Sunday, April 11, 2010

Cost-Effective Medicine: Cracking the Code

My friend, the Buckeye Surgeon, has resisted reforms in medical residency training programs, that have eased some of the inhumane exhaustion on young interns and residents. I have a different view on the subject. This issue generates spirited debate in the blogosphere and in teaching hospitals across the country.

Not all medical education reforms, however, provoke controversy. I learned recently from an Ohio medical student that they are now being taught about the financial costs of medical tests and treatments. This makes so much sense that I am astonished it has taken so many decades to be incorporated into medical training. Indeed, even practicing physicians like me are often clueless about the costs of the tests we recommend. Perhaps, if we saw the price tags of the prescriptions and imaging tests we ordered, we might hesitate and reflect for a few nanoseconds

A commentary in the current issue of The New England Journal of Medicine chastised medical educators and training programs for not practicing or teaching cost consciousness to physicians-in-training. 
A challenging aspect of this issue that medical pricing is fluid and incomprehensible. Churchill’s aphorism describing Russia applies perfectly to medical costs.

It is a riddle wrapped in a mystery inside an enigma.

There is no fixed price for a medical item, as we expect when we purchase a gallon of milk at the grocery store. For example, when I spend a morning performing half a dozen colonoscopies on 6 lucky individuals, the reimbursement for each procedure may be different. While I am not an economist, this seems rather odd. If 6 patrons order the same entrée at the same restaurant, their bills will be identical. Not so, in the medical world, which has a cost system so abstruse that we need CIA codebreakers and cryptographers to decipher it. As an aside, when I receive my own medical bills, I need an insurance company Rosetta Stone to decode them; and I am in the medical business. Unraveling these insurance company documents tests the wits of our most seasoned patients who must be steeled for hours of dogged inquiry to capture a windfall refund of $4.86. However, recovering even a trivial sum is a sweet victory.

A few years ago, in my own community hospital, we were provided with a running total of medical charges accrued for each patient. The financial charges were stratospheric, for even brief hospital stays. I was surprised that the administration shared this data with us, and I wondered if the disclosure was inadvertent. This speculation was supported when the data disappeared from our computer screens without warning, and has never reappeared. We lost a tool that could have helped us to practice medicine more judiciously. If we were reminded of the cost of a CAT scan, at the moment when we casually ordered it, perhaps, we would pause and consider relying on the scan from 2 months ago, which was performed for the same reason.

My hometown newspaper published an article that informed how to comparison shop by price for medical care, not an easy task. The New York Times reported on, where medical consumers can shop for medical care similar to the way many of us purchase airline and hotel tickets. There are various websites that serve this same function. When my own patients ask me for the cost of my procedures, I can’t give a straight answer to this seemingly inocuous inquiry, which they find puzzling. As stated above, each insurance carrier uses its own pricing playbook. And, if I take a biopsy, additional charges will materialize.

The medical marketplace is a unique universe. The patient receives a medical service, has no idea of its cost and likely isn’t paying for it. Any wonder why medical costs are breaking their own records?

Paradoxically, communities that spend more on health care may have inferior medical quality, as shown in the Dartmouth Atlas of Health Care. While I don’t advocate denying medical care because of cost per se, it should be a consideration when medical options are being considered. This is of critical relevance to individual and public health. For example, a flu shot may be medically indicated, but if it cost $250, and isn't covered by insurance, would we roll up our sleeves? Costs matter.

Medical pricing should be simplified, accessible and transparent. We physicians should be aware of how many health care dollars we are burning up. More importantly, patients should have this knowledge also. If they had ‘skin in the game’, and were more financially responsible for their care, this would go far to reform a health care system where mysterious and enigmatic costs, like our politicians' hot air, have nowhere to go but up.


  1. Outstanding!
    Little by little the aircraft carrier is changing course. It only took something like a revolution in the streets, but one result of the last year or so of acrimonious public debate is a budding awareness of costs.

    At some level there has always been that awareness, but due to the byzantine complexity of coding, billing, reimbursement rates, co-pays and overlapping (or non-existent) insurance coverages, and local/regional variations... how much it costs is way down the list of questions a doctor might ask when the challenges of medical treatment are clearly much more important.

