It is spring in McAllen, Texas. The morning sun is
warm. The streets are lined with palm trees and pickup trucks. McAllen is in
Hidalgo County, which has the lowest household income in the country, but it’s
a border town, and a thriving foreign-trade zone has kept the unemployment rate
below ten per cent. McAllen calls itself the Square Dance Capital of the World.
“Lonesome Dove” was set around here.
McAllen
has another distinction, too: it is one of the most expensive health-care
markets in the country. Only Miami—which has much higher labor and living
costs—spends more per person on health care. In 2006, Medicare spent fifteen
thousand dollars per enrollee here, almost twice the national average. The
income per capita is twelve thousand dollars. In other words, Medicare spends
three thousand dollars more per person here than the average person earns.
The
explosive trend in American medical costs seems to have occurred here in an
especially intense form. Our country’s health care is by far the most expensive
in the world. In Washington, the aim of health-care reform is not just to
extend medical coverage to everybody but also to bring costs under control.
Spending on doctors, hospitals, drugs, and the like now consumes more than one
of every six dollars we earn. The financial burden has damaged the global
competitiveness of American businesses and bankrupted millions of families,
even those with insurance. It’s also devouring our government. “The greatest
threat to America’s fiscal health is not Social Security,” President Barack
Obama said in a March speech at the White House. “It’s not the investments that
we’ve made to rescue our economy during this crisis. By a wide margin, the
biggest threat to our nation’s balance sheet is the skyrocketing cost of health
care. It’s not even close.”
The
question we’re now frantically grappling with is how this came to be, and what
can be done about it. McAllen, Texas, the most expensive town in the most
expensive country for health care in the world, seemed a good place to look for
some answers.
From the moment I arrived, I asked almost everyone
I encountered about McAllen’s health costs—a businessman I met at the five-gate
McAllen-Miller International Airport, the desk clerks at the Embassy Suites
Hotel, a police-academy cadet at McDonald’s. Most weren’t surprised to hear
that McAllen was an outlier. “Just look around,” the cadet said. “People are
not healthy here.” McAllen, with its high poverty rate, has an incidence of
heavy drinking sixty per cent higher than the national average. And the Tex-Mex
diet has contributed to a thirty-eight-per-cent obesity rate.
One
day, I went on rounds with Lester Dyke, a weather-beaten, ranch-owning
fifty-three-year-old cardiac surgeon who grew up in Austin, did his surgical
training with the Army all over the country, and settled into practice in
Hidalgo County. He has not lacked for business: in the past twenty years, he
has done some eight thousand heart operations, which exhausts me just thinking
about it. I walked around with him as he checked in on ten or so of his
patients who were recuperating at the three hospitals where he operates. It was
easy to see what had landed them under his knife. They were nearly all obese or
diabetic or both. Many had a family history of heart disease. Few were taking
preventive measures, such as cholesterol-lowering drugs, which, studies
indicate, would have obviated surgery for up to half of them.
Yet
public-health statistics show that cardiovascular-disease rates in the county
are actually lower than average, probably because its smoking rates are quite
low. Rates of asthma, H.I.V., infant mortality, cancer, and injury are lower,
too. El Paso County, eight hundred miles up the border, has essentially the
same demographics. Both counties have a population of roughly seven hundred
thousand, similar public-health statistics, and similar percentages of
non-English speakers, illegal immigrants, and the unemployed. Yet in 2006 Medicare
expenditures (our best approximation of over-all spending patterns) in El Paso
were $7,504 per enrollee—half as much as in McAllen. An unhealthy population
couldn’t possibly be the reason that McAllen’s health-care costs are so high.
(Or the reason that America’s are. We may be more obese than any other
industrialized nation, but we have among the lowest rates of smoking and
alcoholism, and we are in the middle of the range for cardiovascular disease
and diabetes.)
Was
the explanation, then, that McAllen was providing unusually good health care? I
took a walk through Doctors Hospital at Renaissance, in Edinburg, one of the
towns in the McAllen metropolitan area, with Robert Alleyn,
a Houston-trained general surgeon who had grown up here and returned home to
practice. The hospital campus sprawled across two city blocks, with a series of
three- and four-story stucco buildings separated by golfing-green lawns and
black asphalt parking lots. He pointed out the sights—the cancer center is over
here, the heart center is over there, now we’re coming to the imaging center.
We went inside the surgery building. It was sleek and modern, with recessed
lighting, classical music piped into the waiting areas, and nurses moving from
patient to patient behind rolling black computer pods. We changed into scrubs
and Alleyn took me through the sixteen operating
rooms to show me the laparoscopy suite, with its flat-screen video monitors,
the hybrid operating room with built-in imaging equipment, the
surgical robot for minimally invasive robotic surgery.
I
was impressed. The place had virtually all the technology that you’d find at
Harvard and Stanford and the Mayo Clinic, and, as I walked through that
hospital on a dusty road in South Texas, this struck me as a remarkable thing.
