Monday, June 08, 2009

A Fascinating Look at Health Care Costs

I just read a great article in the June 1 issue of the New Yorker: The Cost Conundrum: What a Texas Town Can Teach Us About Health Care. Atul Gawande looks at health care costs by focusing on McAllen, Texas, a small border town which happens to have the highest health care costs in the country. The question is, why? How did this happen in this particular location?
Not to spoil the buildup, but here's the answer: it all comes down to the doctors themselves, and what sort of money culture exists among them:

One morning, I met with a hospital administrator who had extensive experience managing for-profit hospitals along the border. He offered a different possible explanation [for the difference in health care costs between McAllen and 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 said. 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 said. 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. “It’s a machine, my friend,” one surgeon explained.

No one teaches you how to think about money in medical school or residency. 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.

Beyond the basics, however, many physicians are remarkably oblivious to the financial implications of their decisions. They see their patients. They make their recommendations. They send out the bills. And, as long as the numbers come out all right at the end of each month, they put the money out of their minds.

Others think of the money as a means of improving what they do. They think about how to use the insurance money to maybe install electronic health records with colleagues, or provide easier phone and e-mail access, or offer expanded hours. They hire an extra nurse to monitor diabetic patients more closely, and to make sure that patients don’t miss their mammograms and pap smears and colonoscopies.

Then there are the physicians who see their practice primarily as a revenue stream. 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.

Fortunately, some areas have developed very different cultures. Gawande talks about the Mayo Clinic, which has some of the lowest health care costs in the country:

The core tenet of the Mayo Clinic is “The needs of the patient come first”—not the convenience of the doctors, not their revenues. The doctors and nurses, and even the janitors, sat in meetings almost weekly, working on ideas to make the service and the care better, not to get more money out of patients. I asked Cortese how the Mayo Clinic made this possible.

“It’s not easy,” he said. But decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focussed first on what was best for patients, and then on how to make this financially possible.

Most importantly, Gawande notes that this problem is not related to who actually pays the doctors' bills, whether it be the government, private insurers, or individuals out of pocket:

Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.

This last point is vital. 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. Here’s how this whole debate goes. Advocates of a public option say government financing would save the most money by having leaner administrative costs and forcing doctors and hospitals to take lower payments than they get from private insurance. Opponents say doctors would skimp, quit, or game the system, and make us wait in line for our care; they maintain that private insurers are better at policing doctors. No, the skeptics say: all insurance companies do is reject applicants who need health care and stall on paying their bills. Then we have the economists who say that the people who should pay the doctors are the ones who use them. Have consumers pay with their own dollars, make sure that they have some “skin in the game,” and then they’ll get the care they deserve. These arguments miss the main issue. When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care.
I used to want to be a doctor myself, until I almost flunked chemistry freshman year of college. I was idealistic about helping people, fascinated by the science of medicine, and also knew that doctors made a good living. I suppose most people who become doctors are driven by similar factors, but I've always thought that the barriers to entry were so high that they'd weed out anyone who wasn't driven most by wanting to be a heroic lifesaver-- there are easier ways for smart, driven people to make a doctor's salary, after all. But I guess being heroic isn't enough for some doctors nowadays, at least not without a lot of reinforcement of that ethic from one's peers. Sad.


Anonymous said...

I'm a doctor myself (still in residency though). The toughest residencies to get into are the ones with least amount of work for most amount of money. I have close to $300k in school loans. While it's true that the reason why one goes into medicine (for some) is for heroic and altruistic reasons later on reality sets in and you have to pay back those loans somehow (usually at the same time when you're trying to start a family). If it wasn't for the loans I'd be happy to do what I am doing for half the pay. If medical reimbursements are cut back they should also cut back cost of getting a medical education.

Madame X said...

Agreed-- I know the loans must be a killer for most people. Just to be clear, I'm not at all saying that doctors shouldn't be very well-paid-- I think they provide an incredibly important service that requires a huge amount of education and deserve to be well-rewarded for it. But I'd like to think that could be possible without the kind of abuse of the system that this article describes.

Jerry said...

One of my heroes (I'm a medical student) is a doctor I met during my first year of medical school. He is working for the US military and will retire in under 10 years. He is also actively pursuing non-medical streams of revenue, such as real estate and maximizing his military retirement benefits. What leads him to do this? He told me: "I never want to be in a situation where I consider making a medical decision about a patient based on my own income." There are plenty of other factors which negatively affect care (insurance companies, lifestyle choices, etc.). I appreciate that mindset, and hope that I can do the same.