Do we know enough about measuring the quality of healthcare to pick out the best doctors?
When I asked Don Berwick that question last week, he spread his hands: “You’re looking at the cream of crap. The system is so broken,” he explained, “that even the high performers are far away from optimal performance. Most measures of quality are simply measuring the system that the doctor is trapped in, not the doctor himself.”
Who is Don Berwick, and why is he saying such terrible things about our healthcare system?
Dr. Donald Berwick, President and Chief Executive Officer of the Institute for Healthcare Improvement (IHI), is widely recognized as one of the world’s most respected experts on healthcare quality. In 2005, Modern Healthcare, a leading industry publication, named Berwick the third most powerful person in American medicine. In contrast to others on Modern Healthcare’s list, Berwick “is not powerful because of the position he holds,” noted Boston surgeon and author Atul Gawande. (Former Secretary of Health and Human Services Tommy Thompson ranked no. 1 on the list while Thomas Scully, the head of Medicare and Medicaid Services, captured the second spot). “Berwick is powerful,” Gawande explained, “because of how he thinks.”
When Berwick thinks about the U.S. healthcare system, the word he uses is “bloated.” There’s a myth that American healthcare is the best in the world,” he noted at a Families USA conference last week. “It’s not,” he said bluntly. “It’s not even close.”
“It’s thought to be the best because we have the most healthcare,” Berwick told his audience. But in fact, although we spend twice as much as the average developed country providing more care than any other nation in the world “40 percent of the care that Americans actually need is not received.” Why?
“Cost is the barrier.”
“Here is a question I often ask my students,” added Berwick, who is a Professor of Pediatrics at Harvard. “When you meet a new patient, what is the one test that you could do that would tell you how long that patient is likely to live?
Typically, students answer: “Ask them if they smoke,” or “Test their blood sugar.”
“No,” says Berwick, “Just look at the color of their skin.”
Berwick recognizes the central irony of U.S. healthcare: While a great
many Americans don’t receive the care they need, another large segment
of the population receives unnecessary care in a system that is bloated
by its emphasis on growth and profit—rather than on better health.
Berwick has estimated that “up to half of the more than $2 trillion
that the U.S. spends on healthcare does nothing to relieve suffering.”
To the contrary, “much of its adds to suffering.”
Berwick knows this from painful, first-hand experience. In the spring
of 1999 his wife Ann was suddenly struck down by a rare and serious
autoimmune spinal cord problem. Over the next seven months she would be
hospitalized six times at three of the finest medical centers in the
country. For most of that time, no one could tell her what was
happening to her—or what her prognosis was.
But the fact that the physicians could not diagnose the problem is not
what scared Berwick most. As a physician, he understands the
uncertainties and ambiguities of medicine. What terrified him was the
number of errors that were made in each and every hospital. “Above
all,” he later said, “we needed safety—yet Ann was unsafe. The errors
were not rare; they were the norm.”
Berwick had co-founded IHI in 1991. So by the time his wife fell ill in
1999, he knew the system’s shortcomings well. As a result, what he
witnessed while sitting at her bedside day after day for two months
“did not actually surprise me,” Berwick acknowledged. “But it did shock
me.” To read about medical errors is one thing; to experience them
triggers a more visceral response. “Not a day passed—not one—without a
medication error,” Berwick recalled. “Most weren’t serious, but they
scared us.”
At the end of Ann’s hospital odyssey, the Berwicks received the bills.
Luckily, the insurance covered them. But even so, he was astounded to
see the charges for MRI scans that had been done over and over again at
$1,700, $2,000, or $2,200 per procedure. In addition to the redundant
tests, there were the charges for medications that had been ordered in
error: “There they were, pill after pill . . . “ Although she had
spent a total of only 60 days in the hospitals, in 1999 her bill
totaled more than $150,000. “ (Given health care inflation in the last
nine years, today it would probably exceed $250,000).
“And the bare fact,” Berwick observed, “is that of all that enormous
investment, a remarkably small percentage—half at best—stood any chance
at all of helping her. The rest had been pure waste. Even while
simpler needs—for a question answered, information explained, a word of
encouragement, or just good, nourishing food—had gone unmet.
Ann Berwick would be one of the lucky ones. After leaving the hospital,
slowly she recovered. Two years later she was again able to walk. The
cause of her illness remained a mystery.
Berwick did not blame the hospitals for not being able to diagnose the
confounding disease. His complaint was not that the system did too
little, but that it did too much, putting his wife through a serial
ordeal of painful, ineffective and redundant treatments. It is not just
that these hospitals couldn’t cure her. They didn’t care for her.
“On at least three occasions, Ann waited alone for over an hour, cold
and frightened on a gurney in the waiting area outside an MRI unit in a
subbasement in the middle of the night.” Another time, “an emergency
room visit for a diagnostic spinal tap that should have taken two hours
evolved into an eleven-hour ordeal of constant delay. “ On yet another
occasion, “my wife had a surgical procedure and awoke in the recovery
room, asking for me. I was not permitted to join her for ninety
minutes, even though she repeatedly asked that I be allowed to comfort
her.”