Rich towns get the new school buildings, fire trucks, and roads, not to mention
the better teachers and police officers and civil engineers. Poor towns don’t.
But that rule doesn’t hold for health care.
At
McAllen Medical Center, I saw an orthopedic surgeon work under an operating
microscope to remove a tumor that had wrapped around the spinal cord of a
fourteen-year-old. At a home-health agency, I spoke to a nurse who could
provide intravenous-drug therapy for patients with congestive heart failure. At
McAllen Heart Hospital, I watched Dyke and a team of six do a coronary-artery
bypass using technologies that didn’t exist a few years ago. At Renaissance, I
talked with a neonatologist who trained at my hospital, in Boston, and brought
McAllen new skills and technologies for premature babies. “I’ve had nurses come
up to me and say, ‘I never knew these babies could survive,’ ” he said.
And
yet there’s no evidence that the treatments and technologies available at
McAllen are better than those found elsewhere in the country. The annual
reports that hospitals file with Medicare show that those in McAllen and El
Paso offer comparable technologies—neonatal intensive-care units, advanced
cardiac services, PET scans, and so on. Public
statistics show no difference in the supply of doctors. Hidalgo County actually
has fewer specialists than the national average.
Nor does the care given in McAllen stand out for its
quality. Medicare ranks hospitals on twenty-five metrics of care. On all but two of
these, McAllen’s five largest hospitals performed worse, on average, than El
Paso’s. McAllen costs Medicare seven thousand dollars more per person each year
than does the average city in America. But not, so far
as one can tell, because it’s delivering better health care.
One night, I went to dinner with six McAllen
doctors. All were what you would call bread-and-butter physicians: busy,
full-time, private-practice doctors who work from seven in the morning to seven
at night and sometimes later, their waiting rooms teeming and their desks
stacked with medical charts to review.
Some
were dubious when I told them that McAllen was the country’s most expensive
place for health care. I gave them the spending data from Medicare. In 1992, in
the McAllen market, the average cost per Medicare enrollee was $4,891, almost
exactly the national average. But since then, year after year, McAllen’s health
costs have grown faster than any other market in the country, ultimately
soaring by more than ten thousand dollars per person.
“Maybe
the service is better here,” the cardiologist suggested. People can be seen
faster and get their tests more readily, he said.
Others
were skeptical. “I don’t think that explains the costs he’s talking about,” the
general surgeon said.
“It’s malpractice,” a family physician who had practiced here
for thirty-three years said.
“McAllen
is legal hell,” the cardiologist agreed. Doctors order unnecessary tests just
to protect themselves, he said. Everyone thought the lawyers here were worse
than elsewhere.
That
explanation puzzled me. Several years ago, Texas passed a tough malpractice law
that capped pain-and-suffering awards at two hundred and fifty thousand
dollars. Didn’t lawsuits go down?
“Practically
to zero,” the cardiologist admitted.
“Come
on,” the general surgeon finally said. “We all know these arguments are
bullshit. There is overutilization here, pure and simple.” Doctors, he said,
were racking up charges with extra tests, services, and procedures.
The
surgeon came to McAllen in the mid-nineties, and since then, he said, “the way
to practice medicine has changed completely. Before, it was about how to do a
good job. Now it is about ‘How much will you benefit?’ ”
Everyone
agreed that something fundamental had changed since the days when health-care
costs in McAllen were the same as those in El Paso and elsewhere. Yes, they had
more technology. “But young doctors don’t think anymore,” the family physician
said.
The
surgeon gave me an example. General surgeons are often asked to see patients
with pain from gallstones. If there aren’t any complications—and there usually
aren’t—the pain goes away on its own or with pain medication. With instruction
on eating a lower-fat diet, most patients experience no further difficulties.
But some have recurrent episodes, and need surgery to remove their gallbladder.
Seeing
a patient who has had uncomplicated, first-time gallstone pain requires some
judgment. A surgeon has to provide reassurance (people are often scared and
want to go straight to surgery), some education about gallstone disease and
diet, perhaps a prescription for pain; in a few weeks, the surgeon might follow
up. But increasingly, I was told, McAllen surgeons simply operate. The patient
wasn’t going to moderate her diet, they tell themselves. The pain was just
going to come back. And by operating they happen to make an extra seven hundred
dollars.
I
gave the doctors around the table a scenario. A forty-year-old woman comes in
with chest pain after a fight with her husband. An EKG is normal. The chest
pain goes away. She has no family history of heart disease. What did McAllen
doctors do fifteen years ago?
Send
her home, they said. Maybe get a stress test to confirm that there’s no issue,
but even that might be overkill.
And today? Today, the cardiologist said,
she would get a stress test, an echocardiogram, a mobile Holter
monitor, and maybe even a cardiac catheterization.
“Oh,
she’s definitely getting a cath,” the
internist said, laughing grimly.
