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The Policy Lessons Of Health Care Cost Variations: A Roundtable With Bob Berenson, Elliott Fisher, Bob Galvin, And Gail Wilensky



June 18th, 2009
 
by John Iglehart and Chris Fleming

Editor’s Note: Below is the transcript of a Health Affairs Blog Roundtable on Atul Gawande’s New Yorker article on McAllen, Texas, and variations in health care costs. The roundtable used the article as a jumping-off point for a wide-ranging discussion on the policy implications of cost variations, delivery system reform, and other topics. Participants included Robert Berenson, an Institute Fellow at the Urban Institute; Elliott Fisher, Director of Health Policy Research at Dartmouth’s Center for the Evaluative Clinical Sciences; Robert Galvin, Director of Global Health at General Electric (GE); and Gail Wilensky, Senior Fellow at Project HOPE. The roundtable was moderated by John Iglehart, Founding Editor of Health Affairs.

JOHN IGLEHART: The subject of the first thematic issue that Health Affairs published in 1984 was variations in clinical practice patterns. When I met Jack Wennberg for the first time at the Pooks Hill Holiday Inn and suggested this to him, Health Affairs was virtually an unknown journal — that was 25 years ago.

Obviously, the variation theme has been played many a time in the policy community and the health services research community and the like, but I think we’ve all been struck by the impact that the Gawande article has had in the general public community and among elites. Elliott, how have you seen and measured impact from your end? I’m sure you’ve heard from a variety of people about it. As I understand it, the president read the Gawande article and it was discussed at a White House meeting a couple of weeks ago.

ELLIOTT FISHER: I’ve noticed the impact a couple of ways. One was a flurry of e-mails from both administration and Hill staffers asking for further details on accountable care organizations [ACOs] and what could be done to help address the concerns raised by the Gawande article. Second, the follow-up from the press has been substantial, with people wanting to know more, looking into more areas, and asking good questions about the underlying causes of the differences in practice that we need to be worried about. Is it differences in individual characteristics, differences in community culture — what could be explaining these differences?

Why Did The Gawande Article Arouse Such Great Interest?

IGLEHART: Was it your impression that it was Gawande’s elegant writing, putting a human face on variations in this kind of a magazine with an elite audience, that really touched off this great surge of interest, or were there other things?

FISHER: I think it was a couple of things. One, Gawande writes very well and tells a wonderful story. It’s very engaging. Second, he was able to tell plausible stories that are consistent with lots of what we’ve found in our research. He made it easily understandable to a lay audience that the differences in practice aren’t about differences in patient need, and that they can be driven — sometimes quite powerfully — by both the payment system and how local physicians decide to practice.

GAIL WILENSKY: I don’t disagree with either the proposition that John has laid out or, Elliott, your characterization. I’m struck by the level of interest in Gawande’s article, and by the fact that something that has been discussed by policymakers so often and so long periodically invokes this level of surprise.

But I was a little concerned as well reading the article that there are areas of total speculation that receive some of the same attention as areas that have had much more consistent support. I’m thinking about the Anchor Tenant Theory of Economic Development — that’s all very nice, but it’s clearly as speculative as it comes.

By contrast, one of the most interesting aspects that Wennberg raised a long time ago is that variations tend to occur when there is either uncertainty about the diagnosis given the symptoms, or uncertainty about the appropriate treatment given the diagnosis. That would suggest to me that we should not focus only on questions about the economic incentives, such as whether we can go to salaried physicians, or at least accountable units. Both salaried physicians and accountable units may be desirable for a whole set of reasons, but focusing only on them ignores the other obvious track, which may be even easier to implement: trying to put more treatments into the certain rather than the uncertain bucket. I was astounded that Gawande raised this and noted where this happens, but that was the last time we heard about it.

FISHER: Gail, you’re right, but what we’ve learned in the last 15 years at least is that the differences in spending across regions seem to be pretty unrelated to disagreements about evidence, and that most of the differences in spending arise for the kinds of decisions where evidence is never going to help us, where judgment remains. Atul went to pretty great lengths to summarize the paper that Brenda Sirovich wrote in Health Affairs about the lack of correlation between evidence-based decision making and spending. In Sirovich’s research, physicians were given patient vignettes, and there was tremendous variation in decisions such as when to admit a patient with heart failure, when to refer them to a specialist, or how often to see them for an episode of well-controlled hypertension. Through Sirovich’s work, Atul highlights an area which deserves increasing attention: How do we help physicians make judgments when there is substantial uncertainty, as there will always be, especially for patients with serious illness or chronic illness?