One reason that our hospitals have become such chaotic, unsafe and
seemingly uncaring places is that, in our profit-driven system, what
Berwick describes as “a constant stream of new technologies” distracts
health care providers. Dr. George Lundberg, former editor of JAMA,
calls our often blind faith in the latest, most expensive and most
complicated medical technology “a vast cultural delusion. “ Meanwhile,
too often, harried nurses and doctors are so busy ordering tests and
trying out the newest procedures that they don’t seem to have time for
the basics of good medicine: competence and kindness.
Indeed, a stunner of a study published in Health Affairs in 2004 shows
that in those regions of the country where patients receive the most
sophisticated, most expensive hi-tech hospital care they are less
likely to receive the effective low-tech care that we know works—like
an aspirin for a heart attack victim.
No one is certain why more expensive care seems to go hand in hand with
lapses in basic care. Though one researcher points out that in regions
where patients receive the most aggressive, hi-tech care, there tend to
be more specialists and fewer general practitioners: “And if there are
five specialists treating you, each one is going to be slightly less
likely to take overall responsibility for your care , and more likely
to think that another physician has given the aspirin.” I have written about how patients in some parts of the country receive
more aggressive and costly care –without any improvement in outcomes
here and here.
In his speech last week, Berwick expanded on that theme, listing what
distinguishes the areas where –after adjusting for differences in
local prices and the underlying health of the population as well as the
age and race of the patients–Medicare spends $3,000 more per
beneficiary per year, for no apparent reason. Berwick explained what
high spending regions in parts of Louisiana, Texas, Florida, New York,
New Jersey, and Southern California have in common:
- 32 percent more hospital beds, per capita, and
- 65 percent more medical specialists
- Supply drives demand. When more technology, more beds and more specialist are available, the extra resources are automatically used, without anyone thinking too much about it.
But when it comes to quality and results, Berwick observed, patients in these high-spending regions experience:
- Technically worse care
- More hospital stays, visits, specialist use, tests and procedures
- Slightly higher mortality
- Same functional status
- Worse communication among physicians
- Worse continuity of care
- More barriers to quality of care
- Lower satisfaction with hospital care
- Less access to primary care and
- Lower gains in survival
Meanwhile, hospitals bent on growing their income stream open new wings
–even though they don’t have enough nurses to monitor the patients
already under their care. “The national bird of the U.S. hospital is
the Crane,” Berwick told his audience at the conference. “Just look up
at the roof,” he added, referring to the hospital building boom.
This is one reason why one-third of Medicare beneficiaries are
re-hospitalized within 90 day of being discharged from the hospital.
“You see this all the time with patients suffering from congestive
heart failure,” Berwick told me in an interview shortly before he gave
his speech. “There’s a very high bounce rate. Yet we know, from
research, that 85 percent of those readmissions could be avoided by
proper management.
“You need to make sure the medication is right before the patient
leaves the hospital. You need to monitor early signs of deterioration:
weight gain, shortness of breath. You need to anticipate the patient’s
needs. Instead of waiting for the patient to call, the provider should
call, to check up on the patient.
“I hate the word ‘discharge,’” he added. “It means ‘that’s it.’” He
wiped one hand with the other. “’We’re done with you.’ Not ‘we’ve got
your back.’ Instead, we send you back into a chaotic world and lose
track of you. “
Congestive heart failure is one of those chronic diseases that absorb
70 percent of our health care dollars because we manage them so badly.
Twenty-two percent of chronically ill adults report a “serious error”
in their care, Berwick told his Families USA audience. Seventy-four
percent of chronically ill adults say the system needs “fundamental
change” or “complete rebuilding.” And standards of care vary widely in
hospitals across the country, Berwick noted, even in our most
prestigious academic medical centers, with death rates (adjusted for
the case mix) varying by 400 percent. Meanwhile, use of resources
during the last six months of life varies by 500 percent among the 77
“top-rated” U.S. hospitals—with no improvement in outcomes at medical
centers that provide the most intensive and costly care.
If Berwick’s message sounds depressing, there is, in fact, good news
hidden in his report. He offers the answer to the question I’ve asked
in the title to this post—“How Do We Finance Health Care Reform?”
As the failure of the California plan for health care reform
demonstrates, reform does not suddenly make care less expensive. In
fact, when you cover everyone, it costs more. But Berwick makes it
clear that there is plenty of money sloshing around in our health care
system to provide high quality care for everyone—if we reallocate the
$2.1 trillion that we’re spending by reducing the number of unnecessary
tests, ineffective procedures and hospital errors, while putting the
money into needed care—particularly preventive care and chronic disease
management.
Of course, spending $2.1 trillion more wisely and efficiently is easier
said than done. But Berwick makes a number of sound suggestions, based
both on what has worked in other countries and what has worked in
health care systems in the U.S. that have participated in Institute for
Healthcare Improvements efforts at “continuous quality improvement.”
