Today We Pay For How Much It Costs a Physician to Provide a Service; Why Not Also Consider How Much Value the Patient Receives?

When Medicare first created a fee schedule, critics suggested that it was a Marxist invention. Nevertheless, the schedule, which lists what Medicare is willing to pay for some 7,000 procedures, has become the master list for physician reimbursement in our health care system:  most private insurers peg their payments to the Medicare schedule.

The notion of deciding the precise worth of some 7,000 diagnostic and therapeutic procedures is mind-boggling. How exactly does Medicare do it?

The process began in the late 1980s when officials at the Department of Health and Human Services decided that the way Medicare paid doctors should be overhauled. At the time, Medicare was reimbursing physicians  based on what was considered “customary, prevailing and reasonable” in a particular market —in other words the “market value” of the service in that region.

Instead, reformers urged Congress to begin paying doctors in a way that reflected the real cost, to the doctor, of providing the service. (This is where Marx comes in: rather than letting the local market decide what a service is worth “the system appears to be based on the Marxist ‘labor theory of value,’” sputtered Susan Mandel in a 1990 piece in the National Review.) 

But to many in Congress, the notion that physicians should be reimbursed for what it costs them to do what they do—plus a reasonable profit—seemed on the face of it, a sound proposal. The problem, of course, lies in determining what the true “cost” to the physician is.

For help, Medicare turned to William C. Hsiao, an economist at
Harvard’s School of Public Health who had devised a system for
calculating the “relative value” of various medical services. Hsiao had
decided that, to be fair, the value of a doctor’s labor should be
based, not just how much time the procedure cost the doctor but also on the mental effort and judgment involved, the technical skill and physical effort required, and the stress
entailed.  To calibrate the precise amount of mental effort, stress and
technical skill involved in everything from cataract surgery to
performing a hysterectomy on a woman with cervical cancer, the Harvard
team interviewed thousands of doctors.  At the time, they determined
that cataract surgery involves just slightly less work than a
hysterectomy.   

Some specialties require extra training, and the new system also
factored in the value of those years in terms of the “opportunity
cost”—the income the doctor might have made if he had not still been in
school. In addition, fees tried to reflect “practice costs” (overhead
including equipment and supplies) as well as malpractice costs.

In 1992, Medicare adopted Hsiao’s fee schedule, and private insurers
soon followed suit. But the schedule was not carved in stone. As
medical technology changes, some procedures become easier, while others
become more elaborate. Thus the master schedules will always remain a
work-in-progress, rather like a cathedral that outlives its original
architects. (In January, I described
how fees are updated, by a committee that is dominated by
specialists—which, as I noted, goes a long way toward explaining why
Medicare pays relatively little for primary care.)

On the face of it, Hsiao’s system sounds equitable, with, perhaps one
caveat: While it makes sense to compensate a doctor for the income lost
while training for an additional two or three years, at what point,
over the course of a 35-year-career, do you stop compensating for those
extra years?

It seems fair that starting salaries should be higher for specialists
who spent more years training, both because they will have taken on
more debt and because they are that much older when they finally begin
practicing medicine. But after 20 or 25 years, should a specialist with
an extra two years of training still be making significantly more than
a colleague who didn’t put in those additional years?

But that is a relatively minor problem, I think, compared to a deeper flaw in Hsiao’s methodology. The schedule is physician-centered, focusing solely on the cost to the physician in terms of labor, stress, overhead etc. What it doesn’t take into account is the value of the service to the patient.

Typically, in other areas of our economy, we pay more for that which we
prize most: we are willing to spend more on a painting that we find
exquisite than for one that is merely competent. We pay more for a
fresh loaf than for day-old bread.  Utility also comes into play: we
will lay out a larger sum for an extremely comfortable, durable
mattress.

This makes me wonder: when it comes to reimbursing doctors, why don’t
we reward those who provide care that offers the greatest benefit to
the patient? For example, shouldn’t the cardiologist who helps a
patient to stop smoking be paid handsomely?  Yet we pay the physician
who performs an angioplasty far more.