To
determine whether overuse of medical care was really the problem in McAllen, I
turned to Jonathan Skinner, an economist at Dartmouth’s Institute for Health
Policy and Clinical Practice, which has three decades of expertise in examining
regional patterns in Medicare payment data. I also turned to two private
firms—D2Hawkeye, an independent company, and Ingenix,
UnitedHealthcare’s data-analysis company—to analyze
commercial insurance data for McAllen. The answer was yes. Compared with
patients in El Paso and nationwide, patients in McAllen got more of pretty much
everything—more diagnostic testing, more hospital treatment, more surgery, more
home care.
The
Medicare payment data provided the most detail. Between 2001 and 2005,
critically ill Medicare patients received almost fifty per cent more specialist
visits in McAllen than in El Paso, and were two-thirds more likely to see ten
or more specialists in a six-month period. In 2005 and 2006, patients in
McAllen received twenty per cent more abdominal ultrasounds, thirty per cent
more bone-density studies, sixty per cent more stress tests with
echocardiography, two hundred per cent more nerve-conduction studies to
diagnose carpal-tunnel syndrome, and five hundred and fifty per cent more
urine-flow studies to diagnose prostate troubles. They received one-fifth to two-thirds
more gallbladder operations, knee replacements, breast biopsies, and bladder
scopes. They also received two to three times as many pacemakers, implantable
defibrillators, cardiac-bypass operations, carotid endarterectomies,
and coronary-artery stents. And Medicare paid for five times as many home-nurse
visits. The primary cause of McAllen’s extreme costs was, very simply, the
across-the-board overuse of medicine.
This is a disturbing and perhaps surprising
diagnosis. Americans like to believe that, with most things, more is better.
But research suggests that where medicine is concerned it may actually be
worse. For example, Rochester, Minnesota, where the Mayo Clinic dominates the
scene, has fantastically high levels of technological capability and quality,
but its Medicare spending is in the lowest fifteen per cent of the
country—$6,688 per enrollee in 2006, which is eight thousand dollars less than
the figure for McAllen. Two economists working at Dartmouth, Katherine Baicker and Amitabh Chandra, found that the more money Medicare spent per person
in a given state the lower that state’s quality ranking tended to be. In fact,
the four states with the highest levels of spending—Louisiana, Texas,
California, and Florida—were near the bottom of the national rankings on the
quality of patient care.
In
a 2003 study, another Dartmouth team, led by the internist Elliott Fisher,
examined the treatment received by a million elderly Americans diagnosed with
colon or rectal cancer, a hip fracture, or a heart attack. They found that
patients in higher-spending regions received sixty per cent more care than
elsewhere. They got more frequent tests and procedures, more visits with
specialists, and more frequent admission to hospitals. Yet they did no better
than other patients, whether this was measured in terms of survival, their
ability to function, or satisfaction with the care they received. If anything,
they seemed to do worse.
That’s
because nothing in medicine is without risks. Complications can arise from hospital
stays, medications, procedures, and tests, and when these things are of
marginal value the harm can be greater than the benefits. In recent years, we
doctors have markedly increased the number of operations we do, for instance.
In 2006, doctors performed at least sixty million surgical procedures, one for
every five Americans. No other country does anything like as many operations on
its citizens. Are we better off for it? No one knows for sure, but it seems
highly unlikely. After all, some hundred thousand people die each year from
complications of surgery—far more than die in car crashes.
To
make matters worse, Fisher found that patients in high-cost areas were actually
less likely to receive low-cost preventive services, such as flu and pneumonia
vaccines, faced longer waits at doctor and emergency-room visits, and were less
likely to have a primary-care physician. They got more of the stuff that cost
more, but not more of what they needed.
In
an odd way, this news is reassuring. Universal coverage won’t be feasible
unless we can control costs. Policymakers have worried that doing so would
require rationing, which the public would never go along with. So the idea that
there’s plenty of fat in the system is proving deeply attractive. “Nearly
thirty per cent of Medicare’s costs could be saved without negatively affecting
health outcomes if spending in high- and medium-cost areas could be reduced to
the level in low-cost areas,” Peter Orszag, the
President’s budget director, has stated.
Most
Americans would be delighted to have the quality of care found in places like
Rochester, Minnesota, or Seattle, Washington, or Durham, North Carolina—all of
which have world-class hospitals and costs that fall below the national
average. If we brought the cost curve in the expensive places down to their
level, Medicare’s problems (indeed, almost all the federal government’s budget
problems for the next fifty years) would be solved. The difficulty is how to go
about it. Physicians in places like McAllen behave differently from others. The
$2.4-trillion question is why. Unless we figure it out, health reform will
fail.
I had what I considered to be a reasonable plan
for finding out what was going on in McAllen. I would call on the heads of its
hospitals, in their swanky, decorator-designed, churrigueresco
offices, and I’d ask them.
The
first hospital I visited, McAllen Heart Hospital, is owned by Universal Health
Services, a for-profit hospital chain with headquarters in King of Prussia,
Pennsylvania, and revenues of five billion dollars last year. I went to see the
hospital’s chief operating officer, Gilda Romero. Truth be told, her office
seemed less churrigueresco than Office Depot.
