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Should we pay doctors to ignore patients?
Here is one interesting proposal for reforming Medicare:
Each fee is meant to reimburse the doctor for the time and skill he or she devotes to the patient. But it is also supposed to pay for overhead, and this is where the problem begins. To Medicare, a doctor’s overhead (or “practice expense”) includes such items as rent, staff salaries and the cost of high-tech medical equipment. When the agency pays a fee to a doctor who has performed a CT scan, it is meant to cover some of the cost of buying or leasing the scanner itself. Services using more expensive equipment generate higher fees.
...The cost of a CT scanner is fixed, but a doctor earns fees each time it is used...a scanner becomes highly profitable as soon as it’s paid for.
In contrast, the doctor-patient visit, which involves no expensive equipment, offers no significant profit opportunity. So the best way for a doctor to make money in his practice is not to spend time with patients but to use equipment as much as possible.
Get this:
Doctors who do their own CT scanning and other imaging order roughly two to eight times as many imaging tests as those who do not have their own equipment, a 2002 study by researchers at the University of North Carolina found. Altogether, doctors are ordering roughly $40 billion worth of unnecessary imaging each year...
So what's the solution?
For their time, doctors should be given a stipend for each of their patients. It should be larger for patients with complicated medical conditions and smaller for those who are healthy, and it should not be influenced by the number of services or tests a doctor orders.
For overhead, doctors should be paid an amount that covers the typical cost of tests and treatments needed to address a patient’s condition. This strategy — known as “case rate” or “prospective” payment — is standard in American hospitals. The hospital receives a payment for dealing with a patient’s underlying condition rather than individual payments for each test and treatment. This approach offers no incentive to run unneeded tests, and it has been credited with substantially slowing the growth in Medicare payments to hospitals.
Of course this penalizes patients with chronic conditions, namely those which show more complications over time than average for the specified class of ailment (e.g., Bill Walton's foot). At some margin of unexpected complicatedness, the money runs out and people find it very hard to get their doctor on the phone or for an appointment. If the relevant alternative is death, this policy is relatively egalitarian; if the relevant alternative is a smooth recovery, this policy is relatively inegalitarian.
I believe this idea deserves serious consideration.
Addendum: Via Mark Thoma, here are other ideas.
Posted by Tyler Cowen on July 25, 2008 at 05:19 AM in Medicine | Permalink
Comments
one set of "doctors" that have their own equipment and over use it are chiropractors.
http://www.quackwatch.org/01QuackeryRelatedTopics/chiro.html
Posted by: joe at Jul 25, 2008 8:02:26 AM
>>At some margin of unexpected complicatedness, the money runs out and people find it very hard to get their doctor on the phone or for an appointment.>>
Presumably doctors with a pattern of ignoring such patients don't attract as many patients, or otherwise get penalized by those enforcing the system.
Posted by: richard at Jul 25, 2008 8:32:04 AM
An easy test for each of these ideas would be substitute "teacher" for doctor and "student" for patient. Fixed payments? tried that, led to legislation mandating including special ed students without enough funding. Paying based on average test scores? Tried that too, look at no child left behind for all the problems with that one. Random assignment to schools instead of choice? "Random" has been captured by high real estate premiums to buy houses in the neighborhoods eligible for the best schools. Geography will have to be considered too in assigning HMO's.
Posted by: DK at Jul 25, 2008 8:34:39 AM
"For overhead, doctors should be paid an amount that covers the typical cost of tests and treatments needed to address a patient’s condition."
If we let economists (most of whom do not seem to understand sophomore basics of accounting, let alone the financial management of medical offices) design a new health care system, it will be a cluster mess.
Not to mention that when herded into managed care arrangements US consumers get really grouchy, they want choice.
Prospective payments (DRGs) brought down hospital payments because the previous cost-plus system was being widely and wildly abused. The savings were low hanging fruit.
We need health care reform, very carefully designed health care reform.
Posted by: save_the_rustbelt at Jul 25, 2008 8:38:13 AM
For most things we buy, we pay for a final product. We don't pay Ford a certain amount for its steel, a certain amount for its R&D, a certain amount for its capital costs -- we pay for a car. If Ford builds cars for which consumers are willing to pay more than Ford's expenses, Ford will do well; if not, then not. That's their business, and is supposed to be their field of expertise; they should figure out how to build the best (as defined by consumers) car the most efficiently, and not simply build it in some plausible fashion and imagine the consumers will reimburse them.
