Cutting Health Care Costs

TIME magazine article ...

Tuesday, Jun. 23, 2009
How to Cut Health Care Costs: Less Care, More Data
By Michael Grunwald
Ezekiel Emanuel got a memorable introduction to our haphazard health-care system on his first visit to a cancer ward as a medical student. The white coats were ordering a transfusion for a teenage girl, and since shyness does not run in his family — brother Rahm is President Obama's famously foulmouthed chief of staff, brother Ari a similarly silence-deficient Hollywood agent — he interrupted to ask why. Because she had Hodgkin's disease and her platelets were below 20,000, the team explained. Emanuel still had questions: Was there evidence for that protocol? Don't some hospitals wait until 10,000? Why 20,000? Because that's what we do here, one doc replied.

Now a noted oncologist turned White House health adviser, Emanuel has spent much of his career battling the that's-what-we-do-here mentality of American medicine. "It drives me nuts — the ignorance is overwhelming," he says. "I'm a data-driven guy. I want to see evidence." It turns out that Emanuel's boss, budget director Peter Orszag, is also a data-driven guy, as is Orszag's boss, the President of the United States. They've already stuffed $1.1 billion into the stimulus bill to jump-start "comparative effectiveness research" into which treatments work best in which situations. Now they're pushing to overhaul the entire health-care sector by year's end, and they're determined to replace ignorance with evidence, to create a data-driven system, to shift one-sixth of the economy from "that's what we do here" to "that's what works." (Watch a video about a woman living without health insurance.)

The U.S. spends more on health care than any other country does, and studies have suggested that as much as 30% of it — perhaps $700 billion a year — may be wasted on unneeded care, mostly routine CT scans and MRIs, office visits, hospital stays, minor procedures and brand-name prescriptions that are requested by patients and ordered by doctors every day. Orszag is particularly obsessed with research by the Dartmouth Institute for Health Policy and Clinical Practice, documenting huge regional variations in costs but virtually no variations in outcomes. For example, chronically ill patients in Los Angeles visited doctors an average of 59.2 times in the last six months of their life, vs. only 14.5 times in Ogden, Utah; they still ended up just as dead. Medicare now pays three times as much per enrollee in Miami as in Honolulu, and costs are growing twice as fast in Dallas as in San Diego. Patients in higher-spending regions get more tests, more procedures, more referrals to specialists and more time in the hospital and ICU, but the Dartmouth research has found that if anything, their outcomes are slightly worse. "We're flying blind," says Dartmouth's Dr. Elliott Fisher. "We're getting quantity, not quality."

Why Less Would Be More
Americans tend to assume that more is better, especially when it comes to the heroic brand of try-everything medicine we've watched on ER and House M.D. But overtreatment is a national scandal. It's bad for our health: with medical errors now estimated to be our eighth leading cause of death, drugs, procedures and hospital stays can be risky (as well as painful, time-consuming and wallet-straining) even when they're necessary. It's also bad for the economy: health costs are bankrupting small businesses and even conglomerates like General Motors as well as millions of families. And it's awful for the country: Medicare is on track to go broke by 2017, and our long-term budget problems are primarily health-cost problems. At current growth rates, health spending by the Federal Government alone would increase from 5% to 20% of the economy by 2050; Social Security, by contrast, would increase only from 5% to 6%.

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Alas, there's no proven link between more spending and better care. The good news is that parts of the country provide care at a low cost, so there's potential for gigantic savings if the rest of the U.S. could imitate them. One Dartmouth study found that if nationwide spending had mirrored the modest rate of that in Rochester, Minn. — where care is dominated by the renowned Mayo Clinic — Medicare would have reduced its costs for chronically ill patients by $50 billion from 2001 to 2005. As the old inflation-adjusted saying goes, pretty soon you're talking about real money.

But one man's unnecessary costs are another man's profits; lobbyists for drug- and devicemakers, hospitals, doctors and insurers are already fighting to make sure their slices of the more than $2 trillion health-care pie aren't nibbled by reform. Senate Republicans just introduced "antirationing" legislation to bar the government from using comparative-effectiveness research — "a common tool used by socialized health-care systems" — for cost control. They paused in their usual attacks on Obama's profligacy just long enough to attack his stinginess, warning that he will use evidence as an excuse to micromanage the art of medicine, stifle innovation and deny Americans their right to choose whatever treatments they want — or at least their right to taxpayer reimbursements. (Read "The Year in Medicine 2008: From A to Z.")

Some of this is transparent posturing, but there are legitimate concerns about politicians' deciding when treatments are effective enough�or, more controversially, cost-effective enough�to be reimbursable. Medical knowledge is constantly evolving, and treatments that seem to lack solid evidence today might seem indispensable tomorrow. Wasteful tests and procedures don't come with labels marked "wasteful," and most patients and providers genuinely believe the care they're getting and giving is necessary. Comprehensive studies of what works can be slow, expensive and inconclusive. Even Orszag admits the savings from cutting out unneeded care would take a decade to materialize.