ROBERT GALVIN: One of the interesting pieces of this wonderfully written article was how the doctors in McAllen really had no idea about either their resource use or any of their quality measures versus anyone else. While I don’t think it’s the answer in any way to the problem of regional variation, one of the things that really stuck out was the idea that when physicians are practicing in a complete information vacuum, they assume the best without any basis. This was kind of hidden early in the piece, but I thought it was very powerful, and we do have some public policy that is trying to get that kind of data to Medicare physicians at least.

WILENSKY: That’s also an issue that Jack Wennberg has raised in the past when he has talked about the potential of physician-to-physician or professional-to-professional communication: The first response is usually, “I’m not different, it’s my patients who are different,” or, “I’m doing things that produce better outcomes or are more responsive to what my patients want.” It’s only by being able to offer compelling evidence that it’s the physician that is the outlier relative to his or her peers, that the patients really aren’t different, and in fact they are not having better outcomes, that you are able to pull back physician behavior — although there seems to be a high recidivism rate.

Again, I also found this article very interesting, and the human faces make it much more understandable. But I find it interesting that points that Jack has attempted to raise for so long have still not penetrated general thinking to such an extent. Maybe Gawande’s article represents the same phenomenon that we saw with the Institute of Medicine report, To Err Is Human: the ability to communicate to the public in a compelling way information that professionals have regarded as known information.

FISHER: I agree. There’s also a third fact that I didn’t mention initially: timing. At a moment when everybody is worried about the future fiscal integrity of the United States, and health care spending is seen as the greatest threat to that, Gawande appears as the translator of what we’ve all known for a long time. That also contributes to the broad readership and attention that he’s getting.

How Should We Use Information About Cost Variations?

ROBERT BERENSON: Some of the people who have commented to me emphasize that the comparison was not the Mayo Clinic or Geisinger, it was El Paso. It made it very real that we were not comparing one community to some idealized version of health care, but in fact to another Texas community which ostensibly looks the same.

In addition, it happens that in an article I wrote for Health Affairs in 2003 commenting on a Wennberg-Fisher article, I identified McAllen, Texas, by name as the highest-spending community in the country for home health spending. I emphasized that the kind of analysis that the Dartmouth Atlas permits one to do allows the spotlight to be shined on communities. McAllen now shows up again, obviously much more compellingly presented. I would suggest that at least some of what might be going on here is not just practice style, but also fraud and abuse.

This is where Jack Hadley and I have perhaps become a little controversial. We completely accept the fact that geographic variations occur. The question is whether we have policy that just cuts spending across the board in a community. My preference is that we use the kind of analysis that Dartmouth is able to do, and that CMS [the Centers for Medicare and Medicaid Services] should be doing, to investigate more clearly what’s going on. If it turns out that it’s practice style, that’s fine, but it may turn out that there are other causes of this extraordinary spending in McAllen that deserve a different kind of an intervention than simply limiting spending in the area.

FISHER: I agree fully that simply slashing prices is not the way to do this, and we’ve been arguing against that for a while. I’m completely sympathetic, you need to identify the opportunities to go after waste and fraud, but I think the most likely way to succeed at that is to give the providers within a given market an incentive to do that themselves. If you imagine a shared savings program for the physicians in McAllen, they will be able to capture all of those home health savings if they get rid of the fraud and abuse.

BERENSON: I agree. And as we found out when we were testifying together a couple of months ago, we agree on the solution. I’m a big believer in promoting integrated delivery. We may have some nuanced differences, but I think you’re exactly right: That’s what we should be doing. We should be doing that in El Paso as well.

FISHER: Right. The middle is where we have to shift people. One of the unfortunate things about looking at the outliers is that people may well dismiss the McAllens; they may not think about how the Bostons and Chicagos and Atlantas that are in the middle of the spending pack also have tremendous opportunities to reduce avoidable hospitalizations and to improve the efficiency with which they’re caring for patients.

GALVIN: Elliott, I agree. One other piece of the Gawande article that raised some concerns with me — and I thought Gail was going to mention this in her point that some areas were very grounded in data and others were more speculative — is the idea that the solution to addressing regional variation is the accountable care organization model. Accountability and coordination are key, but putting those under a legal organization that is going to have a lot of size and scale concerns a payer like me. That was one part of the paper that I was hesitant to embrace.