Granted, counseling patients or introducing them to nicotine patches
doesn’t involve as much technical skill as angioplasty, and is probably
not as stressful.  (The doctor is much less likely to be sued by the
patient who stopped smoking—even if he relapses.) And learning how to
help patients kick the habit doesn’t take the same type of training.
But it does take time and patience (more time than a single procedure)
— and a commitment to the patient over a period of months.

Yet typically doctors who specialize in smoking cessation are not
well-compensated for their time—even though we know they save lives. By
contrast, research suggests
that the majority of patients who undergo angioplasty do not live
longer or suffer fewer heart attacks than those treated only with drugs.

The symptoms of angina, including chest pain and shortness of breath
may disappear, so there is some benefit for the majority of patients,
but over time, even that advantage disappears.

Meanwhile, the doctor who helps a patient stop smoking has greatly
reduced the patient’s chances of dying a premature and painful death.
Shouldn’t this be factored into the equation when deciding his fees?

And it could happen. In its March 2007 report, the Medicare Payment Advisory Commission (MedPac ) reveals  that

“Some Commissioners have argued that the relative value units of the
physician fee schedule should be at least partly based on a service’s
value to Medicare. . . . For example, if analysis of clinical
effectiveness for a given condition were to show that one service were
superior to an alternative service
for a given condition, then Medicare’s process of setting relative values might reflect that. This
process would be a departure from the established method of setting
relative values based only on the time, mental effort, technical skill
and effort, psychological stress, and risk of performing the service.”

As MedPac describes it, “the value of a service to Medicare” is almost
synonymous with the value of the procedure to the patient. Whether or
not it costs the doctor more physical or mental effort to deliver the
service, it seems logical that we should provide financial incentives
to doctors who provide the most effective services.

Today many health care providers have expanded cardiac centers to
provide extremely lucrative cardiac services; few have set up smoking
cessation clinics.  Yet the physician who persuades the patient to stop
smoking saves the patient a world of suffering—and saves Medicare the
tens of thousands of dollars it might well otherwise have to spend to
treat that patient’s tobacco-related disease. Of course, eventually the
patient will die of something. But dying of lung cancer or emphysema is
an extraordinarily “costly” way to die—in every possible sense of the
word.

22 thoughts on “Today We Pay For How Much It Costs a Physician to Provide a Service; Why Not Also Consider How Much Value the Patient Receives?

  1. You are making an excuse for price fixing, which is responsible for the mess we are in currently, and you advocate even more price fixing? Why make the system even more complicated? The price fixing from the 1980s is destroying healthcare in the U.S. What makes you think that more regulation will save the system from the utter disaster caused by price fixing in the first place?
    Let the market dictate prices, and the silly quibbling over how best the government can screw healthcare in the U.S. will go away.
    On a related note, I know an individual who recently got his car evaluated for an engine problem which cost $600 yet did not solve anything. Should the government intervene in the car-care market, setting prices deemed appropriate for the relative value received from a mechanic, also keeping in mind their baseline costs?

  2. Having been in health care for 35 years, Maggie, let me say that what was known as “customary, prevailing and reasonable” was NOT “market value.” It was and is COLUSION! It was and is “whatever we can get away with.” It was an is bad for the public.
    I’d caution against trying to fine-tune the system so much that we eat up even more costs in administration. With all the complication you’ve introduced here I’d ask why we don’t just put physicians on a salary, where the amount of dollars received do not have to go into the decision-making process, and then rate physicians on the basis of outcomes. Barry would love that, and I argued against him in the beginning, but transparency on the basis of quality performance makes the most sense.
    Yes, that would require a national database of procedures and treatments and outcomes on a physician-by-physician basis. But we need that for other reasons as well.
    Argue against salaried physicians, but it has worked very well for the VA and armed forces physicians and is the way of academic medicine.
    And while I’m at it let me post my recent article on three major problems existing in our hospital system: http://tinyurl.com/5us63e
    We need to fix this.

