Category: Incentives

   "A special light reveals deadly bacteria."  Source of caption and photo:  online version of the NYT article quoted and cited below.

If health care in the U.S. were a free market, with unregulated entry, and real consumer choice, it is hard to believe that some Wal-Mart-of-health-care wouldn’t come along that would gain huge market share and profits by providing its employees incentives to wash their hands.

(p. A1)  PITTSBURGH — At a veterans’ hospital here, nurses swab the nasal passages of every arriving patient to test them for drug-resistant bacteria. Those found positive are housed in isolation rooms behind red painted lines that warn workers not to approach without wearing gowns and gloves.

Every room and corridor is equipped with dispensers of foamy hand sanitizer. Blood pressure cuffs are discarded after use, and each room is assigned its own stethoscope to prevent the transfer of microorganisms. Using these and other relatively inexpensive measures, the hospital has significantly reduced the number of patients who develop deadly drug-resistant infections, long an unaddressed problem in American hospitals.

The federal Centers for Disease Control and Prevention projected this year that one of every 22 patients would get an infection while hospitalized — 1.7 million cases a year — and that 99,000 would die, often from what began as a routine procedure. The cost of treating the infections amounts to tens of billions of dollars, experts say.

But in the past two years, a few hospitals have demonstrated that simple screening and isolation of patients, along with a relentless focus on hygiene, can reduce the number of dangerous infections. By doing so, they have fueled a national debate about whether hospitals are doing all they can to protect patients from infections, which are now linked to more deaths than diabetes or Alzheimer’s disease.

. . .

(p. A16)  Dr. Richard P. Shannon, who championed a program to reduce catheter infections at Allegheny General Hospital in Pittsburgh, was able to show administrators that the average infection cost the hospital $27,000. He demonstrated that reimbursement payments for weeks of extended treatment were not keeping pace with actual costs. “I think it was assumed that hospitals didn’t mind treating these infections because they were getting paid for it,” Dr. Shannon said.

A major emphasis at the Pittsburgh hospitals has been hand hygiene. Studies have consistently shown that busy hospital workers disregard basic standards more than half the time. At the veterans hospital, where nurses have taken to pushing elevator buttons with their knuckles, annual spending on hand cleaner has doubled.

For the full story, see:

KEVIN SACK.  "Swabs in Hand, Hospital Cuts Deadly Infections."  The New York Times   (Fri., July 27, 2007):   A1 & A16.

(Note:  ellipsis added.)

    In the photo on the right, Pittsburgh nurse Bill Cunningham, "puts on a gown and gloves before approaching patients with infections."  Source of graph, caption, and photo:  online version of the NYT article quoted and cited above.

  A clever image, but is it apt, since the article claims doctors are extracting money, rather than injecting it?  Source of image:  online version of the NYT article quoted and cited below.

If patients paid for their own care, doctors would have a greater incentive to improve overall care that is valued by patients.  The perverse incentives of the current government Medicare reimbursement rules would be gone.

One main lesson from the article below is to show how fundamentally hard it is for the government to get the incentives right:  they tried to re-jigger the reimbursement rules, but the law of unintended consequences once again bit them in their collective ass (or more accurately, alas, it bit us). 

(p. C1)  When Medicare cracked down two years ago on profits that doctors made on drugs they administered to patients in their offices, it ended a windfall worth hundreds of thousands of dollars a year for each physician.

The change, which mainly affected drugs to treat cancer and its side effects, had an immediate effect. In all, cancer doctors billed about $4.4 billion for chemotherapy and anemia medications in 2005, down from $5.6 billion in 2004, with Medicare covering 80 percent of the bills in each year. The difference mostly represented profit that doctors had made on the drugs.

But the change did not reduce overall federal spending on cancer care, which increased slightly. And cancer doctors say the change did nothing to reduce a larger problem in cancer treatment.

Some physicians say that cancer doctors responded to Medicare’s change by performing additional treatments that got them the best reimbursements, whether or not the treatments benefited patients. Those doctors also say that Medicare’s reimbursement policies are responsible.

