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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.

Note: You can sign up to receive HealthLeaders Media PhysicianLeaders, a free weekly e-newsletter that features the top physician business headlines of the week from leading news sources.
Elyas Bakhtiari is a managing editor with HealthLeaders Media. He can be reached at ebakhtiari@healthleadersmedia.com.

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3 comments on "Physicians' Role in Controlling Costs"


ally7 (6/8/2009 at 2:25 PM)
Controlling costs does require a multiple factor approach, but without tort reform you are virtually tying the physicians hands. The democrats are funded as heavily by trial lawyers as they are the unions and unfortunately defensive medicine has affected the standard of care. It would have been more appropriate for that New Yorker article author to of course have a bigger sample size, but to look at states without tort reform such as Mississippi and West Virginia and compare there. Beyond that, those states have a significant challenge in recruiting physicians especially with a lack of malpractice carriers due to the preponderance of large settlements there.

aonopchenko (6/4/2009 at 4:07 PM)
Fee for service has been defunct for many years for all practical purposes because of insurance companies wedging themselves between the consumers (patients) and the providers of services (physicians). Returning to a true fee for service model where the patient would pay cash for visits with their primary care physician (real fee for service) would see a rise in primary care reimbursement by significantly lowering the clerical overhead that is required to extract payment from insurance companies and eliminate the hamster on the wheel phenomenon of capitation and a concomitant drop in unnecessary patient visits. This would also attract greater numbers of medical school graduates to primary care as real income would grow for primaries. Allowing the primary care physician to then determine the need for specialty services including imaging and surgery and subspecialty medical care would place the decision into the hands of those most equipped to make them without the negative incentives currently in place by insurance companies to try to limit specialty care. Reserving insurance like the old Blue Shield for higher priced items such as specialty care, hospitalizations and surgeries could still make health care affordable. Of course a return to the "good old days" will never be possible when you try to eliminate the billions of dollars that insurance companies earn and the millions of dollars that insurance company executives make in basically providing nothing more than a barrier to care and an ever spiraling increase in its cost.

R G Love (6/4/2009 at 1:10 PM)
Perhaps I am confused. Does Mayo accept Medicare as payment. I thought that was not the case. Perhaps I have forgotton something. Does the House Clinic for Otology in LA take Medicare as payment? Perhaps I am wrong on that and they do. The problem that is overlooked is that the payment process does not pay any physician what they believe their services are worth. Also, the privacy concepts have been triumphed before the sharing of information by decades. Many of us are confused as to the priority of the health care nonpayors since they keep adding huge penalites and ways to sue doctors without solving any of the concepts of financial viability in practice. While trying to resolve my problem with a huge backlog of lost billings, I found that the people at the insurance companies and at Medicare would not even talk to me about resolving issues until I discovered all kinds of codes and numbers which were kept hidden from me. The Bureaucracy is the problem.