  3. Since many doctors are now on salary I wonder how this factors in to the pricing scheme? Wasn’t this supposed to be the HMO model, doctors wouldn’t over treat since they had no financial incentive to do so?
    One thing that might be interesting is a reform where medical education is free (including living costs) in exchange for some type of employment agreement.
    Of course the “free market” argument is bogus because only one side has any bargaining power. If you don’t want to pay the going rate the doctor will tell you to take a hike.
    It’s too bad libertarians never learned to look out the window after reading their book on economics 101 and see that the real world doesn’t match the textbook.

  4. Robert, Jack and Peter– thanks for your comments.
    Robert and Jack–
    First, today most doctors are not on salary. We are moving in that direction, but today, the vast majority are paid fee-for-service.
    The Medicare Payment Advisory Commission is interested in in ultimately paying doctors and hospitals a fixed amount for each episode of patient care–in one lump, that they then divvy up–with bonuses for better outcomes, and a lower lump sum for poorer outcomes.
    But we’re not in a position to do that next year, in part because the majority of doctors in the country still work in very small practices of 1-5 doctors, and as we’ve discussed in the past, the pool of patients just isn’t large enough to measure outcomes. A few non-compliant patients can skew results, and we don’t want doctors avoiding non-compliant patients (which usually means poor patients.)
    In addition, in order to pay for outcomes, we really need electronic medical records, and more outcomes research. None of this can happen overnight.
    Ten years from now, Medicare hopes to be paying most doctors lump sums per patients with bonuses for outcomes.
    In the meantime, Medicare will continue paying the majority of doctors fee-for service, and that fee-for service schedule needs to be adjusted. That’s what the battle in Congress was about last month. Congress has to revisit the issue in January.
    Medicare needs to pare its spending (or go broke). It was talking about slashing fees 10 percent across the board, but everyone realizes that is a crude tool. Fees need to be “adjusted” MedPac advises “in a budget neutral way” which means raises fees for some services and lowering fees for others. I’m suggesting that we take the effectiveness of the treatment and the benefit to the patient into account when making those decisions.
    Jack– we can’t just “put doctors on salary” anymore than we can “put the nation’s carpenters or plumbers on salary.” By and large these are individuals who work for themselves or for a small business that three or four have formed.
    The government has no authority to decide how they are paid for treating most patients. These doctors do not work for the government the way VA doctors do.
    The government could decide to pay a lump sum per Medicare patient, adjusting for risk based on age, income, race illnesses, severity of the illnesses, etc. (You cannot just pay a flat rate per patient becuase minority seniors and poorer seniors are much sicker and require much more care. Race and income are the two most important factors in determining how long you will live.)
    If you paid a flat rate for every senior, few doctors would take the difficult, time-consuming sick and minority seniors.
    Finally, even if the government decided to “put doctors on salary” when treating Medicare patients, doctors would not have to take Medicare patients.
    And, if they didn’t think the payment was “fair and reasonable,” they wouldn’t.
    There are still enough patients under 65 with good employer-based insurance and/or wealth of their own to keep most of the country’s “better” doctors (by reputation if not in fact) busy without Medicare patients.
    You are entirely right that “customary, fair and reasonable” is the price that doctors in a particularly locality set.
    This is why the idea of paying for what it cost the doctor to perform the service wasn’t a bad one–on the trying to implement that idea led to many disparities.
    Peter–As Robert points out the “free market” argument for setting doctor’s salaries doesn’t work because only one side has bargaining power.
    Most of our healthcare dollars (80 percent) are spent when we are seriously ill (cancer, diabetes) and in those situations, few patients are going to “shop around” trying to find a doctor they can bargain with.
    They know that if the doctor is willing to bargain, it is because he doesn’t have many patients–which means that, for some reason, his word-of-mouth is not very good.
    It’s one thing to risk your car with a cheap, inexperienced mechanic who doesn’t have enough business –another thing to risk your life.
    Moreover, when you are seriously ill you often don’t have time to “shop around.” You need care immediately.

