Friday, September 30, 2011

Costs in Medicine

That is the topic of the national discussion right now. It's everywhere. Several articles online today note that  Obama had promised on the campaign trail that his plan would save everyone money. Skeptics said how, and the answer was a rather diffuse promise to "bend the curve down". No real details on how that would happen.

That, obviously, hasn't happened.

In fact, the Kaiser foundation released data yesterday that costs are at an all time high. Specifically, up 9% from last year.

So on to a new round of hand wringing about medical costs. What is interesting to me is that what I read coming out of Washington seems to be addressing a system that I am not familiar with. I see all around me reasons that medical costs are high, but none of these are seriously addressed, some not even mentioned.

Some years ago, I asked the outgoing President of the American College of Radiology (our large national organization that deals with legislation) what was the most surprising thing that he had learned in his tenure. His reply was immediate, no thought necessary: he was shocked at how little legislators knew about the things they write legislation on. And so it is.

What is my list of unrecognized money sinks in medicine? Here goes(this is in no particular order, because I have not done the work necessary to estimate the magnitude of each of these yet):

1) Malpractice costs: this has seriously warped the decision making process of every physician. This was true when I entered the field, it is much more true now. The insidious thing is that the practice patterns have been in place for so long, that physicians have lost track of the effect it has on them. This is to say that, unfortunately, if malpractice costs were gone tomorrow, cost savings would not start tomorrow; much too much inertia.

2) Hospital competition and profits: Our medium sized town has at least 4 "heart centers". You can get every service known to man in each of these. My hospital has one. The nearest one to us is about 3 miles. The "competition" in medicine is distorted because the patient is not paying. The patient has already paid in the form of insurance premiums, and wants to get the absolute most that they can for their money. The competition, therefore, is to spend more. And, of course, the hospitals get reimbursed on a fee for service model, so the profitable thing is to DO MORE.

Ever wonder why you suddenly see ads on billboards for "wound care centers" and other odd centers that seem to be way off the mainstream of medicine? It is because a smart administrator found an area that the fees had been set relatively high. Therefore, a nice chance to pick off some profit. Do not expect to see an "alcoholic cirrhosis" center anytime soon. Money loser, big time. This also explains the proliferation of breast centers - more later.

Have you also noticed that the decor in most hospitals today is nicer than the nicest home you have ever been in? They want to be sure that it feels luxurious to you, the patient. The cost to do this in a hospital, as opposed to a home, are staggering. Every piece of the construction and decoration of a hospital costs far more than what you would do at home, due to regulations requiring certain quality. A hospital adminstrator would say " I need to spend this to look as nice as the place down the street, otherwise we get a reputation for being "old" and "dirty". We will lose patients.".   He is right, he has nearly no choice on this one. You and I pay for this.

3)Physician self-referral. As a patient, you are recommended to have tests by your physician. Do you know how much he or she makes from this? Often now the physician owns a part of the testing facility and makes money from each referral. This is a very important cause of increased costs, particularly in imaging (CT, MR, Nuclear Medicine). More on this later, but suffice to say that it is intuitive that if a physician makes a profit off of each test he or she does, then there will be  more testing. Ah, you say, but this means I am being better cared for. NO, not at all. I would agree that there is a point (ill defined) up to which you are better cared for, but after that, your outcomes, and life, are worse. This is because any test carries with it the possibility of raising red flags that are not real (false positive results), but must be tended to with more testing. In the worst case (which I have seen) that further testing leads to a serious complication.

A recent review article has gone over all of the available literature on the subject. The papers reviewed had included 76,905,192 individual "episodes of care" (! - there is some statistical power.) The result: as compared to physicians who referred to facilities they did not have ownership in, Physicians who referred to facilities that they had some ownership in ordered 2.48 times as many exams. This is not a 20% increase, this is about a 150% increase. (These results, it should be said, were highly statistically significant). The cost? $3.6 billion per year in unnecessary testing. (JACR vol 8 issue 7 pp 469-476. This may be available to non-ACR members, I am not sure. try>publications)

I need to add here that this is just imaging. This doesn't begin to talk about other ways physicians may self refer, to their own testing facilities that are not imaging. Or to their own treatment centers, such as physical therapy centers.