(See IHI’s website here http://www.ihi.org/ihi)
- To provide financial discipline, institute a cap on the nation’s
total healthcare spending. How would it be enforced? The way it is done
in other countries, Berwick suggested, by setting up budgets for
populations in various part of the country. The regions could be a
small state –or part of a large state.” How would we decide how much to
budget? “We could start with the current per capita cost” Berwick,
suggested, though if we cut back on the phenomenal waste, he added “it
could be 20 percent to 30 percent lower.” - “Someone has to be responsible for enforcing and administering
the budget—making sure that all the services are there—and that can’t
be someone off in ‘insurance land” Berwick added. “We need a
commissioner of care for a given population.” This is what HMOs were
supposed to do, but instead of managing care to improve quality (which
would lead to lower costs), most focused primarily on cutting spending. -
To avoid the perverse incentives of “fee-for-service” which
encourages doctors to “do more”, they should be “on salary in
multi-specialty groups,” Berwick declared. Doctors are better off if
they aren’t lonely,” he said. “They will benefit from being in a
community of professionals. And this doesn’t need to stand in the way
of patients having their choice of doctors. - “Patients needs to have a ‘medical home’ –someone who knows their
care through time and space.” This could go a long way toward
coordinating a patient’s care, and avoiding redundant tests. “But it’s
very hard to do effective primary care in a fragmented system,” Berwick
warned. That is why we need to have doctors working together in
multi-specialty practices. “And we need to make greater use of
nurse-practitioners. In Sweden, which now has what I consider the best
health care system in the world, children rarely see a pediatrician for
a routine visit. They see a nurse-practitioner.” - When it comes to suppliers of medical equipment, drugs and
services, “they have to cease making profit on complexity,” Berwick
insisted. We should be paying for effectiveness, not whether a product
is newer or has more bells and whistles. -
As for hospitals, “they need to try to reduce the use of their
beds.” This should be a conscious goal, Berwick suggested, recalling a
visit to Sweden where a hospital administrator described his “biggest
achievement. That year, he had brought hospital admissions down from
9500 to 7500.”Of course, in the U.S. a hospital CEO who
did that would be fired. But that’s because in ou hospitals, volume =
profit.“We need to decouple volume and profit,” Berwick told me. “They’re talking about doing that with energy in Massachusetts, where my wife is undersecretary for energy. They want the
utilities to encourage conservation, and if they succeed, we won’t just
pay them so much per kilowatt hour, we’ll pay them for “negawatts’—for
reducing the amount of energy used.” So hospitals could be paid for using fewer beds than they had the previous year, much the way we pay farmers not to plant.
- Finally, Berwick stressed that patients need to unlearn the notion
that “more care equals better care.” And U.S. patients become more
“mature” (by which he means wiser, not older), they must learn to think
collectively, recognizing that we are all in this healthcare system
together —and that we live in a world of finite resources. The
individual who is cared for at the most costly and aggressive hi-tech
medical center that U.S. New & World Report “rates” as one of the
nation’s “best” may think that he is getting better care, but in fact,
there is no evidence that this is true. To the contrary, there is
significant evidence that he less safe than he would be if he were
receiving less intensive, but better-coordinated care at a medical
center like University of California at San Francisco, or the Mayo
Clinic, where Medicare spends less per patient, in part because
patients see fewer doctors, and outcomes are better. Moreover, the
patient who consumes unnecessary care is weakening the very health care
system that he depends on.
Berwick ended his speech at last week’s Families USA conference by
talking about “The Tragedy of the Commons.” Those who believe that
“market forces” will cure our health care system believe that if “each
individual pursues his own self-interest” all will be well. Berwick
observed. “This is Adam Smith’s ideal. But such market enthusiasts
ignore the lessons of “The Tragedy of the Commons,” a 1968 essay
written by ecologist Garrett Hardin and published in Science.
In the essay Hardin shows how the individual who does not think
collectively ultimately may act against his own self-interest. As an
example, he imagines a pasture shared by local herders. Each herder
wishes to maximize his profit, and so will increase the size of his
herd whenever possible. Thus, the individual herder gains an
advantage. But each time he adds an animal to the grazing population,
the commons is slightly degraded—and everyone loses. This happens
“again and again” until ultimately, as each herder pursues his own
self- interest; the pasture is over-grazed until finally, it is left
bare of grass.
“Each man is locked into a system that compels him to increase his
herd without limit—in a world that is limited,” Hardin wrote. “Ruin is
the destination toward which all men rush.
Hardin later said that perhaps he should have called his essay “The
Tragedy of the Unregulated Commons.” For the commons to thrive the
resources need to be “managed”—just as, in a world of finite resources,
health care needs to be rationalized, regulated and coordinated, so
that the “right patient gets the right care at the right time.” And no
patient is left alone and cold, in a dark sub-basement.
Great post on a the thoughts of one of the most knowledgeable and thoughtful healthcare leaders.
Still, the ultimate takeaway from this is unless you have some with the authority to set and control global budgets on U.S. healthcare spending, the cost problem with remain unabated.
MG–
You are right. Unless we have a president for whom healthcare reform is a maor priority–and unless he or hse has enough cooperation in Congress–it won’t happen in the next four years.
But I do believe that if we elect a progressive president who is oommitted to reform, and if that president wins a second term (-which is pretty likely) then by the seocond term, more people would have lost their health care insurance, and the pressure on Congres would be enoough to offset the pressure from the heatlhcare industry’s lobbyists.
I other words, unfortunately, the worse economic condiionts get, the better the politcal conditions become for real reform.
