Cutting Health-Care Costs by Putting

Cutting Health-Care Costs by Putting Doctors on a Budget

Time Magazine (http://www.time.com/time/nation/article/0,8599,1908477,00.html#ixzz0lTFodPyF)

Summary of Key Points:

According to the July 6, 2009 Time Magazine article entitled "Cutting Health-Care Costs by Putting Doctors on a Budget," one of the dirty little secrets of the health care industry today is that most health insurance plans have a perverse system of incentives that reward doctors for performing unnecessary tests and procedures. By allowing doctors and hospitals to bill insurers for every individual service, this 'fee for service' model fuels health-care inflation and encourages poor quality control, as doctors are not penalized by making mistakes. Furthermore, because most patients tend to believe that 'more care' is 'better care,' by encouraging patients to over-consume healthcare, doctors improve their own image in patient's eyes and also guard themselves against potential malpractice suits, given that they can state they 'did all they could' to treat the patient.

To reduce the spiraling costs of healthcare in America, a new system has been suggested that creates a financial algorithm for every patient and his or her condition. Insurance companies can then financially penalize the doctor for exceeding the per-patient, per-condition budget, and the insurance company will assume the doctor has been incompetent or negligent if the patient's condition requires more care.

Impact on health care practice:

From being incentivized to give more care, now doctors may be incentivized to give as little care as possible. The algorithm also assumes doctors have a great deal of control over patient behavior. But a diabetic or a coronary patient might not alter his or her diet, or be negligent in administering his or her medication. Furthermore, the algorithm might not be correct regarding the patient's risk factors and costs, given that what is known about medicine and medical technology are in a constant state of flux. The new plan creates a disincentive to take risky and unpredictable illnesses and potentially noncompliant patients, such as the elderly, patients with poor access to transportation, and individuals with low levels of health literacy.

According to one of the creators of the algorithm system Prometheus (presumably after the Greek god of forethought), the more 'defects' doctors prevent, the more money doctors make. Thus a zero-defect manufacturing model is effectively being applied to healthcare. According to the model, it is a defect if a diabetic patient requires a leg amputation, because this should have been prevented with swifter intervention.

Impact on patients

Patients have become notorious for demanding so-called 'unnecessary' tests from physicians, and thus driving up costs. Encouraging physicians to strictly limit the budgets of each patient's care will surely drive down costs and may even conspire to encourage physicians to improve patient preventative care. But there is always the fear that patients will be denied necessary as well as unnecessary tests and procedures, and physicians may shy away from suggesting expensive but potentially life-saving treatments.

This new system essentially splits the interests of physicians and patients: the less care physicians give, the more physicians are paid. Furthermore, there is a strong disincentive to treat potentially uncooperative or risky patients. Patients who have mental health issues or who have chronic conditions that are unpredictable and difficult to treat, such as the obese and diabetics, may fall under such categories. However, these patients are often the individuals most in need of intensive, hands-on care and a close relationship with their physicians.

Impact on practitioners

Practitioners will be frustrated by the new system because accountants and actuaries will be attempting to dictate patient care, rather than the physician's own medical judgment. Every patient is an individual, and every condition is individualistic in nature. Under Prometheus, physicians lack the discretion to create a treatment plan that will be effective -- instead, they must focus on making plans cost-effective.