin’t negotiate a salary; he was asked to set his own salary. If they found it appropriate, they would pay him that amount.
    When he tried asking other doctors at Brigham how much they made, he found out that no one was willing to talk about it. Ultimately he had to guess at a number. The hospital said “that’s fine.” (He still had no idea whether he should have asked for more.)
    As for what doctors at other hospitals made, Gawande found out that it was taboo to ask colleagues how much they brought home.. One can assume that if he bumped into a doctor from another hospital at a party, they, too, didn’t compare salaries.

    This may be a function of brand-name academia. When I was offered a full-time job as an Asst. Professor teaching at Yale many years ago, the department chairman didn’t mention how much I would earn. I knew that it would be considered rude to ask. I was offered the job in the Spring. The following fall when I began teaching, another new assistant professor asked me: “Do you have any idea how much we’re going to be paid?” He didn’t know either. It turned out none of us did–until we received our first paycheck.

  11. Maggie –

    First, with respect to reference pricing, besides drugs, I think it could easily be applied to screening tests like colonoscopies and mammograms as well as imaging and expensive surgical procedures that lend themselves to bundled pricing like heart surgery and hip and knee replacements.

    It would obviously not be appropriate for any care that must be delivered under emergency conditions. I think there should be special rules that apply to such care like imposing a legislated maximum charge of some reasonable percentage above Medicare regardless of what the hospital’s list price is.

    Second, doctors historically never considered it part of their jobs to know or to care about costs. The only exception might be if the patient made it clear that potential out-of-pocket liability for care is a very important issue to him or her. According to Paul Levy, there was a huge amount of publicity in the Boston area over the last couple of years about the large premiums paid to Partners Health System as compared to other academic medical centers and community hospitals. For doctors at Brigham & Women’s or MGH to claim that they had no idea about this issue suggests that they never read the Boston Globe or listened to a local newscast. Their claim is not credible in my opinion.

    Finally, I find it incredulous that any employer could expect a prospective employee to accept a job without being told precisely what the compensation package would be. If you’re leaving another job, especially in another city, how could you make an informed decision about whether to accept the job offer or not? For an employer to say, in effect, trust us; we’ll pay you a salary we think is fair but we won’t tell you how much until you get your first paycheck defies common sense. I’ve certainly never seen that approach even attempted anywhere in the private for profit sector of the economy. I guess the hospital and higher education sectors really are different worlds.

  12. Barry–

    Even mammorgrams vary greatly in quality. (Some radiologists mis-read them– many false negatives..)

    A couple of years ago an article in the WSJ reported on “mammogram mills” where mamograms were quite inexpensive. Many low-income women went to them.
    Two years later they would discover that they had cancer–and it would be too late..

    The quality of knee surgery and hip surgery also varies widely. Some people are never able to walk again.

    We can’t have reference pricing unless we also have quality controls that insure that the reference price product is just as good. We don’t want low-income and middle-income people receiving inferior care.

    The nice thing about generics is that we have loads of evidence showing that, for the vast majority of patients, they
    are just as good.

    When it comes to hip and knee replacements, etc., we need to do what other countires do: create registeries, track outcomes for particular implants and doctors, figure out who is doing it best for less, and then insist that all surgeons
    follow the most successful protocol using the implant that combines highest quality with lowest price.,
    This is what Gawande writes about in his newest New Yorker piece ” Big Medicine.”

  13. Barry–
    I find it quite plausible that Atul Gawnade does not read the Boston Globe.
    He’s pretty busy performing surgery, teaching, writing for the New Yorker, giving talks and writing books.
    And he’s not terribly interested in politics.
    He probably spends his time reading medical journals, books, etc.
    I only glance at newspaper. I read the New Yorker, a few websites and I read books.
    I get most of my news through Yahoo, Twitter, etc.

  14. Hospitals and colleges get right down to pennies when it comes to salaries for secretaries and janitors and teaching assistants. Harvard had a mean strike about this and they are not the only example.

    Above that I guess there is a kind of aristocratic atmosphere. I have never been in the atmosphere, but I remember being stunned to find out that 75 and 80 year old semi retired professors were being paid 6 figure salaries in some institutions.

    Whether this indifference to cost is a main cause of high tuition and high hospital charges, I do not know. It does not help for sure.

    Contrast this with the grubbier part of the economy, what economists call the ‘price takers.’ Independent truckers go broke sometimes because they cannot raise their rates when gas prices go up. In health insurance news, restaurant chains are starting layoffs and other job cuts in the face of the ACA, because they cannot feel they can raise their prices even 50 cents.

    In my Minnesota, the two main orchestras are in lockout because employers want to cut salaries, basically from $120K to $90K. I wonder if hospitals and universities are next.