Universities like YALE STANFORD UCLA say recumbent mri scanners are INFERIOR to UPRIGHT MRI scanners click my name for info and RSNA 2008 WARNS AGAINST CT SCANS CANCER
Maggie,
Great post.
The conceptual appeal of global budgets, especially for hospitals, is obvious. I wonder, however, if you could point us to any references that would address the following issues:
1. What happens to the availability of care, especially for elective procedures and other non-emergencies, as hospitals approach the last couple of months of each year? Do they run out of money? How large a reserve fund is generally available to handle such a contingency?
2. How much do wait times vary both among countries and within individual countries for elective and non-emergency procedures? I assume that emergencies always take priority.
3. To the extent that there are differences in wait times among countries, is it more a function of differences in the ability to manage resources effectively or does it relate to differences in how much of GDP different societies are willing to spend on healthcare?
4. Once a global budgeting system is up and running, to what extent is the next year’s allocation for a given hospital or even a given region driven by political power as opposed to medical needs?
5. I often read that in Canada, people may have to wait weeks or even months for an MRI but a scan for their pet, which must be paid for out of pocket, can be had very quickly. I think the ability to pay for services privately outside of the main insurance system should also be available, not just so the wealthy can jump to the head of the line but to relieve pressure on the system that will always be there as long as resources are finite.
Be wary of the objectivity of those who have had a poor experience with the health care system.
The plural of anecdote is not data.
robert–
As I mentioned, Berwick had created IHI 9 years before his wife became sick–because he realized just how broken the us health care system is.
Before fonding IHI he was vice president of quality improvement measures at Harvard Community health Plan — and became so frustrated that by the mid 1980s he nearly quite his job.
So his wife’s experience didn’t shape his perceptions.
Barry–
There’s a general consensus that we do way too many MRIs in this country. And the more units we buy, the more we do.
Much of the talk about long waits for MRIs, etc. is Canada is exaggerated. Talk to Canadians and it is very difficult to find paitents concerned about this issue. (As I may have said in the past, my daughter went to college in CAnada for four years–at McGill.
Most of her friends were Canadian–she’s stil in touch with them. And they and their families were unanimous in beging very happy with Canada’s health care system. They were also unanimous in feeling that they never would want to have to live with our healthcare system.
That said, some (far from all) Canadian doctors are not happy with the system becuase they feel they could earn much more in the U.S. (which they could.)
The short answer to your question about budgets is that in countries where the health care budget is lower (say, the U.K.) there are likely to be longer waits for elective, non-emergency services than in countries where the budget is higher, per capita (say Switzerland).
Since we spent 40% more than Switzerland, we should be able to accomodate necessary elective surgery without too much problem.
And you should be aware that in the U.S. today a patient may wait 6 months or more for a knee implantif he or she wants to use a particular doctor and that doctor wants to run certain tests, wait for reports, etc. before going foward. (This was the experience of a friend’s mother recently. She wasn’t that upset about the wait; my point is that it happens here too)
As for hospitals running out of money in November–this is why Berwick isn’t talking about budgets for individual hospitals, but rather budgets for regions containing many hospitals.
If you tried to set up a budget for an individual hopsital, one airplane crash, 10-car pile-up. local natural disaster or outbreak of an infectious disease could throw off the budget for the year.
That’s why you need a budget that covers a larger population group (a small state or part of a larger state.) Then it is qute possible to look at spending a year earlier and estimate what you would need for 12 months without running out of money in the fall.
If you set up the budget based on past spending on that population, political power doesn’t really come into it. Though at some point, we are going to have to come to grips with the fact that we are spending twice as much per patient in Manhattan as in Minnesota (after adjusting for difference in race, prices, and the underlying health of the population, which is worse in Manhattan.)
Since people in Minnesota pay the same percentage of their paycheck on Medicare taxes, it really isn’t fair that they are subsidizing over-treatment in Manhattan (nor is it good for Manhattanites, though it has made certain Manhattan specialists very rich.)
Ultimatley, using “continuosu quality improvement programs,” people like Berwick want to teach doctors and hospitals in Manhattan to begin practicing medicine the way they do in Minnesota. This will probably take 20 years or so.
A first step will be to get Manhattan’s many solo practioners to begin joining multli-specialty group practices. (This is already happening among younger doctors; overhead in Manhattan is just too high for many solo practioners to make a go of it. And when they are required to use health IT, they just won’t be able to afford a solo practice.)
In groups, doctors can enjoy economies of scale, and more importantly, they’ll all be looking at the same chart for a given patient. If one doctor is consistently overtreating and straying from what is generally considered “best practice”, the other doctors will point this out to him. Collegiality can go a long way toward reining in someone who just isn’t keeping up with the reserach, or is, for whatever reason a “Lone Ranger.”
So, if a centralized controlling authority for health care rationing is such a great idea, why has it failed each and every time it has been tried? See: the UK, Canada, California and, coming soon, Massachusetts.