  5. Robert, Jack and Peter– thanks for your comments.
    Robert and Jack–
    First, today most doctors are not on salary. We are moving in that direction, but today, the vast majority are paid fee-for-service.
    The Medicare Payment Advisory Commission is interested in in ultimately paying doctors and hospitals a fixed amount for each episode of patient care–in one lump, that they then divvy up–with bonuses for better outcomes, and a lower lump sum for poorer outcomes.
    But we’re not in a position to do that next year, in part because the majority of doctors in the country still work in very small practices of 1-5 doctors, and as we’ve discussed in the past, the pool of patients just isn’t large enough to measure outcomes. A few non-compliant patients can skew results, and we don’t want doctors avoiding non-compliant patients (which usually means poor patients.)
    In addition, in order to pay for outcomes, we really need electronic medical records, and more outcomes research. None of this can happen overnight.
    Ten years from now, Medicare hopes to be paying most doctors lump sums per patients with bonuses for outcomes.
    In the meantime, Medicare will continue paying the majority of doctors fee-for service, and that fee-for service schedule needs to be adjusted. That’s what the battle in Congress was about last month. Congress has to revisit the issue in January.
    Medicare needs to pare its spending (or go broke). It was talking about slashing fees 10 percent across the board, but everyone realizes that is a crude tool. Fees need to be “adjusted” MedPac advises “in a budget neutral way” which means raises fees for some services and lowering fees for others. I’m suggesting that we take the effectiveness of the treatment and the benefit to the patient into account when making those decisions.
    Jack– we can’t just “put doctors on salary” anymore than we can “put the nation’s carpenters or plumbers on salary.” By and large these are individuals who work for themselves or for a small business that three or four have formed.
    The government has no authority to decide how they are paid for treating most patients. These doctors do not work for the government the way VA doctors do.
    The government could decide to pay a lump sum per Medicare patient, adjusting for risk based on age, income, race illnesses, severity of the illnesses, etc. (You cannot just pay a flat rate per patient becuase minority seniors and poorer seniors are much sicker and require much more care. Race and income are the two most important factors in determining how long you will live.)
    If you paid a flat rate for every senior, few doctors would take the difficult, time-consuming sick and minority seniors.
    Finally, even if the government decided to “put doctors on salary” when treating Medicare patients, doctors would not have to take Medicare patients.
    And, if they didn’t think the payment was “fair and reasonable,” they wouldn’t.
    There are still enough patients under 65 with good employer-based insurance and/or wealth of their own to keep most of the country’s “better” doctors (by reputation if not in fact) busy without Medicare patients.
    You are entirely right that “customary, fair and reasonable” is the price that doctors in a particularly locality set.
    This is why the idea of paying for what it cost the doctor to perform the service wasn’t a bad one–on the trying to implement that idea led to many disparities.
    Peter–As Robert points out the “free market” argument for setting doctor’s salaries doesn’t work because only one side has bargaining power.
    Most of our healthcare dollars (80 percent) are spent when we are seriously ill (cancer, diabetes) and in those situations, few patients are going to “shop around” trying to find a doctor they can bargain with.
    They know that if the doctor is willing to bargain, it is because he doesn’t have many patients–which means that, for some reason, his word-of-mouth is not very good.
    It’s one thing to risk your car with a cheap, inexperienced mechanic who doesn’t have enough business –another thing to risk your life.
    Moreover, when you are seriously ill you often don’t have time to “shop around.” You need care immediately.

  6. this is radical, provocative and good stuff. but why limit it to docs. why not reward any provider based on the good they do? one could argue that a health coach who convinces someone significantly overweight to exercise and slim down, thereby sidestepping a lot of big and expensive medical problems in the future is worth more than a surgeon operating on a 90-year-old patient with stage 4 cancer. that makes sense to me, but it doesn’t seem likely that we’ll move in that direction.
    on a more mundane level, is there any evidence confirming that changing reimbursement schemes results in better outcomes? are there lessons learned there worth replicating?