WILENSKY: One of the areas that I found troubling, although it’s hard to raise issues that are as complicated and long term as these, is getting people to think about how exactly we might forge ahead trying to be responsive to these issues that were described. As several people have said, creating primarily Geisingers and Mayos is not something that is going to happen very quickly in very many parts of the country. Therefore, I would like to see some quickly charged demos to try to create different incentives, and empower or embolden or finance different kinds of organizations. This is going to take a variety of different shapes and dimensions, in different parts of the country, but it’s not likely to happen quickly.

From Nixon To Obama: What’s Different Now?

IGLEHART: Let me follow up by asking what you believe is different today than a few decades ago, during the Nixon era, when the president proposed the HMO [health maintenance organization] model as the way to go. The same kinds of organizations were mentioned then — Kaiser, Geisinger, Mayo, etc. What’s different today that will make the current reform effort any more successful than we were a generation ago?

WILENSKY: If we don’t change the incentives, we shouldn’t expect to see different outcomes. There was talk about at least having to offer an HMO, but as Alain Enthoven has commented repeatedly, frequently the incentives weren’t there to encourage people to have options available and to encourage consumers to pick the lowest-cost one. We’re now seeing increasing desperation about our inability to continue the current level of health care spending increases, as well as interest in expanding coverage and a desperate search for money to do so. Increasingly, there is also a grudging acknowledgement that we aren’t getting quality and clinical outcomes that are commensurate with the amount we spend. None of these factors were present in the Nixon era with anything like the intensity that people feel them now.

BERENSON: Nixon was talking about the [Paul] Ellwood or Kaiser model HMOs, which integrated financing and delivery. In contrast, now we are talking more about provider organizations — whether doctors alone or doctors and hospitals — without the financing piece, so we’re asking them to be accountable for health care delivery but not necessarily for the insurance function.

I’d add that we now have some tools that we did not have then. We are close to having a very good risk adjuster. We already have a sort of acceptable risk adjuster which makes the payments much fairer. This gets providers and plans out of the business of avoiding severely ill people and into the business of paying more attention to managing the patients who do sign up. In fact, plans and providers may even be encouraged to sign up chronically ill people because the payment is fair.

We also now have better measures of detection of underservice, which I think was a contributor to the managed care backlash in the 1990s — the concern that people were taking the money and not providing the services. We are in a better position to detect that.

We’ve also had had some practical experience. The Physician Group Practice (PGP) demo in Medicare was not designed perfectly: participating organizations really couldn’t make a full commitment to it because it was only guaranteed to continue for three years, and you don’t reengineer your culture in a three-year period. Even so, the PGP demo has been reasonably successful. We’re now, thinking about maybe not full-risk, but shared risk, shared upside, shared downside. We’ve gotten a little more sophisticated, if we actually were to get serious about a new round of this form of contracting. Ultimately, I think there is a general view coming from many sides that fee-for-service just isn’t sustainable anymore, and we do have to find an alternative.

GALVIN: I think, although it isn’t different yet, one potential difference might arise around something else Atul mentioned in the article, which is that we don’t fund or take very seriously looking at the comparative effectiveness of new payment methods or delivery system models. The Senate Finance Committee came out with this idea of a chronic care management innovation center, which if funded, and if it had power attached to it, might take the relic of the demonstration project model and move it to a more contemporary model where we really do invest, we learn, and maybe apply some of what we learned in models. So again, John, that isn’t new yet, but I think there is a humbler feeling by many of us that we really do need more evidence and more data in this area.

Convincing Physicians To Move Away From Fee-For-Service

WILENSKY: I’d like to address the question of whether there is agreement that we need to move away from fee-for-service medicine. I’m not sure — this is a question as opposed to a statement — whether the large number of practicing physicians are buying into that. I think most policy people would quickly agree that it would be far easier to introduce some of the changes that we’re talking about if we didn’t have fee-for-service, and at the minimum would try to move to bundle payments as opposed to these small fee-for-service piecemeal payments. But I wonder if we have any idea where the majority of the physician community lies. In the past they’ve been not at all supportive of the position of moving away from fee-for-service.