  15. Bob–
    I spent many years in academia and recall that, at least back then, secretaries were very badly paid. The glory of working for Yale was supposed to make up for low earnings.
    Every few years Yale workers went on strike, and students
    supported them.
    Today, many older professors hang on well past 65. Some
    are very productive, but unfortuantely, some are not. And yes they often earning six figure salaries. (Though given the years of education required and the demands of the job, this makes sense. With a few exceptions, they don’t earn as much as most professionals.)
    But they are holding onto jobs that young Ph.D.s sorely need. . .
    That said, professors’ salaries are not the main cause of high
    tuitions.
    Over the past 20 or 30 tuitions years, tuitions have been rising as universities have repaired , maintained and renovated aging university buildings major expense. Many were built before air-conditioning. The buildilngs are too valuable to tear them down and replace them (often historic, landmark buildings), but you can imagine the cost
    of installing AC, redoing wiring, plumbing, heating systems.
    In addition, many universities lost a great deal of money when the market crashed at the end of the Nineties, and again a few years ago.
    As tuition has risen, so has the cost of financial aid.
    Finally, when compared to lawyers, many business executives and others with post-graduate degrees, academics are not earning lavish salaries.
    Median salary for a tenured, full professor is $134,000. For a women in that position, it’s $124,000.
    http://chronicle.com/article/faculty-salaries-data-2012/131431#id=204796 (By and large tenured professors are over 40; probably on average, they’re in their 50s.)
    Lawyers’ salaries are all over the map. Those in the top 10% earn more than $165,000.
    While a person can get a law degree or a business degree in 3 years, it now usually takes 4 to 6 years to earn a Ph.D., and the courses and requirements tend to be more demanding. (Ph.D’s must write a dissertation, which is essentially a book. This can take 2 or 3 years– after completing course work.During that time a grad student usually also is teaching for very low pay.)

  16. Maggie:

    You point out a good reason why I stopped at a Masters rather than persue a Doctorate at Univ. of Chicago in economics. With a young family, the work to succeed in the Doctorate program would have been excessive. I chose a family.

    Often times colleges and universities when they make a small change in a building which needs to be either locally or state approved, they must meet newer and safer building ordinances. Run a new power line and you may end up rewiring a building.

    Energy costs have increased as has the efficiency of new heating plants. It makes sense to change out inefficient heating, windows, insulation, etc. to avoid the increased costs of energy which contine to raise. Older buildings also have asbestos products and lead paint which need to be removed ever so carefully to avoid contamination and health issues.

    The last couple of decades, there has been a decrease in government support for colleges and universities either directly or indirectly through grants, loans, and student-aid.This has placed quite a bit of pressure on institutes of hihger learning to draw down their own funding and increase aid to students from similar funds. In any case, the increase from institutes has not kept pace with the decrease in government aid and inflation. I agree the invested portfolios of colleges and universites took a bath in the nineties and over this last decade in 2002 and again in 2008. Insurance companies suffered losses in the same manner also. Hence forth, there are higher tuitions and insurance premiums.

    I do not understand the fixation of many people with teacher/professor tenure, salaries, and benefits. 30 years ago many people would have snubbed their noses at such occupations. We all knew these occupations were nesscesary; but, we all knew we could make more in the commercial market. Even the healthcare and retirement benefits could not have attracted most of us. How things change . . .

    Now it appears these very same people, whose jobs no one wanted, and their benefits have become the issue for states and banks going bankrupt or having to cut funding elsewhere and we all have ideas on how they can become more efficient. Many seek to cut those retirement and healthcare benefits; which were legislated to these groups of state and private employees, the same as reducing Social Securty for present and future citizens. If the money was properly set aside for retirement by the government(s), we do owe the moneies necessary to carry forth. What is bothersome are the cries for reduction while ignoring the over forecasting of these funds by the states and local government. There are still some forecasting 8% returns which is criminal when taking into consideration the economy. Social Security is a different beast altogether and we would have many who would renege on the Treasury IOUs when they borrowed the money.

    To answer the calls for retiring profs and others purposely because they are filling slots necessary for new and younger people; if the economy was growing along with job growth, would this have even come up on the radar? Not likely . . . Much of the economic issues, revenue decreases, and differences over the same peiod of time are the direct result of tax polices skewed to a small portion of Houshold Taxpayers and Corporations, Defense spending in excess of GDP growth which takes away from Domestic productivity growth, Wall Street and Bank investing in instruments which no longer involve Labor, the skewing of productivity gains to Capital, and the lack of national job growth. Many people can not afford to retire.

    Sorry Maggie, I have digressed.

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