  7. Interesting idea, with a couple of huge problems.
    Creating a value-added matrix for 7000 or so services plus an outcomes measurement will be a monster. Perhaps a targeted approach on a few high value services (smoking cessation, diabetic care) would work better.
    To do a benchmarking outcomes study properly requires massive amounts of time, even with EMR.
    And what to do when a provider gives value to a patient who is non-compliant and squanders the value?
    Like every other reform plan, the devil is in the transition – in other words, how would we make a transition without wrecking the system.

  8. Jim and save the rustbelt-
    Thanks for your comments.
    Jim–
    We do know that outcomes tend to be better at multi-specialty centers where doctors are on salary. (This is not true of all multi-specialty operations, but it is true of the best when compared to the best fee-for-service operations.)
    And yes, with heath care reform, I really do think we are going to pay more for preventive care, less for minimally effective care. Co-pays on minimally beneficial care also are likely to be higher–a way to steer patients toward making rational decision.
    In terms of paying that coach, right now some health plans offer pretty good benefits for gym memberships and they are covering physical therapy–which, for an older person, is often (not always) a good alternative to hip or knee replacement.
    But it’s certainly worth trying first.
    Save-the-rustbelt– Medicare will definitely start with focused pilot projects (diabetes, smoking cessation , etc.)
    –and some of this has already happened at Kaiser, and at the VA.
    Both have been very succesful with smoking cessation. We haven’t seen more of it nationwide because people who smoke are generally low-income; and so it’s hard to make a profit helping them.
    But we know how to help them. (By contrast we don’t know how to help obese people lose weight and kept it off and we don’t know how to help alcholics, with the exception of AA, which works only for certain people.)
    Since we do know how to get people off nicotine, it’s crazy that we don’t do it. It’s not just that this would be a social good; we spend a fortune each year (in higher insurance premiums and higher Medicare taxes, co-pays) treating tobacco-related diseases.
    It would be worthwhile to pay smokers to go to smoking cessation clinics. Of course, you can lead a horse to water . . .they have to want to quite. But given the expense, the hacking cough, etc., I think most smokers want to quite.
    As for benchmarking, quite a bit of that work has already been done by the Dartmouth researchers (who have been looking at the relationship between health care spending and benefits for nearly 3 decades.)
    In recent years they have begun comparing care at specific hospitals, focusing on academic medical centers. The variations in cost and benefits are stunning–with outcomes at the most expensive being worse, not better.
    Go to http://www.dartmouthatlas.org and look at the 2008 Atlas report.
    As for fine-tuning payment on 7,000 procedures– they do that now, every two or three years. I’m just suggesting that they take “benefit to the patient/Medicare” into account when they do it. . .
    The nice thing about having Medicare pay for value is that Medicare takes a long-term view. It know that once the patient signs on,he/she will be with Medicare until he or she dies. So it’s important to provide care that pays off over the long run. Other insurers assume that there is a good chance that the customer will change jobs or insurers and be someone else’s problem in 4 or 5 years–so there’s less long-term thinking about value.

  9. Couple of devil’s advocates points:
    – Salaries works well in theory but docs who are salaried are MUCH LESS PRODUCTIVE than their FFS brethen. Study after study in the 1980s/1990s (including a ton of data from MGMA) noted that docs who are salaried simply do less including reduced number of daily patient visits.
    “Eat what you kill” has been the prevailing mentality by health care providers in this country ever since health insurance and FFS became more widespread starting after WWII.
    – Nasty truth is that from a societal perspective in terms of dollars spent on healthcare, many “preventative medicine” techniques fall short. The only real slam dunk are vaccines.
    In fact, if you really want to reduce spending on Medicare you would subsidize handing out free cigarettes. Granted this isn’t a rational policy option but if you are strictly looking out at economic output/input question it is the most effective solution.