Come to think of it, I wonder whether Ford's current managers are doctors.
Posted by: dWj at Jul 25, 2008 8:47:45 AM
The whole article sounds dubious to me. The author, Dr. Bach, gives no reference to the 2002 study by University of North Carolina researchers on which he bases his conclusions, so I was unable to evaluate it for myself.
Physician ownership of radiologic facilities falls under Medicare rules known as Stark and Anti=Kickback regulations, which are in place to prevent overutilization. Safe harbors and exceptions do exist in the regulations, but they are very complex, and any physician contemplating such a venture will employ an attorney knowledgeable in this area to stay out of trouble.
CT scans and other imaging studies are interpreted by radiologists, who do not order these studies themselves. Payment for these studies comes in two parts - a professional component, which is paid to the radiologist who interprets the study, and a technical component, which is paid to the owner of the equipment. For a CT scan of the chest, Medicare pays the radiologist about $56 and the owner of the scanner about $240, to compensate for the high cost of buying and operating such an expensive piece of equipment. It is illegal for the physician ordering the study to share in the radiologist's fee. Because of the stark and Anti-Kickback rules, most freestanding imaging centers are owned by radiology groups, who do not order the studies performed there.
That being said, the idea of a prospective payment system for Medicare and Medicaid has been discussed for a long time. This is the way that hospitals are currently paid. But hospitals to not admit patients to their wards, doctors do. Hospitals will generally take all comers, but the concern with paying doctors that way is that will "cherry pick" and agree to see only the patients who don't use too many services, leaving the sickest patients uncared for.
Posted by: Ned at Jul 25, 2008 9:02:45 AM
Wasn't this the whole theory about massive savings from switching for "pay for service" to a "capitation" with HMOs in the 1990s?
Didn't it not work in the 1990s?
Won't the same reason it didn't work for HMOs in the 1990s make it not work for Medicaid today?
Posted by: Rich B. at Jul 25, 2008 9:15:16 AM
Are you sure you want to be using Ford as a model for anything other than perhaps mismanagement?
Also, I'm not familiar with "case rate," but either it is not standard practice as the author claims, or I have a poor track record in choosing "non-standard" hospitals that bill separately for every diagnostic run and every specialist seen.
Posted by: meter at Jul 25, 2008 9:32:16 AM
Why don't we just give the subsidy to the patient, and then let the patient purchase whatever medical care he/she wants?
Posted by: Rob at Jul 25, 2008 9:37:49 AM
Right diagnosis; wrong solution. Demand side payment reforms are unlikely to ever work.
Solution: Let the supply side propose the different payment regimes.
See my Wall Street Journal op ed on this:
http://www.ncpa.org/prs/cd/2008/022308_WSJ.pdf
Posted by: John Goodman at Jul 25, 2008 10:37:31 AM
Another option to deal with this is that we could just nationalize all of the expensive medical equipment!
Posted by: Kevin Postlewaite at Jul 25, 2008 12:46:18 PM
Why don't we just give the subsidy to the patient, and then let the patient purchase whatever medical care he/she wants?
Health care supply is less than health care demand, and there are institutional and regulatory barriers to creating more supply. So if you give poor patients money to purchase health care, then the rich patients will simply pay more money than those poor people to get that limited supply.
Of course, socialism doesn't solve the problem of scarcity, people are still denied basic health care under "universal" health care programs. But socialism makes people feel better about it, because in theory (and only in theory) the poor and rich are equally as likely to be denied that health care.
Posted by: Rex Rhino at Jul 25, 2008 5:28:05 PM
After having lived overseas in a couple of countries that offer society wide medical care paid for by taxes and the government. I can't say that I ever saw any serious downsides. That may seem strange coming from someone used to the US system but I've had less health care coverage and more hassle to get in to see a doctor (and I'm quite healthy in general with no cronic conditions - mostly injuries and infections) than I ever had overseas, even as a guest. Simple, quick and effective. I do not understand the motivations of doctors in the US.
An example, I went to the doctor one week. I had been dealing with a swollen pinky finger. Turned red, puffy, then white then started to turn purple at which point I went to the doctor (about 5 days of this). It was pretty obvious I had some sort of tissue infection. What does the doctor do? Orders blood tests to make sure I don't have gout! Think about this, pinky finger, healthy young woman, doesn't drink much or often, exercises, reports no injuries to the finger, etc. etc. Boy does everyone who looks at her finger say - wow what an infection.