    That last paragraph should be made into a poster and sent to every doctor and waiting room in the country.

    Medical pricing should be simplified, accessible and transparent. We physicians should be aware of how many health care dollars we are burning up. More importantly, patients should have this knowledge also. If they had ‘skin in the game’, and were more financially responsible for their care, this would go far to reform a health care system where mysterious and enigmatic costs, like our politicians' hot air, have nowhere to go but up.

    As a layman I said something very similar just two days ago.

    ...patients (remember them?) need to understand there is a limit to what medicine can and cannot do. But those limits are two-fold: medical (what is scientifically feasible) and financial (what can you afford?).

    And the tough part is this: it's up to BOTH MEDICAL AND INSURANCE PROFESSIONALS TOGETHER to speak these hard truths to their patients/clients. Those who imagine that political types will do so are living in a fool's paradise.

    It's gratifying to find a physician consulting the Dartmouth Atlas and following the (long overdue) public discussion of costs and where they originate. With medical professionals leading the way patients will eventually realize that "more" does not always mean "better."

    As a senior caregiver I took care of a client taking Prozac, Namenda, Aricept, Prednisone and four or five others I can't recall. He was a walking zombie and as I looked at his list of meds my thought was "this guy is walking testimony to DTC advertising." At some point drug companies will have to get with the program and stop pushing past the medical pros, creating consumer demand like they are selling cars.

  2. Pricing of goods and services in the health care realm should be transparent. However, I am not sure that we can reach a consensus on what simplified actually means. Prices are an information system, conveying information regarding availability, demand, and value. Prices, if they are to fulfill their informational as opposed to passive accounting function, are dynamic and complex.

    The other element which makes the pricing of medical services more difficult is the system we have in place which separates those who pay from the service from those who receive the service. Why send a price signal to someone who does not have to absorb the cost? Yes, there will be some of us who will be appalled by outrageous price gaming but over time, such outrage will dissipate.

    Prices make the most sense in a market based economy where those who receive the service assume the cost. In scenarios where a third party assumes the immediate cost the effects of prices changes and bizarre pricing strategies become much less predictable.

  3. Pricing also depends on who has local leverage: the hospitals or the insurance company. See this post for a couple of graphs illustrating how great the range can be within a single small state.

  4. I am an athsmatic who suffers from allergies and chronic bronchitis. I have a very good PPO thru my job, but I hate having to go to the doctor every time I get sick. 1. I can go to any doc I want and I haven't found one I like so I just end up going to the quickcare clinic down the street. 2. There is always a copay and the doc at the quickcare can only excuse me for 3 days and sometimes it takes longer than that for me to recover. 3. I then have to call Unum, a 3rd party company, to initiated an unpaid FMLA to excuse my multiple days off. 4. The doc always writes me a billion (it seems like) prescriptions for meds I don't need!! If I tell a doc I have a bottle of hydrocodone at home that I've been taking for my cough, why does he prescribe some other different cough medicine? Now I have to worry if the other meds he prescribed will conflict with the hydrocodone, or if I really need any of those other drugs. I often tell the pharmacy not to fill at least half of the scrips I'm given. If I'm treating myself and I just need a doc note, why am I buying 5 drugs from a pharmacy when I still have left over meds from the LAST doc who wrote me a gazillion scrips? And please stop prescribing Amoxacillin. The stuff is toxic!! Augmentin is HALF Amoxacillin! Just as bad. 5. If I take the stupid anti-biotic for the silly sinus infection turned bronchitis, my immune system will be shot to nothing and I will then catch the next actual bug that comes along in my office. Write me a prescription for Orange Juice or something?? Why destroy my anti-bodies and make me susceptible to the next infection or illness? Is it any wonder that the consumer suspects it's a marketing ploy to milk more of my paycheck from me, or more money from my insurance company? Modern medicine truly makes no sense to me, but work requires I seek out the services of a doctor to prove I was sick or I could be fired for playing hookie. The whole capitalistic corporate mess just makes me want to scream, because it really does come down to the bottom line....Profit Margin. Why does this year's profit margin have to be larger than last year's? I don't blame doctors for their ignorance. (I believe it IS ignorance, and not incompetance.) But in this day and age, doctors aren't in charge of the medical profession. Drug companies and Insurance Agencies run the whole thing. I say bring on HCR and I am not fooled by the horror stories of Socialistic Medicine. Watch the movie "Sicko" and get over it!