“The system doesn’t value the time we spend with patients,” said Dr. Peter Eisenberg, a cancer doctor in Greenbrae, Calif., and a former director of the American Society of Clinical Oncology. “The system values procedures.”

The ballooning cost of cancer treatment, one of Medicare’s most expensive categories, offers a vivid example of how difficult it may be to rein in the nation’s runaway health care spending without fundamentally changing the way doctors are paid.

. . .

(p. C6)   Now, oncologists are lobbying Medicare officials and members of Congress to reverse some of the changes and again raise the prices the government pays for drugs.

But Dr. Robert Geller, who worked as an oncologist in private practice from 1996 to 2005 before leaving to become senior medical director at Alexion, a biotechnology company, said that increasing drug reimbursement might raise oncologists’ profits but would not relieve the system’s deeper flaws.

As long as oncologists continue to be paid by the procedure instead of for spending time with patients, they will find ways to game the system, however much money they make or lose on prescribing drugs, he said.

“People go where the money is, and you’d like to believe it’s different in medicine, but it’s really no different in medicine,” Dr. Geller said. “When you start thinking of oncology as a business, then all these decisions make sense.”

For the full story, see: 

ALEX BERENSON.  "A Stubborn Case Of Spending On Cancer Care."  The New York Times (Tues., June 12, 2007):  C1 & C6.

(Note:  ellipsis added.)

   Source of graph:  online version of the NYT article quoted and cited above.

   Source of graph:  online version of the NYT article quoted and cited below.

(p. A1)  Stark evidence that high medical payments do not necessarily buy high-quality patient care is presented in a hospital study set for release today.

In a Pennsylvania government survey of the state’s 60 hospitals that perform heart bypass surgery, the best-paid hospital received nearly $100,000, on average, for the operation while the least-paid got less than $20,000. At both, patients had comparable lengths of stay and death rates.

And among the 20 hospitals serving metropolitan Philadelphia, two of the highest paid actually had higher-than-expected death rates, the survey found.

Hospitals say there are numerous reasons for some of the high payments, including the fact that a single very expensive case can push up the averages.

Still, the Pennsylvania findings support a growing national consensus that as consumers, insurers and employers pay more for care, they are not necessarily getting better care. Expensive medicine may, in fact, be poor medicine.

“For most consumers, the fact that there is no connection between quality and cost is one of the dirty secrets of medicine,” said Peter V. Lee, the chief executive of the Pacific Business Group on Health, a California group of employers that provide health care coverage for workers.

. . .

(p. C4)  And the survey found that good care can go unrewarded. One Philadelphia area hospital, Main Line Health’s Lankenau center, which performs a large number of bypass surgeries and has a high success rate, according to the survey, was paid an average of $33,549 by private insurers. That was less than half the nearly $80,000 in average payments received by the other hospitals, with poorer track records.

. . .

“The current reimbursement paradigm is fundamentally broken,” said Dr. Ronald Paulus, an executive with Geisinger, who says there is no current financial incentive for a hospital to provide the kind of care that leads to better outcomes and lower payments.

. . .

The problem, according to some health policy experts, is that the hospitals may, in fact, be rewarded for poor care:  keeping patients too long because they caught an infrection or had a complication.  That, they say, could be the main lesson of the Pennsylvania survey.

"What this highlights is the assumption that more money means better care is flat-out wrong," said Mr. Lee, the chief executive of the California employer group.  "It’s easy to pay for bad quality, and we pay for it every day."

For the full story, see: 

REED ABELSON.  "In Health Care, Cost Isn’t Proof of High Quality." The New York Times  (Thurs., June 14, 2007):  A1 & C4. 

(Note:  The last three paragraphs, and the last sentence of the fourth from the last paragraph, of the print version of the article, are missing from the online version.)

(Note:  ellipses added.)

  Source of graphic:  online version of the NYT article quoted and cited below.