She had straight brown hair, sympathetic eyes, and looked more like a young
school teacher than like a corporate officer with nineteen years of experience.
And when I inquired, “What is going on in this place?” she looked surprised.
Is
McAllen really that expensive? she asked.
I
described the data, including the numbers indicating that heart operations and
catheter procedures and pacemakers were being performed in McAllen at double
the usual rate.
“That
is interesting,” she said, by which she did not mean, “Uh-oh, you’ve
caught us” but, rather, “That is actually interesting.” The problem of
McAllen’s outlandish costs was new to her. She puzzled over the numbers. She
was certain that her doctors performed surgery only when it was necessary. It
had to be one of the other hospitals. And she had one in mind—Doctors Hospital
at Renaissance, the hospital in Edinburg that I had toured.
She
wasn’t the only person to mention Renaissance. It is the newest hospital in the
area. It is physician-owned. And it has a reputation (which it disclaims) for
aggressively recruiting high-volume physicians to become investors and send
patients there. Physicians who do so receive not only their fee for whatever
service they provide but also a percentage of the hospital’s profits from the
tests, surgery, or other care patients are given. (In 2007, its profits totalled thirty-four million dollars.) Romero and others
argued that this gives physicians an unholy temptation to overorder.
Such
an arrangement can make physician investors rich. But it can’t be the whole
explanation. The hospital gets barely a sixth of the patients in the region;
its margins are no bigger than the other hospitals’—whether for profit or not
for profit—and it didn’t have much of a presence until 2004 at the earliest, a
full decade after the cost explosion in McAllen began.
“Those
are good points,” Romero said. She couldn’t explain what was going on.
The
following afternoon, I visited the top managers of Doctors Hospital at
Renaissance. We sat in their boardroom around one end of a yacht-length table.
The chairman of the board offered me a soda. The chief of staff smiled at me.
The chief financial officer shook my hand as if I were an old friend. The
C.E.O., however, was having a hard time pretending that he was happy to see me.
Lawrence Gelman was a fifty-seven-year-old
anesthesiologist with a Bill Clinton shock of white hair and a weekly local
radio show tag-lined “Opinions from an Unrelenting Conservative Spirit.” He had
helped found the hospital. He barely greeted me, and while the others were
trying for a how-can-I-help-you-today attitude, his body language was more
let’s-get-this-over-with.
So
I asked him why McAllen’s health-care costs were so high. What he gave me was a
disquisition on the theory and history of American health-care financing going
back to Lyndon Johnson and the creation of Medicare, the upshot of which was:
(1) Government is the problem in health care. “The people in charge of the
purse strings don’t know what they’re doing.” (2) If anything, government
insurance programs like Medicare don’t pay enough. “I, as an anesthesiologist,
know that they pay me ten per cent of what a private insurer pays.” (3)
Government programs are full of waste. “Every person in this room could easily
go through the expenditures of Medicare and Medicaid and see all kinds of
waste.” (4) But not in McAllen. The clinicians here, at least at Doctors
Hospital at Renaissance, “are providing necessary, essential health care,” Gelman said. “We don’t invent patients.”
Then
why do hospitals in McAllen order so much more surgery and scans and tests than
hospitals in El Paso and elsewhere?
In
the end, the only explanation he and his colleagues could offer was this: The
other doctors and hospitals in McAllen may be overspending, but, to the extent
that his hospital provides costlier treatment than other places in the country,
it is making people better in ways that data on quality and outcomes do not
measure.
“Do
we provide better health care than El Paso?” Gelman
asked. “I would bet you two to one that we do.”
It
was a depressing conversation—not because I thought the executives were being
evasive but because they weren’t being evasive. The data on McAllen’s costs
were clearly new to them. They were defending McAllen reflexively. But they
really didn’t know the big picture of what was happening.
And,
I realized, few people in their position do. Local executives for hospitals and
clinics and home-health agencies understand their growth rate and their market
share; they know whether they are losing money or making money. They know that
if their doctors bring in enough business—surgery, imaging, home-nursing
referrals—they make money; and if they get the doctors to bring in more, they
make more. But they have only the vaguest notion of whether the doctors are
making their communities as healthy as they can, or whether they are more or
less efficient than their counterparts elsewhere. A doctor sees a patient in
clinic, and has her check into a McAllen hospital for a CT scan, an ultrasound,
three rounds of blood tests, another ultrasound, and then surgery to have her
gallbladder removed. How is Lawrence Gelman or Gilda Romero to know whether all that is
essential, let alone the best possible treatment for the patient? It isn’t what
they are responsible or accountable for.
Health-care
costs ultimately arise from the accumulation of individual decisions doctors
make about which services and treatments to write an order for. The most
expensive piece of medical equipment, as the saying goes, is a doctor’s pen.
And, as a rule, hospital executives don’t own the pen caps. Doctors do.