Doctor refuses antibiotics, sends me for blood tests and to come back in 4 days. I go back. Pinky finger is now fully purple, am in serious pain and cannot work because I cannot type. Doctor finally, after an argument, orders antibiotics. The strongest antibiotics they have at a really high dosage because it's such a bad infection.
Someone please tell me our system isn't broken and this was just a really stupid doctor? But no, from my limited knowledge that doctor just got paid for two office visits from my insurance company when one of less than 15 minutes should have been all that was needed.
With a well educated and well-informed society (much improved over 20 years ago) one would begin to think that patients with a higher understanding of their own health and body care would need less time with a doctor unless a complicated or cronic condition arose in which situation most people that have access to information would be asking their doctor for advice because they don't actually know what is wrong with them. But no, we're still the stupid masses that don't know much about our bodies and have to pay the price - both in lost work and in higher insurance premiums because doctors are the gate keepers to drugs that will help. (This is not an advocation for unregulating drugs nor for overprescription of antibiotics.)
Posted by: young girl at Jul 26, 2008 12:34:30 AM
Meter, a case rate is a more general term for a prospective payment. CMS creates DRGs. Private payers will use the same system but can refer to it as a case rate, global payment, or just DRG.
More generally, I have yet to sort out my thoughts on health care, but I do think the Wyden-Bennett proposal is the best we've heard in quite a while.
I also agree with those who say that if you lack the political capital to reform the health care system more generally, you can simply reform Medicare, because all the private payers will follow.
If you want to see the future of payment you need to pay attention to the CMS rules and legislation, including the most recent. CMS has a slew of quality demonstration projects with different size carrots and sticks designed to reform the health care system.
EMRs are coming. They've now created incentives, and in a few years the hammer will be brought down on those who don't comply. Value-based payment is coming. Right now they are building quality measurement expertise (sorely lacking, as any ornery physician will tell you).
The private payers either lack the coordination institutions or will to do it themselves, and CMS -- after years of abject failure -- is at last getting creative.
I don't have much faith in any government agency to develop an optimal system, but I do think we will see better days ahead. How good they are depends on the battle between rent-seekers and competitors.
Posted by: Publius at Jul 26, 2008 10:21:11 AM
Chiropractic has a long history of great doctor-patient relationships. Although many of my colleagues out in the field have overused modalities in the past, the new push towards evidence-based practice is starting to weed those individuals out as studies have shown that most modalities such as ultrasound and STIM are not effective over typical chiropractic adjustments.
Posted by: Alex at Jul 28, 2008 7:51:40 AM
Publius, I'm still confused - and your acronyms (CMS, DRG, EMR?) didn't help! :) The quote is thus:
"This strategy — known as “case rate” or “prospective” payment — is standard in American hospitals. The hospital receives a payment for dealing with a patient’s underlying condition rather than individual payments for each test and treatment. This approach offers no incentive to run unneeded tests, and it has been credited with substantially slowing the growth in Medicare payments to hospitals."
I've yet to be billed from a hospital on what that quote cites as a "case rate;" rather I have been billed separately for every diagnostic and every specialist consulted. Is case rate as defined in that quote actually common for hospitals?
Posted by: meter at Jul 28, 2008 12:13:25 PM
Perhaps this kind of billing is unique with regard to hospitals and Medicare.
Posted by: meter at Jul 28, 2008 1:28:55 PM
The obstetrician with an ultrasound machine in her office scanned me ($450) every time I got a checkup, ~12 times total. The obstetrician who ordered her ultrasounds from a separate facility limited me to one for the whole pregnancy.
Posted by: Claire F at Jul 28, 2008 8:30:48 PM
young girl,
Sounds like the 'wonderful' socialized Japan healthcare system. If you think the US system is bad, try going for care in Japan. I waited with a 104 ºF fever for 2 hours before being able to see a doctor (that was awesome) despite having had my temperature taken when I went in the door.
I have never had anything but good experiences in the US, and nothing but bad in Japan. Anecdotal evidence to be sure, but most Americans I know here have experienced much the same. Long waits, poor level of care, unnecessary tests, and outdated shitty medicine in insufficient doses.
Posted by: Sal Paradise at Jul 28, 2008 9:24:59 PM
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Posted by: 傢俱 at Dec 3, 2008 10:13:31 PM