Still, those savings could mean the difference between national solvency and fiscal catastrophe, so Obama is targeting two major barriers to data-driven medicine. The first is the perverse "fee-for-service" incentives that now plague our health-care system: hospitals get paid more if you stay longer and come back often; doctors get paid more if they do more tests and procedures — and you come back often. More services, more fees. "You've got to follow the money," says former Senator Tom Daschle, Obama's initial choice for health czar. "We reward volume, so that's what we get." Obama wants to reward quality instead.

The other big barrier is information: evidence-based medicine is hard to practice without evidence. There are studies showing that generic and over-the-counter drugs for hypertension, heartburn and psychosis are often just as effective as costlier brand-name alternatives; that stents can work miracles when inserted quickly after heart attacks but don't seem to help much as preventive measures; that the areas with the most hospital beds, imaging machines and specialists spend the most on excess hospital stays, MRIs and specialty care. But the big money in medical research goes to testing new drugs and cutting-edge technologies, not to comparing existing treatments. Drug companies often just have to prove that their products are better than placebos to get FDA approval; new devices merely have to be similar to existing products. Nobody has to show that their drug or device works better than rival drugs or devices, or treatments that don't require drugs or devices. So the things we know are dwarfed by the things we don't know.

Then again, we do know what high-quality, low-cost medicine looks like. It's already available in Rochester, Minn.

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The Mayo Way
The Mayo clinic attracts Kings and Presidents, injured athletes and ailing billionaires. When Mr. Burns visited Mayo on The Simpsons, Fidel Castro and the Pope were chatting in the waiting room. But Rochester's costs are well below the national average because Mayo also provides tremendous value for ordinary care; its flagship hospital spent just more than half as much per patient in the last two years of life as did the UCLA Medical Center.

What makes Mayo different? It's clearly avoided the oversupply trap — the UCLA center had about 50% more beds, and its chronically ill Medicare patients spent about 50% more time in the hospital. But that's just part of the "Mayo way." (See the top 10 medical breakthroughs of 2008.)

On a visit to Rochester last month, I watched a hospice team of nurses, social workers, a chaplain and just one doctor talk about dying patients in ways that might have baffled the white coats on Emanuel's cancer ward: platelets were discussed, but so were spiritual needs, family tensions, hobbies and anything else relevant to quality of life. It sounds squishy, but Mayo patients who request palliative care have 84% lower hospital costs, 53% lower overall costs and higher satisfaction. Mayo has computerized medical records that provide instant access to patient histories, improving information-sharing, reducing pharmacy errors and eliminating the hassle of tracking down charts. The staff cafeteria even gives away fruit, illustrating Mayo's apple-a-day commitment to prevention and wellness. Like other low-cost, high-quality institutions — the Cleveland Clinic, Geisinger in Pennsylvania, Intermountain in Utah — Mayo is dedicated to offering integrated and coordinated care, with a broad network of providers working together to reduce redundant tests and office visits, improve disease management and generally avoid treating patients like pinballs. "It's a team sport here," says David Lewallen, a Mayo orthopedic surgeon. "A bunch of tennis players doing their own thing just doesn't work — it's too expensive, and it's bad medicine. We only do things to help the patient, and we're all looking over each other's shoulders."

Mayo also has an institutional obsession with evidence-based medicine, using electronic records for in-house effectiveness research, constantly monitoring its doctors on everything from infection rates to operating times to patient outcomes, minimizing the art of medicine and maximizing the science. "We try to drive out variation wherever we can," says Charles (Mike) Harper, a neurologist who oversees Mayo's clinical practice in Rochester. "Practicing medicine is not the same as building Toyotas, but you can still standardize. Uncertainty shouldn't be an excuse to ignore data." Mayo has teams working on evidence-based protocols to reduce the use of intensive care, lower valve-replacement costs and avoid unneeded transfusions. It's standardizing a handoff protocol that reduced errors after shift changes at its Arizona branch, as well as a program that boosted patient satisfaction by teaching doctors at its Florida branch to listen better. Mayo even has its own registry to track artificial joints, which are expected to increase fivefold by 2030 as baby boomers seek spare parts. Reducing the failure rate for artificial hips and knees 10% could save taxpayers $500 million a year.

Mayo doctors are also shielded from the incentives that discourage evidence-based medicine, because they all receive fixed salaries. They don't make more if they do more to patients, and they don't make less if they take more time to talk to them — even if they use the time to explain why a CT scan or a wonder drug advertised on TV might not be advisable. They don't have to worry about reimbursements that overvalue radiological tests and invasive prostate treatments, undervalue preventive care and watchful waiting and put zero value on returning a phone call or thinking about a case. "We've been able to buffer our staff from the harsh realities of the system, so they can concentrate on patient needs," says Dawn Milliner, a kidney doctor who oversees clinical practice throughout Mayo. "But it's not clear how long we can keep doing that."