If doctors wield the pen, why do they do it so
differently from one place to another? Brenda Sirovich,
another Dartmouth researcher, published a study last year that provided an
important clue. She and her team surveyed some eight hundred primary-care
physicians from high-cost cities (such as Las Vegas and New York), low-cost
cities (such as Sacramento and Boise), and others in between. The researchers
asked the physicians specifically how they would handle a variety of patient
cases. It turned out that differences in
decision-making emerged in only some kinds of cases. In situations in which the
right thing to do was well established—for example, whether to recommend a
mammogram for a fifty-year-old woman (the answer is yes)—physicians in high-
and low-cost cities made the same decisions. But, in cases in which the science
was unclear, some physicians pursued the maximum possible amount of testing and
procedures; some pursued the minimum. And which kind of doctor they were
depended on where they came from.
Sirovich asked doctors how they would treat a
seventy-five-year-old woman with typical heartburn symptoms and “adequate
health insurance to cover tests and medications.” Physicians in high- and
low-cost cities were equally likely to prescribe antacid therapy and to check
for H. pylori, an ulcer-causing bacterium—steps strongly recommended by
national guidelines. But when it came to measures of less certain value—and
higher cost—the differences were considerable. More than seventy per cent of
physicians in high-cost cities referred the patient to a gastroenterologist,
ordered an upper endoscopy, or both, while half as many in low-cost cities did.
Physicians from high-cost cities typically recommended that patients with
well-controlled hypertension see them in the office every one to three months,
while those from low-cost cities recommended visits twice yearly. In case after
uncertain case, more was not necessarily better. But physicians from the most
expensive cities did the most expensive things.
Why?
Some of it could reflect differences in training. I remember when my wife
brought our infant son Walker to visit his grandparents in Virginia, and he
took a terrifying fall down a set of stairs. They drove him to the local
community hospital in Alexandria. A CT scan showed that he had a tiny subdural
hematoma—a small area of bleeding in the brain. During ten hours of
observation, though, he was fine—eating, drinking, completely alert. I was a
surgery resident then and had seen many cases like his. We observed each child
in intensive care for at least twenty-four hours and got a repeat CT scan. That
was how I’d been trained. But the doctor in Alexandria was going to send Walker
home. That was how he’d been trained. Suppose things change for the worse? I
asked him. It’s extremely unlikely, he said, and if anything changed Walker
could always be brought back. I bullied the doctor into admitting him anyway.
The next day, the scan and the patient were fine. And, looking in the
textbooks, I learned that the doctor was right. Walker could have been managed
safely either way.
There
was no sign, however, that McAllen’s doctors as a group were trained any
differently from El Paso’s. One morning, I met with a hospital administrator
who had extensive experience managing for-profit hospitals along the border. He
offered a different possible explanation: the culture of money.
“In
El Paso, if you took a random doctor and looked at his tax returns eighty-five
per cent of his income would come from the usual practice of medicine,” he
said. But in McAllen, the administrator thought, that percentage would be a lot
less.
He
knew of doctors who owned strip malls, orange groves, apartment complexes—or
imaging centers, surgery centers, or another part of the hospital they directed
patients to. They had “entrepreneurial spirit,” he said. They were innovative
and aggressive in finding ways to increase revenues from patient care. “There’s
no lack of work ethic,” he said. But he had often seen financial considerations
drive the decisions doctors made for patients—the tests they ordered, the
doctors and hospitals they recommended—and it bothered him. Several doctors who
were unhappy about the direction medicine had taken in McAllen told me the same
thing. “It’s a machine, my friend,” one surgeon explained.
No
one teaches you how to think about money in medical school or residency. Yet,
from the moment you start practicing, you must think about it. You must
consider what is covered for a patient and what is not. You must pay attention
to insurance rejections and government-reimbursement rules. You must think
about having enough money for the secretary and the nurse and the rent and the
malpractice insurance.
Beyond
the basics, however, many physicians are remarkably oblivious to the financial
implications of their decisions. They see their patients. They make their
recommendations. They send out the bills. And, as long as the numbers come out
all right at the end of each month, they put the money out of their minds.
Others
think of the money as a means of improving what they do. They think about how
to use the insurance money to maybe install electronic health records with
colleagues, or provide easier phone and e-mail access, or offer expanded hours.
They hire an extra nurse to monitor diabetic patients more closely, and to make
sure that patients don’t miss their mammograms and pap smears and
colonoscopies.
Then
there are the physicians who see their practice primarily as a revenue stream.
They instruct their secretary to have patients who call with follow-up
questions schedule an appointment, because insurers don’t pay for phone calls,
only office visits. They consider providing Botox injections for cash. They
take a Doppler ultrasound course, buy a machine, and start doing their
patients’ scans themselves, so that the insurance payments go to them rather
than to the hospital. They figure out ways to increase their high-margin work
and decrease their low-margin work. This is a business, after all.