Why are so many lumbar fusions done, in spite of the absence of evidence for their efficacy?  Well, doctors find the procedure lucrative.  Patients do not pay for it themselves, so they have little incentive to look hard at the effectiveness.  And health care providers, through licensing and government regulations, have largely insulated themselves from competition from low cost providers.

(p. C1)  In Idaho Falls, Idaho, anyone suffering from the sort of lower back pain that may conceivably be helped by the fusing of two vertebrae is quite likely to have the surgery.  It’s known as lumbar fusion, and the rate at which it is performed in Idaho Falls is almost five times the national average.  The rate in Idaho Falls is 20 times that in Bangor, Me., where lumbar fusion is less common than anywhere else.

These numbers come from the wonderful Dartmouth Atlas of Health Care.  The Dartmouth researchers adjust the numbers to take into account age, race and sex, which is another way of saying that there is no good explanation for the huge variations they find.  Doctors in the Idaho Falls area are probably just being more aggressive than doctors elsewhere.

But it’s not clear that their patients are any better off.  The evidence for lumbar fusion is incredibly mixed.  It seems to help people with certain kinds of pain, but many others recover just as well without the surgery. Of course, doctors are almost always better off if the surgery is done:  The typical hospital bill for lumbar fusion is roughly $50,000.

This is about as good an example as you can find of the health care mess.  The number of lumbar fusions performed in this country has more than tripled since the early 1990s, and Medicare now spends more than $600 million a year on the procedure.  It’s one reason your health insurance bill has gone up.

For the full commentary, see: 

DAVID LEONHARDT.  "ECONOMIX; Health Care As if Costs Didn’t Matter."  The New York Times  (Weds., June 6, 2007):  C1 & C8.

    Source of graphic:  online version of the NYT article quoted and cited above.

The experiment described in the article excerpted below sounds promising. Such experiments would be easier, and more common, if health care were not so highly regulated, and if the government did not create such large barriers to entry in the practice of medicine.

(p. A1)  What if medical care came with a 90-day warranty? 

That is what a hospital group in central Pennsylvania is trying to learn in an experiment that some experts say is a radically new way to encourage hospitals and doctors to provide high-quality care that can avoid costly mistakes.

The group, Geisinger Health System, has overhauled its approach to surgery. And taking a cue from the makers of television sets, washing machines and consumer products, Geisinger essentially guarantees its workmanship, charging a flat fee that includes 90 days of follow-up treatment.

Even if a patient suffers complications or has to come back to the hospital, Geisinger promises not to send the insurer another bill.

Geisinger is by no means the only hospital system currently rethinking ways to better deliver care that might also reduce costs. But Geisinger’s effort is noteworthy as a distinct departure from the typical medical reimbursement system in this country, under which doctors and hospitals are paid mainly for delivering more care — not necessarily better care. 

. . .

Under the typical system, missing an antibiotic or giving poor instructions when a patient is released from the hospital results in a perverse reward: the chance to bill the patient again if more treatment is necessary. As a result, doctors and hospi-(p. C4)tals have little incentive to ensure they consistently provide the treatments that medical research has shown to produce the best results.

Researchers estimate that roughly half of American patients never get the most basic recommended treatments — like an aspirin after a heart attack, for example, or antibiotics before hip surgery.

The wide variation in treatments can translate to big differences in death rates and surgical complications. In Pennsylvania alone, the mortality rate during a hospital stay for heart surgery varies from zero in the best-performing hospitals to nearly 10 percent at the worst performer, according to the Pennsylvania Health Care Cost Containment Council, a state agency.

For the full story, see: 

REED ABELSON.  "In Bid for Better Care, Surgery With a Warranty."  The New York Times  (Thurs., May 17, 2007):  A1 & C4.

    Providing a warranty provides the hospital to provide higher quality care, as evidenced, for example, in this nurse counting sponges to make sure that none have been left behind in the patient.  Source of photo:  online version of the NYT article quoted and cited above.