The fact is, the nice little story about the shepherds is just that, a nice little bedtime story. It only makes sense if there are no enforced property boundaries. The scenario we’re asked to accept is that of a hybrid communist/capitalist system that clearly doesn’t work. If, instead, each shepherd had his own plot of land, an oversized herd would hurt only the one over expanding. If he over expanded too much, then he’d go out of business and his assets (namely the land and sheep) would be available for the other two shepherds to buy and use more wisely. They then bring more wool and meat to the market, and everyone wins (except the guy who went out of business…but that was his fault and he, alone, paid the price). That, my friends, is the general idea presented by Adam Smith. Not the absurd strawman constructed by Hardin.
In terms of the health care issue, what we currently have is that communist/capitalist system. Each of us can make our own treatment decisions, but then the price of those decisions are paid for by society at large (in the case of Medicaid/Medicare). This not only an unfair system, but it is ultimately unsustainable. So, we have 2 choices.
#1: Go fully communist (as the Democrats generally want to do and as the UK and Canada have done). In that system the government determines who gets what. And those decisions are made by bean-counters.
#2: Go fully capitalist. Then I get to make my own decisions, but I must pay the resulting price. Then there is no cost the society and I get to remain free (you know, like that pesky Constitution guarantees?)
But hey, if you happen to want some IRS-like government bureaucrat determining whether or not you’re child is worth saving, go right ahead and get in line for Communist Health Care. If that be your choice…“May your chains rest lightly upon you and may posterity forget that you were our countrymen.” (Samuel Adams)
Tom
Your choice is that we :
“Go fully capitalist. Then I get to make my own decisions, but I must pay the resulting price. Then there is no cost the society and I get to remain free (you know, like that pesky Constitution guarantees?)”
You’re right, under the system you favor, there is no cost to society. The individual pays the full price.
This works out well for affluent people who can afford a hospital bill of, say $250,000 for 3 weeks.
Or $100,000 for a year’s supply of a cancer drug, plus another $200,000 in bills from your oncologist, occasional hospital stays, etc.
And if you, or your child, is lucky enough to live 7 years, you can multiply those numbers by 7.
It doesn’t work out as well for middle-class people. (In this country median household income is somewhere around $52,000.–before taxes. Half of the households in this country earn less than that.
After you pay for rent or mortage payments, food,utilities, buy minimal clothing, make car payments and buy gasoline to get to work (two cars if both spouses work), save for a child’s college education, and possibly a little for retirement, you’re not in a postion to save $250,000 -??? to cover those doctors’ bills.
Nor are you in a position to pay $12,500 a year for family coverage, plus co-pays and deductibles. (That’s the average cost for a family plan. Some people are lucky enough to have an employer pay 1/2 or even 2/3 of that. But people who live in housholds where joint income is under $52,000 generally don’t work for large employers who can afford such generosity. So if they want health insurance for a family, they woudl have to pay the whole $12,500 themselves.)
Some people would argue that half of all U.S. households earn $52,000 or less because they just aren’t working hard enough.
Lots of people working in restaurants, in Wal-Mart, cleaning houses,cleaning office buildings, working on farms,working on contruction projects, etc. would disagree.
They think that they have a right to healthcare too. It’s called life, liberty and the pursuit of happiness.
If you don’t have your health, you can’t take advantage of opportunities– let alone pursue happiness.
2 Comments.
1. Follow the money. A) Primary Care Physicians are paid per visit, for a limited number of issues. If they want to stay in business, they will quickly address 3 issues and have the patient follow up in a few weeks. That means that they will address the patient’s cholesterol with medications, their hypertension with medications, and their hyperglycemia with medications and will never get reimbursed for fixing the real problem of diet, exercise, and smoking.
B) ER docs are paid for the number of patients seen. They increase this by algorhythmic medicine. Instead of taking time to get a good history and physical, one can get a short story, order the labs and CT, and move on. The ER group is happy, the legal department is happy, and you have ruled out anything that will put the group in jeopardy of liability. The reason that the person has multiple visits to the ER is never addressed.
C) The surgeons and specialists are paid for procedures. They also determine whether the patient needs the procedure or not. They do not get paid for managing the patient after the procedure, so get them in, do the procedure, and get them out. The more procedures the better as long as it does not put the physician in jeopardy of a lawsuit. This does not identify the chronic issues underlying multiple procedures.
D) If primary care physicians are in a multispecialty group, then there is a large incentive to refer patients to the proceduralists because the group will make money off procedures, not patient management. Therefore, they will send patients off for multiple tests and procedures through their group.
E) When physicians work for a hospital system or HMO, they often end up overwhelmed with patients, but there is no reward for seeing more patients. Therefore physicians are rewarded for addressing surface issues and getting patients out of the office or hospital as soon as possible, hence multiple bounce-backs.
F) There is no financial incentive to be a primary care physician and large financial incentives to become a proceduralist. Reimbursement is dictated by insurance companies who follow the lead of Medicare. Payment is dictated by the federal government, not supply and demand.
2. The legal system drives the medical system. If a physician orders multiple tests and sends the patient to multiple proceduralists, it costs him or her nothing and the physician does not have to face a lawyer in a courtroom asking me why the physician didn’t order every test and procedure available. If the physician saves the patients and insurance companies money by not ordering tests and procedures, the physician do not get reimbursed for this unless the physician is part of an HMO or hospital system.