In
every community, you’ll find a mixture of these views among physicians, but one
or another tends to predominate. McAllen seems simply to be the community at
one extreme.
In
a few cases, the hospital executive told me, he’d seen the behavior cross over
into what seemed like outright fraud. “I’ve had doctors here come up to me and
say, ‘You want me to admit patients to your hospital, you’re going to have to
pay me.’ ”
“How much?” I asked.
“The
amounts—all of them were over a hundred thousand dollars per year,” he said.
The doctors were specific. The most he was asked for was five hundred thousand
dollars per year.
He
didn’t pay any of them, he said: “I mean, I gotta sleep at night.” And he emphasized that these were
just a handful of doctors. But he had never been asked for a kickback before
coming to McAllen.
Woody
Powell is a Stanford sociologist who studies the economic culture of cities.
Recently, he and his research team studied why certain regions—Boston, San
Francisco, San Diego—became leaders in biotechnology while others with a
similar concentration of scientific and corporate talent—Los Angeles,
Philadelphia, New York—did not. The answer they found was what Powell describes
as the anchor-tenant theory of economic development. Just as an anchor store
will define the character of a mall, anchor tenants in biotechnology, whether
it’s a company like Genentech, in South San Francisco, or a university like
M.I.T., in Cambridge, define the character of an economic community. They set
the norms. The anchor tenants that set norms encouraging the free flow of ideas
and collaboration, even with competitors, produced enduringly successful
communities, while those that mainly sought to dominate did not.
Powell
suspects that anchor tenants play a similarly powerful community role in other
areas of economics, too, and health care may be no exception. I spoke to a
marketing rep for a McAllen home-health agency who told me of a process
uncannily similar to what Powell found in biotech. Her job is to persuade
doctors to use her agency rather than others. The competition is fierce. I
opened the phone book and found seventeen pages of listings for home-health
agencies—two hundred and sixty in all. A patient typically brings in between
twelve hundred and fifteen hundred dollars, and double
that amount for specialized care. She described how, a decade or so ago, a few early agencies began rewarding doctors who
ordered home visits with more than trinkets: they provided tickets to
professional sporting events, jewelry, and other gifts. That set the tone.
Other agencies jumped in. Some began paying doctors a supplemental salary, as
“medical directors,” for steering business in their direction. Doctors came to
expect a share of the revenue stream.
Agencies
that want to compete on quality struggle to remain in business, the rep said.
Doctors have asked her for a medical-director salary of four or five thousand
dollars a month in return for sending her business. One asked a colleague of
hers for private-school tuition for his child; another wanted sex.
“I
explained the rules and regulations and the anti-kickback law, and told them
no,” she said of her dealings with such doctors. “Does it hurt my business?”
She paused. “I’m O.K. working only with ethical physicians,” she finally said.
About
fifteen years ago, it seems, something began to change in McAllen. A few
leaders of local institutions took profit growth to be a legitimate ethic in
the practice of medicine. Not all the doctors accepted this. But they failed to
discourage those who did. So here, along the banks of the Rio Grande, in the
Square Dance Capital of the World, a medical community came to treat patients
the way subprime-mortgage lenders treated home buyers: as profit centers.
The real puzzle of American health care, I
realized on the airplane home, is not why McAllen is different from El Paso.
It’s why El Paso isn’t like McAllen. Every incentive in the system is an
invitation to go the way McAllen has gone. Yet, across the country, large
numbers of communities have managed to control their health costs rather than
ratchet them up.
I
talked to Denis Cortese, the C.E.O. of the Mayo
Clinic, which is among the highest-quality, lowest-cost health-care systems in
the country. A couple of years ago, I spent several days there as a visiting
surgeon. Among the things that stand out from that visit was how much time the
doctors spent with patients. There was no churn—no shuttling patients in and
out of rooms while the doctor bounces from one to the other. I accompanied a
colleague while he saw patients. Most of the patients, like those in my clinic,
required about twenty minutes. But one patient had colon cancer and a number of
other complex issues, including heart disease. The physician spent an hour with
her, sorting things out. He phoned a cardiologist with a question.
“I’ll
be there,” the cardiologist said.
Fifteen
minutes later, he was. They mulled over everything together. The cardiologist
adjusted a medication, and said that no further testing was needed. He cleared
the patient for surgery, and the operating room gave her a slot the next day.
The
whole interaction was astonishing to me. Just having the cardiologist pop down
to see the patient with the surgeon would be unimaginable at my hospital. The
time required wouldn’t pay. The time required just to organize the system
wouldn’t pay.
The
core tenet of the Mayo Clinic is “The needs of the patient come first”—not the
convenience of the doctors, not their revenues. The doctors and nurses, and
even the janitors, sat in meetings almost weekly, working on ideas to make the
service and the care better, not to get more money out of patients. I asked Cortese how the Mayo Clinic made this possible.
“It’s
not easy,” he said. But decades ago Mayo recognized that the first thing it
needed to do was eliminate the financial barriers. It pooled all the money the
doctors and the hospital system received and began paying everyone a salary, so
that the doctors’ goal in patient care couldn’t be increasing their income.