  10. MG–
    The Dartmouth reserach–which is meticulous, and generally regarded the gold standard of reserach on value for health care dollars–shows that docs on salary are not less productive. If they work
    collaborative, at a medical center like InterMoutain, Mayo, or the
    Cleveland Clinic, no one wants to be seen as a ‘slacker.”
    MGMA just isn’t as respected–it has its own priorities.
    Reserach also shows that VA docs are very productive.
    So I’d like to the reserach you refer to. I also

  11. Maggie,
    Docs who are salaried are less productive. Just ask any practice manager or CFO in this country.
    As for the research, a number of health care economists including folks at Univ. of Minnesota and Univ. of Washington have looked at this and found physicans believe just as other rational ecnomic beings.
    If you give them a chance to earn more by producing, they will. One of the fundamental flaws with FFS.
    As for a specific research, I would recommend speaking with Doug Conrad at Univ of Washington or Roger Feldman at the University of Minnesota if you wanted to know more.

  12. Maggie,
    One last point – the places you sight (Cleveland Clinic, InterMountain) are far from the norm when it comes to providers in this country.
    Also, I am wanted to make sure that I am seperating quality and productivity. Big differences there and I would have to look at the research that showed what the outcomes were for salaried vs. FFS docs.

  13. MG–
    Yes Intermountain, Mayo and Cleveland are at the top of the pile but so are the medical centers that they are compared to where most physcians are working fee-for-service–including the most prestigious academic medical centers in the U.S.
    Dartmouth looks at quality of outcomes and efficiency– how many physician inputs it took, how many days in the hosptial, how many procedures, etc to achieve very good outcomes with high patient and doctor satisfaction.
    The most efficient hospitals achieve better outcomes while doing less–the patient sees fewer specialists, spends fewer days in the hospital, doesn’t have to be re-admitted (because they did it right in the first place)
    Sometimes productivity is measured in terms of how much people “do”–but having 12 specialists runnign around like chickens with their heads cut off while piling up fee-for-service bills is not our goal.
    Our goal is better quality and lower costs. That may well entail “doing less” –and taking better care of your patient. Our worst hospitals are the most chaotic.
    This is another way that healthcare is different from other industries. In most industries if everyone is doing more, and more productive, they turn out more product–which raises revenues, and should raise profits.
    But in a hospital, the goal is not higher revenues and profits. It’s better outcomes. Of course that can mean lower revenues (not as many re-admissions, shorter stays, fewer infections. )
    We need to figure out a way to reimburse hospitals for doing those things that improve outcomes but lower revenues.

  14. I understand your point about the Dartmouth Atlas. Higher quality and lower cost but there are also plenty of academic medical centers that don’t do this even if you use some of the severity-adjusted measures out there.
    Think we are getting away from what from my point was originally that every physician payment method has it flaws – FFS has it caveats (over utilization) but so does salary (productivity issues) and capitation (under utilization).
    Basically, all of these physician payment methods have their limitations and neither is directly tied to quality or efficiency. I would argue that there has been some progress made on quality and less so on the efficiency side.
    In the interim, what it really comes down to in the end of the day is for a political solution. CMS has to stand up to specialists and say “no mas.” I just think the reality of this is in the next year or two is almost zero.