I want to soften this by also saying that while this is a serious financial and ethical problem, I am also amazed that it is not worse than it is. In other words, many physicians will act against their own interest in recommending that you not have a test.

4) Hospital advertising;  small potatoes, but still, in terms of outcomes, an absolute total waste of money that is paid for out of patient fees.

5) Patient expectations: Here is a big one. Suffice to say for now that much unnecessary work is done at the implied or expressly stated demand of the patient.

6) Middle man profits: this one is hard to quantitate, as it is so diffuse, but I will give it a shot.

7) Insurance company profits: much to say on this, little space.

8) Overtreatement of everyone, but most notably the terminally ill

Not in this list is physician pay. Why not? Isn't it obvious that that is a major cost. Well, if you are a politician trying to win re-eletion, this is a ripe target. But, if you are intelligently attacking a problem, you will be much more nuanced in your thinking. To start, physician pay is roughly 17% of the total expense. Last year, medical costs rose 9%. As a thought experiment, you could cut physician pay to zero, and in two years, would be back to square one, with costs still increasing.

More practically: my income fell last year, as it has for the past 3 or 4. (here, it should be noted that I am working 30% longer hours and producing 60-80% more in those hours than I did 15 years ago. So, the work has substantially increased, and the income has gone down. From your standpoint as a paying patient, I have become much more efficient, and you are getting much more for your dollar).

 It certainly wasn't my individual income that contributed to the 9% increase, and my colleagues are in similar situations. The individual physician has, by and large, seen their income contract. Perhaps the total amount paid physicians is higher, but if so, that would be because of more physicians. We are already seeing a dramatic increase in physicians refusing to see medicare patients because they lose money on every one. This suggests to me that there is no more "savings" to be had from further reducing the amount paid to physicians.

What seems to be always missed in the discussion of physician pay is that it is not what the physician charges the patient that is so expensive: it is what the physician does for the patient that is increasing so rapidly. "Does" in the sense of expenditure events that the physician puts into motion: ordering imaging tests, ordering lab tests and the like.

It has been my observation that as the government ratcheted down physician payments (and the insurance companies followed) that the physicians had to develop ways of staying financially solvent. This involved opening their own testing facilities in many cases. It appears to me that there was a slow change from the physician being exclusively the patient's representative, to being someone who had a conflict of interest. On one hand, being at least in concept responsible for the patient's best interest, to, on the other hand, being interested in reaping more money for their care. I am embarrassed to report to you (but honesty demands that I do report this) that I have heard physicians say "they are MY patients and I deserve whatever profit comes from their care". Important - I have heard this only twice, and it is so striking because it is so far off the ideal. Nevertheless, it was said, and probably represents the feelings of more who were not so ignorant as to actually verbalize the thought.

I believe that physicians were happy with the arrangement that they were paid a good living for acting as their patient's advocates and it was only when the government made it financially impossible to do this and still remain solvent, did they begin to look for other, less ethical ways of keeping the practice afloat financially.

So it seems that the "solution" to high costs that was put in place in the 80's - just pay less - has had major unintended consequences. They began to order more tests that they would benefit from in three ways: 1) protection from malpractice suits 2) The patients are happier because they see their physician being very active ordering tests and reviewing the results of the tests. They feel more cared for and consider him to be a "smart" doctor because he knows what to do! 3) Personal financial gain from referring to facilities from which he derives profit.  This is not unexpected if you intelligently assess the situation.  This all could have been anticipated.

And now, the institutions that pushed us down this path are telling us that physicians and hospitals are not to be trusted, but simply allow them more authority to direct medical care from Washington and all will be well.

Till later,


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