Mayo promoted leaders who focussed first on what was
best for patients, and then on how to make this financially possible.
No
one there actually intends to do fewer expensive scans and procedures than is
done elsewhere in the country. The aim is to raise quality and to help doctors
and other staff members work as a team. But, almost by happenstance, the result
has been lower costs.
“When
doctors put their heads together in a room, when they share expertise, you get
more thinking and less testing,” Cortese told me.
Skeptics
saw the Mayo model as a local phenomenon that wouldn’t carry beyond the hay
fields of northern Minnesota. But in 1986 the Mayo Clinic opened a campus in
Florida, one of our most expensive states for health care, and, in 1987,
another one in Arizona. It was difficult to recruit staff members who would
accept a salary and the Mayo’s collaborative way of practicing. Leaders were
working against the dominant medical culture and incentives. The expansion
sites took at least a decade to get properly established. But eventually they
achieved the same high-quality, low-cost results as Rochester. Indeed, Cortese says that the Florida site has become, in some
respects, the most efficient one in the system.
The
Mayo Clinic is not an aberration. One of the lowest-cost markets in the country
is Grand Junction, Colorado, a community of a hundred and twenty thousand that
nonetheless has achieved some of Medicare’s highest quality-of-care scores.
Michael Pramenko is a family physician and a local
medical leader there. Unlike doctors at the Mayo Clinic, he told me, those in Grand Junction get piecework fees from
insurers. But years ago the doctors agreed among themselves to a system that
paid them a similar fee whether they saw Medicare, Medicaid, or
private-insurance patients, so that there would be little incentive to
cherry-pick patients. They also agreed, at the behest of the main health plan
in town, an H.M.O., to meet regularly on small peer-review committees to go
over their patient charts together. They focussed on
rooting out problems like poor prevention practices, unnecessary back
operations, and unusual hospital-complication rates. Problems went down.
Quality went up. Then, in 2004, the doctors’ group and the local H.M.O. jointly
created a regional information network—a
community-wide electronic-record system that shared office notes, test results,
and hospital data for patients across the area. Again, problems went down.
Quality went up. And costs ended up lower than just about anywhere else in the
United States.
Grand
Junction’s medical community was not following anyone else’s recipe. But, like
Mayo, it created what Elliott Fisher, of Dartmouth, calls an accountable-care
organization. The leading doctors and the hospital system adopted measures to
blunt harmful financial incentives, and they took collective responsibility for
improving the sum total of patient care.
This
approach has been adopted in other places, too: the Geisinger
Health System, in Danville, Pennsylvania; the Marshfield Clinic, in Marshfield,
Wisconsin; Intermountain Healthcare, in Salt Lake City; Kaiser Permanente, in
Northern California. All of them function on similar principles. All are
not-for-profit institutions. And all have produced enviably higher quality and
lower costs than the average American town enjoys.
When you look across the spectrum from Grand
Junction to McAllen—and the almost threefold difference in the costs of
care—you come to realize that we are witnessing a battle for the soul of
American medicine. Somewhere in the United States at this moment, a patient with
chest pain, or a tumor, or a cough is seeing a doctor. And the damning question
we have to ask is whether the doctor is set up to meet the needs of the
patient, first and foremost, or to maximize revenue.
There
is no insurance system that will make the two aims match perfectly. But having
a system that does so much to misalign them has proved disastrous. As
economists have often pointed out, we pay doctors for quantity, not quality. As
they point out less often, we also pay them as individuals, rather than as
members of a team working together for their patients. Both practices have made
for serious problems.
Providing
health care is like building a house. The task requires experts, expensive
equipment and materials, and a huge amount of coördination.
Imagine that, instead of paying a contractor to pull a team together and keep
them on track, you paid an electrician for every outlet he recommends, a
plumber for every faucet, and a carpenter for every cabinet. Would you be
surprised if you got a house with a thousand outlets, faucets, and cabinets, at
three times the cost you expected, and the whole thing fell apart a couple of
years later? Getting the country’s best electrician on the job (he trained at
Harvard, somebody tells you) isn’t going to solve this problem. Nor will
changing the person who writes him the check.
This
last point is vital. Activists and policymakers spend an inordinate amount of
time arguing about whether the solution to high medical costs is to have
government or private insurance companies write the checks. Here’s how this
whole debate goes. Advocates of a public option say government financing would
save the most money by having leaner administrative costs and forcing doctors
and hospitals to take lower payments than they get from private insurance.
Opponents say doctors would skimp, quit, or game the system, and make us wait
in line for our care; they maintain that private insurers are better at
policing doctors. No, the skeptics say: all insurance companies do is reject applicants who need health care and stall on paying
their bills. Then we have the economists who say that the people who should pay
the doctors are the ones who use them. Have consumers pay with their own
dollars, make sure that they have some “skin in the game,” and then they’ll get
the care they deserve. These arguments miss the main issue. When it comes to
making care better and cheaper, changing who pays the doctor will make no more
difference than changing who pays the electrician. The lesson of the
high-quality, low-cost communities is that someone has
to be accountable for the totality of care. Otherwise, you get a system that
has no brakes. You get McAllen.