Maggie,
Thanks for the explanation of how the budgeting process for hospitals would work under Berwick’s proposed approach. I’m still not sure I understand, however. For example, suppose we came up with a budget of $55 billion to take care of the roughly 8 million people in NJ. If there are 75-100 hospitals in the state, if someone doesn’t come up with a budget allocation at the individual hospital level, how would revenue flow into the facility other than under the current fee for service system, perhaps modified by the gradual implementation of episode pricing?
As a taxpayer, I would also have a problem with setting initial budgets based on the most recent experience. All that would do is lock all of the current system’s inefficiencies into place. Instead, I think there should be something like the commission that NY recently formed to rationalize hospital capacity which was modeled after the Defense Department’s Base Realignment and Closing Commission (BRAC). The converse of build it and they will come is to take excess capacity out of the system. The next best approach would be to let the less efficient hospitals starve to death instead of constantly propping them up with state, county, or local tax money. Even with universal coverage, however, illegal immigrants will not be covered, and they will still show up in ER’s and require (uncompensated) care. While this is likely to be a non-issue in most of the U.S., it could be quite significant in certain locations with large immigrant populations.
You also suggest that the 40% lower spending level in Switzerland implies that there is already plenty of money in our healthcare system to take good care of everyone. Yet, Switzerland has a population of only 7.5 million people, and it is a far more homogeneous population than we have in the U.S. I’m sure that in your financial journalism days, you encountered products that looked very intriguing in the laboratory but then encountered insurmountable technical problems in trying to scale up to commercial production quantities. Compared to the U.S., Switzerland, with its population smaller than NYC’s and more homogeneous at that, is a laboratory.
Finally, I agree that the days of the solo practitioner are numbered, and large, multi-specialty group practices should be both more efficient and able to provide better care to patients, not to mention afford the investment necessary to implement electronic medical records. However, I recall a blog conversation on this subject about a year ago when a doctor who belonged to such a group practice, claimed that the economies of scale dissipate rapidly once you get beyond 5 or 6 doctors. The reason is that the organization gets much more complex and simply needs more management – both bodies and layers.
Barry
Thoughts on budgets:
Like Medicare with patients that exceed usual LOS/DRG expectations, there are outlier payments made to hospitals. For example, a patient with stay of 67 days secondary to respiratory failure of unanticipated nature incurs a huge bill, the bulk of which would never be covered by standard DRG payment. CMS supplements.
Similarly, from an actuarial point of view, a hospital budget, assuming no Katrina-esque or 9/11 tragedies, is predictable in the short-term, give or take. Yes, CFO’s will say one decimal point or 1% error and you are sunk for the year. True. Whether the Feds/State will make up the shortfall and they run in the red is a different story, but they know how things stand from quarter to quarter. Ultimately, the facility must be aware if they are negotiating poor contracts, running inefficiently, or assuming too much liability secondary to charity/bad debt. Compare this to a a Grady in Atlanta (NYT piece was excellent and an eye opener), where it was a combination of both poor funding AND bad mgmt.
So, keeping that in mind, I could envision a “regional oversight board” with teeth that could see and act when things are going off track. If a hospital is legitimately squeezed, support should be built in the system (?? cap and trade with other regions, advances on budgets, subsidies). Either way, I dont think “a cap” is a rate limiting step. As they say, “stuff happens,” and workarounds and safety valves can be built in in the cases of non-malfeasance.
Obviously, this could get complicated, but it is just a thumbnail sketch.
Brad
Barry & Brad —
Thanks for your comments.
Brad–you’re right, there has to be a regional oversight board with teeth–this is Don Berwick’s health commissioner.
Barry– Yes it’s complicated but far from impossible to administer caps and budgets.
Many other countries have regional budgets–and they work. Rather than reinventing the wheel, we just need to study how they do it. Things wouldn’t work quite the same way here–they don’t work quite the same way in any European country. But there are many models to learn from.
Yesterday I met with an oncologist from Germany who is a Harkeness fellow with the Commonwealth Fund, here for a year doing a study regarding how we overuse antibiotics on children withe middle-ear earaches (About half the earaches are viral, so sntibiotics do no good. The kids need a) diagnsosis to try to figure out whether it’s viral or not and b) more painkillers and less antibiotics. Another case of waste in our system.
But I digress. One thing he said is that he and the other Harkness fellow (from varous European countries and New Zealand) were shocked by how little Americans know about health care in other countires–even though other coutries are far ahead of us in many areas including chronic diseases management, use of healthcare IT, reducing waste and overspending.
And while we’re relatively xenophobic, the Europeans are constantly learning from each other–and from us.
He was completely familiar with Don Berwick’s work and Jack Wennberg’s work at Dartmouth. Had read all of the papers, etc. His mentor in Germany had studied at Harvard’s school of public health at one point and knows Berwick.
He couldn’t understand why we have so little interest in what is working elsewhere.
It’s worth noting that Germany also has a pretty heterogenous population because they have so many workers who have come in from countries like Turkey (unlike the U.S., when they use immigrant labor to do jobs Germans don’t want to do, they feel obliged to provide the families with free health care.) And Germany also inherited quite a bit of poverty from East Germany.
Yet, despite their heterogenous poulation, they provide excellent healthcare at about half the cost of what we spend.
