The Myth of A Painless Way to Cut Health Care Costs

Elliot Fisher, a professor at Dartmouth who has tirelessly researched variation in medical care across the country, has been in the news a lot lately. The Dartmouth Atlas research team has documented enormous variations in utilization around the country. This variation was recently the topic of a widely-quoted New Yorker article by Atul Gawande which helped demonstrate the seamy underbelly of American medicine: our physicians do more procedures because that’s how they earn their money.

National Public Radio had a story yesterday morning entitled “A Painless Way To Cut Health Care Costs?” Fisher was quoted extensively – pointing out that we should move away from fee for service payment methodologies we could eliminate a lot of medical costs. (I agree). Reporter Julie Rovner wondered if this means that slowing the growth of health care costs “doesn’t have to hurt.”

It all depends who you are.

If you are a patient, decreasing variation is good. Decreasing variation means that we offer more reliable health care, and decreasing overutilization will prevent medical errors and lower patient copayment and coinsurance charges. No problem there.

If you are an employer or the government purchasing health insurance – ditto. Decreasing variation (and increasing the prevalence of evidence based care) should lead to higher value in the health care purchase. Sign me up.

But is this likely to be painless for hospitals and doctors? Not by a long shot!

Health care, at 1/6 of the economy, employs a lot of people and creates an enormous amount of wealth. In most communities with a hospital, that hospital is the major employer in town. The top ten nongovernmental employers in Massachusetts includes three hospital systems and one university that includes hospital employees in its headcount.

In a sense, if we cut out 30-35% of all hospital revenues, we would end up with Detroits all across the country (especially in Massachusetts).

Let’s also not forget that the US has much lower utilization than all of the OECD countries that we look to as examples. So – while Fisher et al have demonstrated convincingly that medical communities in northern New England and the northern Plains states deliver better care while spending fewer resources, the excess cost in the US compared to Europe is largely due to cost per unit, not utilization.

I agree with Fisher and others that we should work hard to decrease variation and by so doing decrease utilization. In many instances (like preventive care), decreasing variation and increasing evidence based care will actually increase utilization and costs; I favor this too.

But I would not call solving this problem “painless, “ and I would not underestimate how difficult it will be to overcome opposition to efforts that would undermine the current business model.