FISHER: I think we know that they’re not in favor of moving away from fee-for-service, as much as even their leadership recognizes it’s the right direction to go. But I agree with Gail that moving toward episode payments will be important even if you think about more integrated systems or physician networks — there will always be services that you would like them to send to someone else. You’d like them to refer their patients to places that are doing the great bypass surgery or the cancer treatments. Episode payments or ways of more closely bundling those payments that encourage those systems to be efficient will be very important. It will also be essential to the survival of our academic medical centers.

BERENSON: I agree with Gail completely that physicians who are making $400,000 or $500,000 in the existing fee-for-service system aren’t leading the bandwagon to move to a new payment system. That’s why I’ve argued that you need to reprice the current Medicare and then private-purchaser fee schedules so that suddenly all the resistant actors who see no need to join a multispecialty group or an IPA [independent practice association] — which are models that could get up relatively quickly, particularly the IPA model –- have a reason to join. As long as fee-for-service is rewarding services at a very generous level, which I think most specialists would say that they have received — they might not agree that it’s generous, but by most standards it is — they’re not going to want to participate in something new. Therefore, to create the conditions to move away from fee-for-service, you need to pay attention to the distortions in the current Medicare fee schedule, which then get compounded even more in private fee schedules.

I also have something of a dissenting view on episode payments. I don’t think you get to population-based payment by going through bundled payments.

FISHER: I would agree. You can’t get there through them, but they will be an important adjunct.

BERENSON: I guess, but if the focus is on, let’s say, the current Medicare acute care events demo for hip replacement, knee replacement, and heart surgery, you continue to have hospital specialist-oriented care. You still have fee-for-service incentives, even if it is a bundle, unless you’ve got awfully good appropriateness criteria. You may get a more efficient throughput in that hospitalization, but in fact, if anything, you’ve now aligned even more closely the incentive for service line development of specialty lines, and not holistic views of taking care of patients. That may be what you have to do for academic health centers that may be more resistant, but I really think we want to start with primary care-oriented IPAs and multispecialty groups, and invite the specialists to join there.

As you said earlier, Elliott, if in fact you have some risk bearing, then that organization will want to make sure that the home health agencies aren’t doing unnecessary or even fraudulent services. If you’re simply paying for bundled episodes, you’re not going to get where you want to go. So I’m not sure we should be spending an awful lot of time trying to figure out how to get bundles right.

WILENSKY: I know Bob Berenson has indicated his skepticism and concern about the bundling strategy. I’m at least as concerned that if the hospital is the recipient of the money, we could end up with hospital-centric care. The one great advantage of the thinking during the Nixon period was that the money was going to an inclusive entity, including the financers and the deliverers of care. If accountable units put the money in the hands of the hospital, that would make it more difficult to get the appropriate level of care, in part for the reasons that Bob Berenson was just suggesting, which could be a result of the bundled payments.

FISHER: Let me just clarify at least so that you all know and our readers know where Mark McClellan and I are going in our support for early pilots and our definitions of organizations that could be accountable care organizations. We are completely agnostic. The key requirements are that they have primary care physicians, as Bob [Berenson] was mentioning; that they be able to be accountable for the overall cost of care of the population; and that they be big enough so that we can actually measure their costs. We think the critical size is probably 15,000 people under age 65, and maybe 5,000 Medicare beneficiaries, given the greater disease burden and the higher costs in that population.

So, Gail, we’re completely on board. We also should recognize, however, that there are some organizations where hospitals already are employing their physicians and could relatively quickly, especially in rural areas or small communities, move to become accountable organizations that have hospitals and physicians.

Dealing With Market Power And Monopolistic Pricing

GALVIN: Elliott, what really worries me about that model is that when we analyze our data, both from last year and more recently, we are seeing price increases — not use increases, but price increases — of up to 25-35 percent. These increases have been almost completely in markets that have hospitals with a sizable number of employed physicians in that community. We’re not clear whether we’re getting any quality increases, but we’re sure having affordability issues.

FISHER: I think monopolistic pricing will be a real issue, and it will be good for us all to talk about what levers we could use to address that. One is oversight. The other is that shared savings models that are accountable for the overall cost of care don’t do very well when they raise prices.

GALVIN: I agree, Elliott. Whether it’s pilots or, down the road, enabling ACOs, I do think a key part of the discussion has to be upside control: How do we build that into whatever policy we develop?