  15. Maggie:
    I am so glad you’re bringing up this very important topic of physician-centered vs. patient-centered medicine. (Dare we ever hope for truly “collaborative medicine”?)
    Instead of looking only at EITHER the amount of training and stress a doctor endures, OR the amount of benefit a patient experiences, as indications of how much a doctor should be paid, how about also looking at another aspect of patients’ concerns: whether the patient would have wanted the treatment in question, IF he or she had known what the aftermath might be; in other words, if he or she had been fully informed.
    In a comment I left in response to your posting about jd’s reactions to the rude behavior of his wife’s surgeons in the OR during her C-section, I pointed out that, in our physician-centered medical system, doctors often encourage patients to have surgeries they would not have wanted, had they been told about all the very real possibilities of post-surgery complications.
    There is a terrific video of Dr. Jack Wennberg online — http://dartmed.dartmouth.edu/spring07/video/atlas.php?player=qt&movie=05 — in which he discusses a Canadian study that found that, when surveyed, of the patients whose doctors declared them “clinically appropriate” candidates for knee replacements, ONLY 15 PERCENT actually WANTED the surgery. This is an astounding figure, because, as we well know — in most cases — doctors’ assessments of “need” and “necessity” usually win out.
    How many patients are actually “fully informed” — especially in cases where doctors really WANT to perform a high-stakes surgery? (Remember, surgeons are often thrilled by the challenge of performing a difficult surgery!)
    I recently heard the true story of a 91-year-old man whose neurosurgeon strongly encouraged him to undergo a major surgery, telling him that he would, in all likelihood, do “just fine.” Well, he did withstand the surgery “just fine.” It’s the recuperation that is causing him big problems! And apparently, this renowned neurosurgeon hasn’t spent much time visiting the man post-surgery, so he may not know that his patient is NOT doing “just fine.”
    I will never forget my favorite Jack Wennberg quote: “The wrong patient [for a procedure or surgery] is the patient who doesn’t want the procedure when fully informed.” (I am still searching for the video. If anyone can locate it, please add the link here. If I find it, I’ll do the same!)
    Maggie, I know that you are a big believer in “more care does not mean better care,” and that patients who are subjected to the most aggressive treatments don’t necessarily fare better. In fact, as you know, their outcomes are often worse.
    We should keep this in mind when considering how doctors should be paid.
    Julia Schopick
    http://www.HonestMedicine.com

  16. MG and Julia–
    Thanks for your comments.
    MG– For well-insured patients “underutilization” is far from a problem in this country. Overtreatment is. (The Dartmouth reserach shows that 1/3 of our healthcare dollars wasted on ineffective, unnecessary, often risky and over-priced drugs, devices and procedures.”
    So the concern that capitation (or salary) will lead to underteatment really shouldn’t be a big concern. If a patient is convinced that he or she is being undertreated, they can try another doctor for a second opinion.
    But put it this way: At Kaiser in California docs are on salary and outcomes there are (by and large)the gold standard for general care in California while costs are significantly lower than at many California medical centers.
    The Dartmouth research shows very clearly that “under-utilzation” leads to better outcomes.
    I agree that Medicare must get tougher when making decisions on what to cover–and insist on comparative effectiveness research proving that the new, more expensive, drug device or procedure is actually better.
    I think this is going to happen–if only because Medicare is running out of money. There is already legislation in Congress co-sponsored by the chairs of the Senate committee on finance and senate committee on debt.
    Julia–Yes, I’ve seen that video. I’ve also written about shared-decision making at Dartmouth here http://dartmed.dartmouth.edu/fall07/html/choice.php
    and will be writing more about it in a piece I will be posting on Health Beat –probably after Labor Day. I will include one of the breast cancer videos that Dartmouth uses.
    Jack Wennberg is part of the Working Group that I’ve put together to study Medicare reform. (See press release here: http://www.healthbeatblog.org/2008/07/the-century-fou.html.
    I’m hoping that we will recommend that Medicare pay for shared-decision-making. Because so many patients decide not to go ahead with elective surgery if fully informed about the risks as well as benefits, I think its likely the program would pay for itself.
    But as you know, that’s not the goal of shared-decision-making. Just a by-product. The goal is to make sure that the right patient receives the right treatment at the right time.