    Anyway, wanted to say thanks for this blog. I found myself here all day reading your entries. Very informative, and yet still didn't help me solve the issue that caused me to visit this site in the first place. Know any good doctors in Las Vegas? I'm still trying to find a good PCP who will slow down and listen to me instead of bombarding me with questions and taking only short answers.

  5. Excellent post - imo, the core of the problem is third party payment. Why should the patient care about charges he is not paying (directly). And drs gave up caring about price bcs they deal with a myriad of payors + end up taking what they get. This relates back to the tax treatment of businesses providing medical care as a tax free benefit -- and this originated back to WWII when we had price controls (as a way to give employees more without increasing their wages).

    So the end result is as every economist would predict, price controls create tremendous economic distortions + unintended consequences. And today's medical system is should be proof enough.

    The byzantine coding with its attendant upcoding issues is a system that started from the toxic brew of medicine and politics.

    In this case, I would argue for divorce.

  6. Right ammo but perhaps wrong target.

    There is an implication in your post that a decision to perform a test or procedure may be cost sensitive - 'I'd do it for ten dollars but not a thousand' mentality. While its pure Pollyanna to divorce such decisions totally from cost, its equally hard to believe without tort reform such decisions are likely to be widespread as long as there is potential liability for decisions that do not conform to doing everything medically possible.

    The more viable target is to bring better outcomes data into clinical decision making. While the prevailing images are of physicians who are constantly up to date on the latest medical information or that their experience base is a superior basis for medical decisions, the quantitative data tells a very different story. Whether its the famous DOD study of C-sections in 85 VA hospitals that found the range between 6% and 17%, with anything over 10% producing more complications and higher overall costs, or overuse of branded drugs or third line protocols as first line therapy there is a considerable amount that physicians could do to upgrade their decision making .

    Ironically, the companies who have that data largely shy away from the medical community directly because they fear a backlash that could constrain their very lucrative business, such as the banning of physician script data collection by NH and Vermont. As much as physicians pay lip service to better data, they fear more creation of an environment where outcomes analysis forces them into 'cookbook' medicine.

    These fears are not unfounded. Buried in the latest Health Care Reform legislation are Boards and expenditures to define cost effective standards with the inevitable next step that government (and therefore many private carriers)won't reimburse for care outside those protocols.

    Prudent physicians would be smart to start embracing data into their practices and demand more of it. Best Physicians Heal Thyself before the Government provides the cure

  7. Thanks to all for excellent comments. @Robert, I fear that the government will 'heal' our profession rather than us, as physicians never miss an opportunity to miss an opportunity. With regard to costs, there is more than enough money wasted in health care on unnecessary care to fund real reform and cover the uninsured.

  8. Michael,
    Sorry for the lateness of this comment.

    I agree there's more than enough money wasted to cover essentially all necessary health care, and that physicians should pull back and think more about the costs of what we prescribe. Unfortunately, we (docs) have a pretty poor track record in this regard.

    Fundamentally, what's at issue is whether health care can or should be managed as a business, i.e. with concern for things like the "market" and "transparent pricing," as are considered above. I don't buy it.

  9. I bristle when people say healthcare should not be managed like a market - healthcare should be special. To me, this shows a fundamental misunderstanding of what markets do.

    Markets are a way for allocating resources - scare resources, those that are limited in some way.

    If you are uncomfortable with using a price mechanism for resource allocation, then you are requesting some board-panel-committee-commission -- make those choices rather than the individual.

    How BEST to allocate a resource that has some scarcity is the issue. If you don't care for markets and don't like commissions (panels, committees, czars, etc), then what are you advocating for?

    God will not come down from the heavens and make the decisions. It is time to step up and say with specificity, how is the resource to be allocated? Otherwise, it just comes off as whining.

  10. Commenters may be interested in this link:

  11. For those interested, here's another link on transparency and pricing. Enjoy!