What's Driving Increasing Healthcare Costs?
A while back I read a great article on the health care cost crisis in the New Yorker by Atul Gawande. The article is titled, The Cost Conundrum and I took some time to read it again today. It's a long one.
It's so insightful that I thought I'd do a short post to call out the key points. If you have any interest at all in health care I'd highly recommend giving it a read.
The article starts after Gawande learns that McAllen, Texas is one of the most expensive health care markets in the country. In 2006, Medicare spent $15k per enrollee in McAllen, almost twice the national average.
Gawande visits McAllen to find out why costs there are so high. The answer is surprisingly simple and is outlined in this excerpt.
Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen. And, as a rule, hospital executives don’t own the pen caps. Doctors do.
He finds that doctors in McAllen are using their pens a lot. They're more entrepreneurial and profit-minded than their counterparts in other markets. And as a result are prescribing far more health care than an average market like El Paso, which is just a few miles away.
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 five 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. The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine.
Doctors in McAllen are more likely to pursue referral fees from other health systems, be shareholders in their own practices and be involved in other business ventures. More procedures means more revenue and more money in their pockets.
Gawande argues that the solution to higher cost markets doesn't lie with the payer issue, as most politicians seem to argue. Regardless of who's paying, when doctors in certain markets are prescribing increasing amounts of care, the cost problem doesn't go away. Instead, the solution, he argues, lies in the promotion of systems like that of the Mayo Clinic.
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 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 focused first on what was best for patients, and then on how to make this financially possible.