  17. Having worked with hundreds of physician practices and hospitals as a provider, manager, consultant, and author, I’d second the notion that physician payment should include value that patients receive.
    The fact that current payment is based on internal metrics i.e. physician labor, stress, overhead etc. is symptomatic of a healthcare system that lacks a common purpose. The result? Provider, payer, and employer constituents long ago sunk into narrow, internally focused agendas whether it’s quarterly profits for insurers, cutting costs for employers or primary care’s poor reimbursement.
    In fact, patients are largely invisible in the healthcare system- witness your recent excellent blog by the husband of a patient having a C-Section who was virtually ignored by the physicians conducting her procedure.
    Healthcare desperately needs greater simplicity starting with a common purpose. One that patients, providers, payers and employers can understand and brings us back to the reason we’re here: patients. An aim that goes beyond treating disease.
    A simple goal might be “care that heals, enables and delights patients at the lowest possible cost.” Every time. Heal-not necessarily medicate, enable because patients not hospitals and doctors are the biggest determinants of health outcomes and delight because satisfaction alone is no predictor of loyalty.
    While well-intended, many national improvement initiatives (a number of which I’ve participated in) actually increase fragmentation and inefficiency with their limited focus on clinical metrics like blood sugar and blood pressure. These same metrics often require double data entry by participating providers. Building patient self-care skills (that can reduce unnecessary cost and visits) as well as satisfaction are largely absent from project outcome metrics.
    Measuring whether a patient has been healed, enabled and delighted need not be overly complex or costly. For example, research in other industries has found that only one question need be asked to measure satisfaction: whether a consumer would recommend a provider of goods or services to a friend or family member. Currently, with few exceptions, after the annual ritual of collecting multi-question patient satisfaction surveys the results are usually filed with little or no follow-up, recall of recurring issues or genuine “fixing” of complaints regarding access, predictable costs, and convenience.
    The power of a simple, customer focused national goal for healthcare could also enable more effective decision making at the national and even local provider level. For example, should an EHR (electronic health record) system receive national certification or even considered for purchase if it doesn’t include an easy to use PHR or patient health record that patients can access and take anywhere? Shouldn’t email care, group visits and telemedicine be routine?

  18. Maggie said, “… shouldn’t the cardiologist who helps a patient to stop smoking be paid handsomely?”
    If you follow that to a logical conclusion, no doctor will want to care for any patient who continues to smoke (or is obese, or has recurrent cancer, etc.).

  19. Sue–
    Thanks for your excellent comment.
    I couldn’t agree more: healthcare needs a common purpose.
    You write: “While well-intended, many national improvement initiatives (a number of which I’ve participated in) actually increase fragmentation and inefficiency with their limited focus on clinical metrics like blood sugar and blood pressure. These same metrics often require double data entry by participating providers.”
    Yes–this is the problem with many pay-for-performance schemes. This is why, these days, the Medicare Payment Advisory Commission and other interested in measuring quality are interested in looking at total “outcomes” rather than what was done each step of they way.
    I also agree that e-mail, group visits and telemedicine should be routine.
    This would free up doctors to spend 30 minutes with the patients who need 30 minutes,while spending two minutes to reply to an e-mail that, if it were an office visit, would involve the patient waiting 45 minutes to be seen for 12 minutes –and a harried doctor not having 30 or 40 minutes for the patient who needs more time and counseling.

  20. B. Spoon–
    I’m afraid you misunderstood. The cardiologist who helped a patient stop smoking would receive a bonus.
    If the patient didn’t stop smoking he wouldn’t be penalized. No system that rewards for quality penalizes doctors if patients are non-compliant. We don’t want doctors avoiding non-compliant patients.

  21. I’m afraid Maggie does not understand that rewarding physicians for compliant patients is the same as punishing them (by withholding “rewards”) for non-compliant ones. Which kind of patient would any human being want to fill their medial practice with: rewarding or unrewarding patients?

  22. We agree that we don’t want doctors avoiding non-compliant patients.
    Reward doctors for years of service, level of education and continuing education, for taking on complicated cases and procedures, working nights, weekends, holidays….but not on how much (or how little) care they deliver, or how compliant their patients are.