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Physicians' Role in Controlling Costs

Elyas Bakhtiari, for HealthLeaders Media, June 4, 2009

Controlling costs took center stage this week in the healthcare reform discussions taking place in Washington. Although the specifics at this point remain largely up in the air, a key passage in President Barack Obama's speech to Senate Democrats on Tuesday may hint at what will be expected of physicians in future cost-control efforts.

Obama said he would be discussing with legislators how to change incentive structures by looking at why "places like Mayo Clinic in Minnesota are able to provide some of the best healthcare services in the country at half or sometimes even less of the costs than some other areas where the quality is not as good."

Reading between the lines, it seems he's talking about overutilization of services. Or if he's not now, he will be soon.

I say that because I came across another similar reference to Mayo Clinic this week while reading Atul Gawande's, MD, comparison of two Texas towns in an article in the New Yorker.

Gawande takes the cost conundrum posed by organizations like Mayo a step further by digging into why two nearly-identical towns—with about the same number of people, similar public health statistics, and similar quality of care levels—would have a nearly $7,500 difference in Medicare expenditures per capita.

Medicare spends nearly $15,000 per enrollee in McAllen, TX, the focus of Gawande's investigation, even though its income per capita is only $12,000, while Medicare spending down the road in El Paso is half that.

The question is: Why? Is the service actually better? Are patients getting better value for the higher costs? Could malpractice fears be leading to defensive medicine?

The breakthrough came when Gawande was sitting around a dinner table one night with a group of six of McAllen’s physicians discussing possible reasons for the abnormally high Medicare spending.

"Come on, we all know these arguments are bullshit," one general surgeon finally said in the New Yorker story. "There is overutilization here, pure and simple." Doctors were racking up extra tests, procedures, and services, he explained.

Gawande certainly isn’t the first to raise the alarm about overutilization, but he joins a growing chorus of voices highlighting unnecessary tests and procedures as an argument for changing the physician reimbursement system.

Last week, for instance, Sandeep Jauhar, MD, wrote in the New York Times about the commoditization of patients and warned against overutilization through unnecessary referrals. Healthcare stakeholders, including the AMA, who three weeks ago promised to decrease the healthcare growth rate by 1.5%, followed up with specifics this week, proposing to save up to $180 billion through better utilization of care.

All seem to agree that the problem is the fee-for-service system that creates financial incentives for physicians and hospitals to focus on quantity, rather than quality.

And all seem to be converging on one solution: Bundling payments.

The details are still unclear—that may mean paying a lump sum that would cover all physician services and hospital care for one patient—but at the very least it will mean a very different environment for both physicians and hospitals.

There are other solutions up for consideration, as well. Medical imaging is a prime target, and federal officials are considering requiring physicians to get prior authorization before running a test or even reducing reimbursements for imaging services.

Whatever comes of this, the days of fee-for-service as we know might be numbered.


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Elyas Bakhtiari is a freelance editor for HealthLeaders Media.

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