That's the bad news about Mayo's success: it's not sustainable. The harsh reality is that smart, conservative, data-driven, patient-focused medicine is not necessarily profitable medicine. Last year, Mayo lost $840 million on $1.7 billion in Medicare work. It compensated by charging private insurers a premium for the Mayo name, but they're starting to balk. "The system pays more money for worse care," says Mayo CEO Denis Cortese. "If it doesn't start paying for value instead of volume, it will destroy the culture of the organizations with the best care. We might have to start doing more procedures just to stay in business."

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Are We the Change He Seeks?
In the coming weeks, millions of dollars will be spent on the health-care debate because trillions of dollars are at stake. Lobbyists are already warning that Obamacare will empower bureaucrats to reject new drugs and procedures on the basis of shadowy cost-effectiveness formulas that place a monetary value on life. Ads will soon transform the seemingly innocuous push for comparative research into a nightmarish vision of Big Government telling doctors what to do, suppressing the development of lifesaving technologies, ignoring the needs of minorities in pursuit of one-size-fits-all "cookbook medicine," destroying an American tradition of personalized care. "It's a $2 trillion industry with blood in the water," says James Weinstein, head of the Dartmouth Institute. "You can't be surprised that the sharks are circling."
Helping organize the pushback against the drive for data has been former House whip and legendary Democratic operator Tony Coelho, an epileptic who helped write the Americans with Disabilities Act and now leads the Partnership to Improve Patient Care. The partnership is an odd coalition of the drug companies, devicemakers and medical specialists who stand to lose the most from evidence-based medicine, joined by a variety of patient groups (some of whom also receive industry funding) concerned about access to care. Coelho says he welcomes effectiveness research if it can help doctors and patients make more informed decisions, but he argues with passion that it should never be used to limit treatments, modify reimbursements or otherwise cut costs. "If you come at this trying to save the almighty dollar because you think we're spending too much money on drugs and devices and Sally and Joe, the American people will revolt," Coelho says. "You'll get your jollies because you're bringing down the cost of health care, but you won't really be solving problems." The partnership's official position is essentially that more public research is great as long as it doesn't affect public policy.

It's true that information alone can be helpful. Anesthesiologists sharply reduced mortality rates after their association published evidence-based guidelines; emergency-room nurses have reduced infection rates by following clinically proven to-do lists. After one pharmacy benefits manager sent letters urging customers with high cholesterol to check out the evidence-based Consumer Reports site Bestbuydrugs.org, 4.3% switched to cheaper but equally effective drugs, for savings of $12 million. Similarly, when doctors and patients are fully educated about the costs and benefits of various treatment options for prostate cancer, surgery rates drop by half.

But without incentives to use it, information alone will not lead to reform. Obama wants to make evidence-based medicine financially attractive so that providers are rewarded rather than punished for reducing readmissions and unnecessary procedures. "We can't just do research and let it sit on a shelf," Orszag says. It is fair for industry groups to insist on an independent agency to oversee the effectiveness research, so that decisions about what to study are separate from decisions about what to reimburse. And some of Obama's quality incentives are fairly straightforward, like extra dollars for primary care, prevention and computerization; to discourage wasteful defensive medicine, he seems willing to limit malpractice lawsuits when doctors stick to best practices. But ultimately, rewarding quality rather than quantity will require daunting changes in Medicare reimbursement policies. That could mean lower patient costs and higher provider revenues for proven treatments, but when patients want more expensive options unsupported by data, they may have to pay the difference themselves.

In the past, industry lobbyists have persuaded Congress to squash even mild reimbursement reforms; former Health and Human Services Secretary Donna Shalala recalls a futile effort to reduce overpayments and promote competition among oxygen providers. "Congress stops anything that's going to gore anybody's ox," Shalala says. "If Congress is going to be involved in the nitty-gritty payment details, reform is dead." Obama wants to let another independent agency, similar to the military-base-closing commission, recommend how to pay for quality, which would limit political haggling. But even if such a panel focused on clinical effectiveness rather than cost-effectiveness — so that taxpayers would cover vastly more expensive approaches as long as they were slightly more effective — the shift would still be dramatic for Medicare, which currently covers just about any possibly effective treatment with virtually no regard for cost. If Medicare takes the lead in reform, private insurers should follow.

This would probably qualify as "rationing," but anyone who's ever had an insurer refuse to pay for something knows that health care is already rationed, in the sense that you can't always get everything you want. Still, oxen would be gored, and the backlash could be nasty. The ultimate success of Obamacare might depend on a cultural change among doctors and patients, a national realization that more care isn't better care. "We've got this ethos that the best doctors do everything under the sun and rule out every zebra," Emanuel says. "And hey, they get paid more to do it. But we've got to change all that."