BERENSON: I agree completely. I’ve been doing interviews for now many years with the Center for Studying Health System Change [as part of the Community Tracking Study], and I have to maintain the anonymity of those I talk to, but some of the finest, most well-respected multispecialty groups will acknowledge in confidence that they’re able to ask for 200 or even 250 percent of Medicare [costs] to do what they are doing very well. I think this issue of market power is a real one. I would say, however, that this issue exists regardless of whether we move to accountable care organizations; it’s just the ability of hospitals mostly, but also single-specialty groups increasingly, to figure out what the leverage game is all about. Market power is an issue that we need to find a solution to, and I’m not sure I see one other than a regulatory one.

FISHER: In the absence of integration, it becomes very hard to do many of the things that we think should happen. I’m not confident in the capacity of primary care physicians to coordinate care by themselves across sites and other providers. I look at what some of the more organized systems can do in terms of supporting clinical improvement. Look at what Brent James has done at Intermountain Health Care by establishing protocols for managing diabetics. Look at what Partners Health Care in Boston has done with applying Jack Wennberg’s tool of variations to the practice patterns of their primary care and emergency room physicians around imaging services.

This is how I think we’re going to get at the issues of judgment that are so important in reducing the overall cost of care and improving it. Tom Lee of Partners shares his slides showing that certain primary care physicians were ordering five times as many advanced imaging studies as other primary care physicians in the same physician group; it’s invisible until you measure it, and they didn’t know they were ordering tests more frequently. Then you have the professional feedback of having the section chief say, “Look at what you’re doing,” and “Let’s work together to figure out whether the people who are doing fewer are doing too few,” and “Let’s figure out how we help you reduce the utilization that might not be necessary if you were making judgments more like your peers.” This seems to me a very powerful tool for improving the overall quality of care and dealing with this problem of gray-area decision making.

GALVIN: Agreed. Getting to that change in practice pattern, and being smart enough to not make things worse, with unintended consequences along the way: That’s the challenge, because it’s a very powerful model, and Partners’ experience with imaging is a very good example of how it can work well.

WILENSKY: Can we turbocharge some pilots to really start moving? I’m uneasy about wholesale reimbursement change without actually trying it. I don’t want to wait too long, and I’m all for not letting this be an excuse to drag our feet; for lots of reasons, that would be a bad idea. But I’m not sure we know the consequences. As an aside, I support what I heard Bob Berenson say, that there may be more of a role at least in the short term for IPAs than is sometimes acknowledged.

BERENSON: Yes, I’d want to reemphasize that. It’s often asked, “What are the solo and small-group docs going to do with the new models of care we’re talking about?” The answer is, in fact, there have been, and continue to be in California, successful IPAs. There are successful IPAs in other parts of the country — Florida, Rochester, NY –- as well. Part of the problem IPAs are now having, I think, is that the commercial market is moving away from HMO products to PPO [preferred provider organization] products, and that basically is contradictory to IPAs — you can’t share risk in PPO products.

My understanding, having spent a couple of weeks in Southern California recently, is that the delegated-capitation model under HMOs is actually functioning quite well. I spoke to executives of IPAs who were buying electronic health records for their docs, doing quality improvement –- they were doing it. They were addressing control issues. They were providing the management and to some extent the leadership, but they were losing market share because employers were moving away from HMO products to PPO products. So in a strange way, Medicare now, by direct contracting with IPAs, could be the new engine for some rejuvenation of what was going to be the coming thing 15 years ago, and is now in decline less because it’s failed and more because the market has moved in other places.

WILENSKY: The Federal Trade Commission had been going after IPA models with a vengeance. I don’t know whether that has stopped.

BERENSON: Well, if they were real. I think there are sham IPAs. I still frankly don’t understand why you would want to grant permission to an organization that is getting together for quality improvement if, in fact, they are not sharing risks together. I think that’s just a key part of this whole thing: Are you making a commitment to move away from fee-for-service so that you are going to practice population health, and so that the more services you provide, the worse off you will be financially, or are you not? To empower organizations that aren’t taking risks makes no sense to me. The FTC has resisted some of these, but I’m not sure they all should have been supported. It’s become so convenient to say, “Oh, we’re going to do quality enhancement, and by the way, we’re also going to do what Bob Galvin was talking about, drive up the price.”