One
afternoon in McAllen, I rode down McColl Road with Lester Dyke, the cardiac
surgeon, and we passed a series of office plazas that seemed to be nothing but
home-health agencies, imaging centers, and medical-equipment stores.
“Medicine
has become a pig trough here,” he muttered.
Dyke
is among the few vocal critics of what’s happened in McAllen. “We took a wrong
turn when doctors stopped being doctors and became businessmen,” he said.
We
began talking about the various proposals being touted in Washington to fix the
cost problem. I asked him whether expanding public-insurance programs like
Medicare and shrinking the role of insurance companies would do the trick in
McAllen.
“I
don’t have a problem with it,” he said. “But it won’t make a difference.” In
McAllen, government payers already predominate—not many people have jobs with
private insurance.
How
about doing the opposite and increasing the role of big insurance companies?
“What
good would that do?” Dyke asked.
The
third class of health-cost proposals, I explained, would push people to use
medical savings accounts and hold high-deductible insurance policies: “They’d
have more of their own money on the line, and that’d drive them to bargain with
you and other surgeons, right?”
He
gave me a quizzical look. We tried to imagine the scenario. A cardiologist
tells an elderly woman that she needs bypass surgery and has Dr. Dyke see her.
They discuss the blockages in her heart, the operation, the
risks. And now they’re supposed to haggle over the price as if he were selling
a rug in a souk? “I’ll do three vessels for thirty thousand, but if you take
four I’ll throw in an extra night in the I.C.U.”—that sort of
thing? Dyke shook his head. “Who comes up with this stuff?” he asked.
“Any plan that relies on the sheep to negotiate with the wolves is doomed to
failure.”
Instead,
McAllen and other cities like it have to be weaned away from their untenably
fragmented, quantity-driven systems of health care, step by step. And that will
mean rewarding doctors and hospitals if they band together to form Grand
Junction-like accountable-care organizations, in which doctors collaborate to
increase prevention and the quality of care, while discouraging overtreatment, undertreatment, and sheer profiteering. Under
one approach, insurers—whether public or private—would allow clinicians who
formed such organizations and met quality goals to keep half the savings they
generate. Government could also shift regulatory burdens, and even malpractice
liability, from the doctors to the organization. Other, sterner, approaches
would penalize those who don’t form these organizations.
This
will by necessity be an experiment. We will need to do in-depth research on
what makes the best systems successful—the peer-review committees? recruiting more primary-care doctors and nurses? putting doctors on salary?—and disseminate what we learn.
Congress has provided vital funding for research that compares the
effectiveness of different treatments, and this should help reduce uncertainty
about which treatments are best. But we also need to fund research that
compares the effectiveness of different systems of care—to reduce our
uncertainty about which systems work best for communities. These are empirical,
not ideological, questions. And we would do well to form a national institute
for health-care delivery, bringing together clinicians, hospitals, insurers,
employers, and citizens to assess, regularly, the quality and the cost of our
care, review the strategies that produce good results, and make clear
recommendations for local systems.
Dramatic
improvements and savings will take at least a decade. But a choice must be
made. Whom do we want in charge of managing the full complexity of medical
care? We can turn to insurers (whether public or private), which have proved
repeatedly that they can’t do it. Or we can turn to the local medical
communities, which have proved that they can. But we have to choose
someone—because, in much of the country, no one is in charge. And the result is
the most wasteful and the least sustainable health-care system in the world.
Something even more worrisome is going on as well.
In the war over the culture of medicine—the war over whether our country’s
anchor model will be Mayo or McAllen—the Mayo model is losing. In the sharpest
economic downturn that our health system has faced in half a century, many
people in medicine don’t see why they should do the hard work of organizing
themselves in ways that reduce waste and improve quality if it means
sacrificing revenue.
In
El Paso, the for-profit health-care executive told me, a few leading physicians
recently followed McAllen’s lead and opened their own centers for surgery and
imaging. When I was in Tulsa a few months ago, a fellow-surgeon explained how
he had made up for lost revenue by shifting his operations for well-insured
patients to a specialty hospital that he partially owned while keeping his poor
and uninsured patients at a nonprofit hospital in town. Even in Grand Junction,
Michael Pramenko told me, “some
of the doctors are beginning to complain about ‘leaving money on the table.’ ”
As
America struggles to extend health-care coverage while curbing health-care
costs, we face a decision that is more important than whether we have a
public-insurance option, more important than whether we will have a
single-payer system in the long run or a mixture of public and private
insurance, as we do now. The decision is whether we are going to reward the
leaders who are trying to build a new generation of Mayos
and Grand Junctions. If we don’t, McAllen won’t be an outlier. It will be our
future.