Market medicine

There are two real market participants in the medical system- doctors and insurers. Who wins?

The New Yorker ran a deeply insightful piece by Atul Gawande on cost in the medical system. His conclusion was that cultural differences between areas of the country that show huge medical cost disparities (up to 3-fold between county-size areas) come down to how willing doctors are to fleece their patients, (financially speaking, of course).

In high-cost areas, doctors obey market incentives, ordering extra tests and procedures, buying ownership shares in hospitals and other facilities to which they then herd their patients, collecting kickbacks from drug companies and medical sub-contractors, and so forth. In low-cost areas, doctors are not so closely attuned to the modern medical market and have not caught on to how easy it is to make money by "practicing" a lot of medicine. Or they may be part of special systems like the Mayo clinic which has a dramatically different incentive system. Much of the pressure in high cost areas may arise unconsciously from an excess population of doctors, who then keep themselves in business the best way they know how.

Notable here is that the putative consumer is not really a market participant. As Obama recently told the AMA, "We (health care consumers) do what you tell us to do". Likewise, drug and device manufacturers show through their marketing who makes the choices, spending far more on swaying doctors (or telling patients to "ask their doctors") than on direct consumer marketing.

On the other side of the equation are insurers, who are trapped in a bizarre system of paying whatever doctors order, though slowly, reluctantly, and with a maximum of paperwork. Who wins? Obviously, the doctors win. Everyone wants the best care, and is willing to do what the doctors deem the best care, with "most" care often filling in for best if doctors are corrupt as well as lazy. Insurers can draw the line at useless treatments and outright fraud, but there is vast scope for plausible treatment up to that point, given the immense arsenal of modern medicine.

The implication for health care reform is that, if cost control and improved care are its goals, then doctor's (and insurer's) incentives need to be fundmentally changed. Creating new markets by which insurers get squeezed by customer/employer consortia, while also being further regulated to pay out all plausible claims and cover all claimants, will simply not address the problem. Reducing payment rates on a per-procedure basis, which is currently the typical method of cost containment, only motivates doctors to turn around faster- treat patients more rapidly, with less attention, and with more costly procedures. The problem is the piecework nature of medical reimbursement.

How can doctors be motivated to practice with patient outcome and cost as their true guides (in that order)? The article describes the success the Mayo clinic has had by paying doctors salaries and making promotions and raises dependent on teamwork and patient outcomes. This system is oriented towards teamwork and integrated care, counteracting the ever-increasing complexity of modern medicine. Teams are rewarded for their focus on patient well-being, and doctors can take the time needed to consult with each other and meet jointly with patients to coordinate care.

The amazing thing is that this system decreases overall cost, since doctors are not shooting at dart boards in hurried (and self-serving) attempts at diagnosis and treatment, but focus on each care situation with enough dilligence to make better diagnoses, thus achieving more efficient care. This dilligence includes reviews after the fact with colleagues, which is an essential part of medical school training, but then disappears for most doctors in practice today. Mistakes in diagnosis and treatment not only waste resources and time, but often complicate subsequent care and make the patient worse off, including, in some cases, killing them.

Switching to an integrated and re-incentivized system generally would not have much to do with who pays the bills- insurance could still be run by private insurers (constrained to pay on an HMO basis, perhaps) or a single payer system. The key part is to transform doctors from the atomized go-it-alone/treat-it-in-isolation private buccaneers of today into collaborative parts of an integrated system motivated to get each caregiving contact right rather than to make it pay.

Modern medicine, while amazing and definitively better than such alternatives as the old-fashioned shaman and "alternative medicine", still leaves very much to be desired. Understanding of many areas such as metabolic syndromes, mental illness, and cancer is still primitive, and treatments such as radiation, psychotropic drugs, and diet alterations are likewise a swamp of ignorance. Even when a great deal is known in an area of medical science, expecting individual practicing doctors to keep abreast of that knowledge is quite unrealistic.

Doctors are only human and face a medical literature of oceanic dimensions. Being in contact with colleagues for individual cases, while very helpful, will still not be enough. They will need computerized systems to assist with diagnosis and treatment, not only to put the medical literature at their fingertips, but also as expert systems that lead the diagnostic process to better outcomes, based on the constantly changing standards of care and advanced expertise.

Caveat Emptor Medicinae!

Incidental links:

• Typical case of bad diagnosis followed by hugely expensive treatment
• Tom Tomorrow wonders about health care
• Medical expert systems exist, but also have legal issues
• David Brooks, as usual, gets it half-right
• Our incurable superstition
• Excellent review of cap-and-trade