The Role Of Pilots And Demonstrations

FISHER: Let me come back to Gail’s question about pilots. I certainly believe that we have some learning to do. For example, what are the right ways of setting targets and establishing contracts with ACOs? What are the best ways of structuring Medicare contracts and of aligning private-payer contracts so that physicians face a common set of incentives? I think the IPA model is likely to be a very important foundation in many communities of advancing this. But there is a danger in a pilot that then says we need to go back to Congress before we take it to six more sites. We may want a more aggressive learning system that lets us start with 10 sites, then roll to 50, and then expand once we’ve got the design characteristics well defined.

BERENSON: In addition, I’ll go back to what I heard anecdotally from some of the PGP sites. You are not going to do the real reengineering, converting a hospital from a profit center to a cost center, based on a three-year or even a five-year commitment, when at the end of it somebody is going to pull the plug. I think most of the PGP sites did the easy things around transition care and some chronic disease management for congestive heart failure because it would be easy if the demo wasn’t continued to turn that off. We haven’t really changed the culture in the organization. We haven’t done what we would be doing if we knew we had a long-term commitment to this financing model. So that makes it even more challenging, but I think for organizations where we have some confidence that they would be able to be an accountable care organization, the commitment needs to be made for a long term, even if you don’t expand to other sites. Even if it’s a failure. Those particular sites that are in have to be assured of minimum of a certain number of years beyond three.

FISHER: Up to a point — not if they’re costing the government money.

BERENSON: Absolutely.

WILENSKY: I think the way to do that is to put in the conditions under which you do not either continue or make this a part of legislation. The history of demos, even successful demos and pilots, has been that they tend to die out unless they automatically trigger the next phase, absent adverse or undesirable consequences.

FISHER: That’s the way McClellan and I have been trying to have this design go forward if we can get it into the legislation. The second thing I want to mention though, and it’s in response to Bob Berenson’s point about duration, is that you also need a critical mass of payers. When we had our conference on accountable care organizations last winter, several of the participants in the PGP program came and described their experiences, and the one that was most successful was one that also had a group of private-sector payers in a similar shared-savings model. They really did have an incentive to get their primary physicians to change their practices and keep people out of the hospital, and they closed several hospital wards.

GALVIN: I really think this is a key point, and it has been an important focus of the Center for Payment Reform, a new organization that represents entities that use and pay for care. In addition to specific models and a good conceptual framework for what kind of payment we want, we need some structure to get moving on investing and evaluating pilots that are different from today’s demonstration projects. One of the key changes needed is being able to go across payers. There is a good chunk of the private sector, both employers and private insurers, who would be willing to work with Medicare on a system like that, but we can’t do it without some change in the reform legislation this year. I think that’s something we all could agree on. Whether we disagree on certain points about bundling or ACOs and what they might look like, I think we all agree that we need to move forward and we need to have a different model for demonstrations, innovation, and evaluation.

FISHER: Yes.

BERENSON: Also, somehow the governance has to be removed from the political arena. Whether it is the Medicare Payment Advisory Commission [MedPAC] or some other entity, somebody without a political agenda has to be overseeing the success of these demos and pilots.

Is Delivery System Reform Getting Enough Attention?

IGLEHART: Do you all believe that the proposals that are emerging in the ongoing reform dialogue are placing enough emphasis on delivery reform?

WILENSKY: Not yet. Hopefully that will change when we begin to see the detail and how they are going to structure the reform. There has not been a lot of detail in general, but there has been even less detail about that aspect. It’s primarily been talk about a combination of coverage expansions and the public plan.

GALVIN: And financing, right?

WILENSKY: Well, at least the need to finance it with vague references as to how that might be done. But of course, since there isn’t very much specific about what the coverage expansions look like, it’s hard to get specific about the financing. There has been precious little on delivery system reform.

GALVIN: Yes, it’s a predictable graph that starts with a lot of talk about payment and delivery system reform, and then morphs into a focus on coverage and financing. That’s not inappropriate. With all these Americans without insurance and the fact that it costs money, it’s fine. I do think it’s up to advocates like we have here, and many, many other people who really are committed to delivery system reform, to keep driving the issue. We will have bills, and we’ll have a conference, and we’ll have an opportunity, but I don’t think it will happen without the people who are passionate about this continuing to make the case.