It’s interesting that upper-middle-class and upper-class Germans have a choice between the public health system and a private health system, but 90% pick the public health system. It offers fewer amenities and you are more likely to wait for non-emergency care, but when it comes to protecting your health it is considered as good and is less expensive. This 40-something doctor has chosen the public sector healthcare for himself–which says a lot for the high level of Germany’s public sector care.
And they are continuing to reform their system. Recently, they decided that prescription drug makers cannot charge more than generic drug makers charge for the drug (even if it’s still on patent) unless they can prove it is more effective.
The Germans aren’t worried that this will leave drugmakers with too little money to do research–they realize that at this point,they do very little constructive reserach. Most of their reserach money is poured into huge trials of drugs that require huge trials because they’re not very effective.
And they are still reducing hospital beds because, like the U.S. they have excess capacity.
And there, hospital construction is regulated. While they have private sector hospitals in Germany (like our for-profits) you can’t just open one unless you can show a need.
He’s shocked by how much excess capacity we have in the Northeast corridor from Boston down to Washigton and in Florida.
In March I’m going to a 3-day intl healthcare conference in Berlin where speeches and I hope to learn much more about what is happening abroad.
Maggie,
I agree that there are many aspects of the German healthcare system that would probably be a good fit with U.S. values and culture. Indeed, if I remember correctly, the Clinton initiative of the early 1990’s was modeled, to a significant degree, on the German system that existed at that time.
When comparing the cost of various healthcare systems around the world, we continue to use spending as a percentage of GDP in our analysis. I’m not so sure that this is either the best or the most appropriate approach. From the viewpoint of the average person, I think it would be more sensible to look at health insurance spending plus out of pocket healthcare costs as a percentage of pre-tax income. In Germany, for example, according to Niko’s excellent post of January 30th, the country is moving to a uniform sickness fund contribution rate of 14% of income plus up to an additional 1% of income if the allocation from the soon to be established Central Fund is inadequate to cover the bills. In France, the payroll tax rate is 13%, I believe, and that only covers about 75% of healthcare costs according to Ezra Klein. For other countries that rely more heavily on general tax revenue, as opposed to payroll taxes or insurance premiums, it should not be hard to determine the healthcare tax burden as a percentage of income at various points across the income spectrum.
In the U.S., take, for example, a person earning the median income of $52K. If the employer provides family coverage at a cost of $12K per year (including the individual’s contribution, if any) and the employer also pays 7.65% in FICA taxes on the employee’s behalf, most economists tell us that the employee’s actual income is not $52K but $65K ($52K in wages + 75% of the cost of family coverage nominally paid by the employer with 25% contributed by the employee + $4K in FICA taxes paid by the employer). For simplicity, I’m assuming no other benefits, though there is probably a 401-K match, perhaps disability and life insurance and assorted other benefits worth, perhaps, another $3K-$5K. Of the 15.3% total FICA tax, 2.9 percentage points help to finance Medicare. So, the employee in this example is really paying $12K for his own family health insurance coverage plus another $1,500 or so in FICA taxes to finance Medicare or $13,500 out of his $65K in pretax income or 20.7% of income compared to (as much as) 15% in Germany and 13% in France excluding the cost of out of pocket payments for co-insurance and deductibles, if any, plus non-covered services.
Even under some of the reform ideas currently being put forward by Democrats, they are trying to create the impression that individual contributions would be capped at 6.5% of income with another 6.5% of payroll to be paid by employers who do not already provide health insurance for their employees. Even under this scenario, the employee’s insurance cost would be 13% of income for his or her own coverage plus another 2.9% in FICA taxes to help finance Medicare or 15.9% of income for the insurance coverage alone. This would be a comparable or slightly higher burden than our friends in Germany and France pay for a system that is constantly billed as offering far better care at far less cost. While the care may or may not be better depending on how it is measured, the cost (in taxes or premiums) as a percentage of income actually paid by the employee looks to be in the range of 13%-15% of income everywhere. Much of the middle class in the U.S. that currently enjoys generous employer coverage is paying considerably more than that. The sooner we help them to understand that, the better.
As a follow-up to my last post, I want to make two other points. First, during the health insurance reform debate in Wisconsin last year, I saw estimates that pegged the typical large, self-funded employer’s spending for health insurance (including the employee’s contribution toward the premium) at 15%-17% of payroll. Second, Charlie Baker, CEO of Harvard-Pilgrim Healthcare, a highly regarded non-profit insurer posted some months back that the typical employer in HPHC’s territory spends $7,500-$8,000 per employee (median age about 40) for health insurance which reflects a mix of family and individual only coverage. Based on the median family income of $52K, this implies spending of roughly 15%-16% of payroll. If we take the $8,000 figure and assume the employee contributes 25% of the premium cost, the employer’s cost is $6,000 per employee. Add to that the 2.9% of wages that each employee contributes in FICA taxes (including the 1.45% employer share) to help finance Medicare, and it adds up to our median income employee spending approximately 15%-16% of his gross income (wages + health insurance + employer share of FICA taxes) for health insurance. This excludes the cost of co-pays, deductibles and out-of-pocket costs for non-covered services and even assumes that the employee and his or her family pay nothing in federal income taxes which help to pay for Medicaid, VA healthcare, etc. It looks to me as though any reasonable health insurance reform approach, including one financed completely with public money, is likely to cost the typical middle class family 15% of gross income give or take a little, which is about the same as in Germany and France even though both of those countries spend significantly less of their GDP on healthcare than we do. It raises the question as to whether there are any definition issues at work here such as spending for public health initiatives, research by the NIH and CDC, hospital construction, home health and nursing home care, etc. which we include in our total health expenditure statistics. Other countries may or may not include those. I don’t know.