BERENSON: I think, in fact, we have a danger of not only not having delivery system reform, but regressing from even where we are today. I believe we are about to have a significant problem of access to primary care services for the Medicare population, and it will soon become the whole population, because nobody is going into primary care practices who is an American-trained physician. I haven’t seen anything to seriously take that issue on. We’re not going to have the kind of accountable care organizations that Elliott and Mark are talking about without an adequate workforce of primary care physicians. If we can’t get that one right, I don’t know what we’re doing.

FISHER: I agree we need to strengthen primary care, but I think it’s a little bit of a chicken and egg issue as well. Who would want to go into primary care in the current work environments?

BERENSON: Well, that’s right, but I think sometimes you can throw some money at a problem and it will get better.

FISHER: I hope we can throw some money at it.

BERENSON: It’s not sufficient, but it’s necessary. Work that I’m involved with suggests that we’ve got the prices really wrong. Some might say that’s inevitable, that with a 6,000-code fee schedule you’re going to get the prices wrong. I think there has been more of a lack of attention and a lack of political will to address what needs to happen there. I think we in the short term need to stop the hemorrhaging, to get some primary care docs back in the pipeline. In the long term, we set up the conditions for forming integrated delivery systems as people understand that the gravy train of fee-for-service specialty services will not be what it is today.

It may be that I’m taking an extreme position on this, but I haven’t seen anything coming close on the physician payment side. I think on the rehospitalization side, trying to deal with 20 percent readmission rates within 30 days, what I’ve seen so far has been relatively timid. They’ve identified the issue. I think we could be much more aggressive in that area. I’m somewhat disappointed at this point, but not everybody has reported in yet.

WILENSKY: We are just at the cusp of seeing what people are actually going to propose. Now, they may or may not go to that level of detail in the legislation, but I don’t know how discouraged we should be yet that we haven’t seen it, because we basically haven’t seen the details of anything.

I have two additional thoughts to share. One is that it would be useful to be able to augment the Medicare data as was in part done, or at least referenced, with the Ingenix data by Gawande. I’d like to put the issue that Buz Cooper has raised to rest. It does not convince me that there is a problem, but it would be useful to bury that as an excuse not to go forward.

Second, I am hopeful that if this has now has raised an issue that has been more or less on the surface of our knowledge for the last 25 years over the top, where it is an accepted fact, we need to aggressively start talking about the public policies that are likely to be responsive to the problem.

FISHER: I’d like to add one thing to what Gail said about the questions raised by Buz Cooper around whether under-65 and over-65 spending track each other well. Where we have looked, under-65 and over-65 utilization patterns track pretty well. The question that seems to remain quite substantially is whether the issues raised by Bob Galvin earlier around pricing power may lead to dramatically different prices across markets, that then contribute to less of the correlation in total spending. But when Laurence Baker looked in the Medicare fee-for-service population, the Medicare Advantage population, and the under-65 population, he found very similar patterns of utilization of at least hospital services.

WILENSKY: It sounds like, working with UnitedHealth Group or their Ingenix unit or some of the other big insurers, that we could shed some light on that issue, because I think it’s something that is hard to be dismissive of if we don’t have better data.

FISHER: We do need better data. I know that Amitabh Chandra and Mike Chernew have been trying to look at that in one of those insurance databases.

WILENSKY: Good.

IGLEHART: Well, thank you all.

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4 Responses to “The Policy Lessons Of Health Care Cost Variations: A Roundtable With Bob Berenson, Elliott Fisher, Bob Galvin, And Gail Wilensky”

  1. Michael D. Miller, MD Says:

    Great discussion. Having sat in on some group discussions about health reform here in neon-Blue Cambridge, MA it would be great if everyone interested in health reform understood the complexities of actually reforming health care delivery and controlling costs as well as the Bobs, Elliott, Gail and John. Having talked to each of them at various points over the last 20 years, I know they know of what they speak. However, the missing link between their knowledge and the public’s understanding of the problems and solutions are simple explanations – which is why I think Atul’s article has had such resonance. (No offense to Health Affairs, but many more non-wonky individuals also read the New Yorker.) I’ve done this type of explaining both in person and on my blog (for example, see “Health Reform Explained Simply at http://www.healthpolcom.com/blog/2009/07/07/hard-health-reform-explained-simply/), but unfortunately, too many people have tightly held beliefs about healthcare either from reading slanted “propaganda” or from their own life experiences. Since physicians generally have significant credibility and connections to their patients and their communities It would be great if we could get many more of them on-board for substantive delivery and financing system changes, but as Atul’s article points out – and as Gail and Bob Bernenson discussed – most physicians who are profiting from the current situation are probably resistant to change. Whether Congress, et. al., will persevere with real changes via legislation and regulation or go a health reform route that expands upon the existing wobbly system remains to be seen.