Maggie:
I think you have identified the problem here. People who cannot afford medical care claim that they have a “Right” to receive it nonetheless. They may very well, in some sense, have a right to expect free health care. However, I don’t see how you get from there to the idea that the US government has the power to provide the money for that care.
If you read the Constitution, you will find it is that the express purpose of the document is to define the powers of the federal government. The final provision of the Bill of Rights then states, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” I don’t think it could be more clear.
None of this, by the way, means that I don’t think we should give people health care free of cost. I just don’t think that my fellow citizens, acting through the federal government, should demand my money at the point of a gun.
You mention a goodly number of dollar amounts in your post. There is a huge number of tax dollars spent on health care each year these days. One major problem with that is the overhead of government. For every dollar that is sent to Washington, something like $0.40 actually makes it to the final destination. Then, that $0.40 is used to buy retail goods (in this care, healthcare). Think how much more we could get for our money if it were private charities running the system. You might ask why I think private charities would be more efficient than our government. Simple, the former is subject to market forces while the latter is not. If I am giving money to a charity of my own free will, I will demand that they spend it in a wise fashion. If they do not, I’ll take my donations elsewhere and the most efficient charities will survive (there goes Adam Smith again). As for any objections that private giving would never be enough to cover those in need, I think you underestimate the American people’s generosity (we can more fully discuss my thoughts on this topic at another time, if you like).
My final question to all those who support Socialized Health Care: How will your proposed system be different from that already in place in Canada the UK? You answer is essential because both of those programs are terrible. They are going bankrupt and are immensely unfair. As one quick example, the UK just mandated that the waiting time for a particular procedure be no more than 5 months. The fix was ingenious. They just went out to the 5 month mark and kicked everyone beyond it off the list! Great, problem solved. (http://blogs.dailymail.com/donsurber/2008/02/01/keeping-health-costs-down/)
Tom:
You write: “How will your proposed system be different from that already in place in Canada the UK? You answer is essential because both of those programs are terrible. They are going bankrupt and are immensely unfair.”
Evidence for those assertions?
Dr. Berwick travels frequently to developed countires around the world, and he will tell you that, by many measures the health care systems in the U.K. and Canada are better than ours.
As I mentioned in an earlier comment, my daughter lived in Canada for 4 years and found middle class and upper-middle class Canadians very happy with their health care system. She also got very good free care while she was there.
You also might want to take a look at Niko’s post here, revealing that the U.S. ranks last in the world when it comes to stopping preventable deaths.http://www.healthbeatblog.org/2008/01/the-newest-last.html
Of course some people say that we have a harder time keeping people healthy because our population is so “heterogenous” (i.e. minoritites pull down the stats.)
But then how do you explain the study published in a U.S. medical journal a couple of years ago showing that when you compare the health of caucasians in the U.S. to caucasians in the U.K. affluent caucasians in the U.S. are only as health as low-income people in the U.K.
And affluent white people in the U.K. are much healthier than their peers in the U.S.
The British also have much better preventive care.
So, is your answer that we should model our system after that of Canada and/or the UK?
As for evidence I’ll cite just one study from Canada that you just don’t see coming from the US: Waiting for treatment for chronic pain – a survey of existing benchmarks: toward establishing evidence-based benchmarks for medically acceptable waiting times. (Pain Res Manag. 2007 Winter;12(4):245-8)
There are plenty of others that explore the various factors involved with rationing a scare resourse. The fact is you can’t make something both free and universal unless it is without cost. This is true in the case of both free market and socalized medicine. The difference is how the rationing is done. The question is not really how can we fund the program, but rather to whom are we going to say ‘no’.
Just a few more now that I’ve had a minute to look:
Physician Assistants–a solution to wait times in Canada? (Healthc Manage Forum. 2007 Summer;20(2):38-42)
Waiting for a family doctor. (Can Fam Physician. 2007 Mar;53(3):579-82)
They deserved better (CMAJ. 2007 May 22; 176(11): 1557)
…to name just 3.
I found this interesting…
http://www.boston.com/news/world/europe/articles/2008/02/05/study_good_health_costlier_in_long_run/
If true, it kind of puts the interests of the state at odds with those of the individual, huh?
profit
profit classic profile.
As I mentioned, Berwick had created IHI 9 years before his wife became sick–because he realized just how broken the us health care system is.
Before fonding IHI he was vice president of quality improvement measures at Harvard Community health Plan — and became so frustrated that by the mid 1980s he nearly quite his job.
So his wife’s experience didn’t shape his perceptions.
Still, the ultimate takeaway from this is unless you have some with the authority to set and control global budgets on U.S. healthcare spending, the cost problem with remain unabated.
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