  2. JamesUnland Says:

    It seems as if ‘eliminating geographic disparities’ and ‘encouraging best practices’ and ’tilting reimbursement toward medically effective treatments’ …. all of these are code for standardizing or — to use the more academic term — ‘rationalizing’ the practice of medicine, with respect to which the underlying technologies and databases have really existed for about 20 years. I have more questions than answers at this point and my main question is … Is the Obama administration going for a ‘hat trick’ through: (1) a lot of outright systemic savings through standardizing most treatments, utilization, etc; (2) hence, greatly reducing ‘malpractice’ suits by virtue of the fact that many fewer physicians will be practicing ‘outside of accepted norms’ or otherwise flat out won’t be paid even leaving aside that they might be accused of ‘fraud’ by virtue of a racheted-up definition of overutilzation as fraud; and (3) readjusting/tweaking the item-by-item reimbursement levels themselves to incentivize certain behaviors and disincentivize others or, better yet, recalibrate the relative composition/distribution of specialties?

  3. hwilliston Says:

    The whole panel seems to skirt around the most crucial element of accountability. While supporting transparency and better data collection they completely avoid the concept of calculating the cost per patient per year for each physician,s provider number. This would be very unclean data as the AMA has mentioned in its objection to such information being used but it is a start. It might account for some variation in frequency of diagnostic imaging testing by the owners of the six MRI in our town of 60,000 or of the physicians they employ or are associated with. It might help clarify what exactly the costs to the system are for the home health orders that flow across my desk daily. I am overwhelmed but it would be a big eye opener to get a monthly statement as to what costs I am generating in all of these areas, at least from the public financed care such as Medicare and Medicaid. There are legitimate variations in patterns of practice but those who are outliers should be able to justify what they are doing. There will be under as well as overservicing and then there will be patterns of practice that we all could emulate and learn from.
    The other thing they only skimmed over was some of the disparities in payments. We have patients billed $20,000 for facet injections for back pain or $14,000 for the same procedure on the neck. Why is this one procedure worth tens of c-sections or appendectomies? Many of our local neurologist and anesthesiologist have left there original field to join the rapidly growing area of “pain management”. What are the costs for this and what are the results, I have not been impressed at all by the improvement in patient,s pain levels or function.

  4. Jeff Goldsmith Says:

    This discussion of Atul’s article skirts around the edges of the central problem, the problem Atul identified as the “culture of money” problem. Though Bob is right that there might be fraudulent practices in McAllen’s physician/hospital community, to paraphrase Michael Kinsley’s comment on political campaign contributions, “It’s what’s legal that’s the scandal”.

    Physicians in McAllen have exploited their credulous, lower income patients, who trust them to do the best for their medical problems. They own their own nerve conduction testing equipment, MR scanners, PET scanners, laboratory equipment- you name it- and augment their income through self referral, exploiting the “in office ancillary exemption” to Stark. They are partners in a physician-owned hospital, exploiting the “whole hospital” exemption to Stark. They shake down the other hospitals and home health agencies for bribes, disguised as medical directors fees, which are lightly regulated and rarely audited. See my Commentary in Health Affairs “Hospitals and Physicians: Not a Pretty Picture” Dec 5, 2006 for a discussion of this problem.

    This isn’t a problem you fix with across-the-board Medicare fee reductions, or clever gain sharing formulae. Most of the profits come from commercial insurance in any case. Little delegations of “accountable” doctors aren’t going to persuade McAllen’s cardiologists to turn in their CT scanners, or the oncologists to give up their PET scanners. Using the ACO idea to solve this problem is a little like sending community leaders and agricultural extension agents out to the opium poppy growers in Helmand Province in Afghanistan and urging them to grow arugula instead.

    You fix the McAllen problem not by clever reconfiguration of Medicare payment methodology. You fix it by eliminating the loopholes to the existing Medicare fraud and abuse laws (steel yourselves for an assault from the subspecialty societies and hospital companies which benefit from them) and assuring that those who pay off physicians to refer patients to them are prosecuted. Follow the money, and you’ll find the solution to this problem.

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