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Increasing number of surgeries and medical procedures is driving healthcare costs at an unsustainable pace. Insurance companies try to limit use of surgeries and medical procedures by placing restrictions which hassle the patients and physicians. However, such measures have had limited impact and only serve to increase the administrative cost for the insurance companies as also the physician practices, which in turn further increase the cost of healthcare delivery. A root cause analysis could help identify the incentives that drive marginally indicated surgeries and procedures. Policy makers could then design appropriate measures to change incentives for physicians to help rectify this problem. This could not only result in large healthcare savings but also improve the quality of care by obviating the morbidity and mortality related to the marginally indicated surgeries and procedures. A 'Five Why' analysis was performed to get to the root of this problem.
Increasing number of procedures/surgeries and diagnostic tests are commonly blamed for the rising costs of healthcare in the US. The 'higher' usage of surgeries/procedures is also cited as an example of 'ever increasing physician greed' and extreme cases of this have been the basis of numerous media stories about the dysfunction in our healthcare. Potentially, a significant reduction in the unnecessary or marginally indicated procedures/surgeries could lead to a major reduction in the healthcare costs without compromising quality (it may actually raise quality of care). A root-cause analysis of what drives this physician behavior could help identify the underlying problems and rectify these to 'correct' this undesirable physician behavior. We used the Toyota method of asking 'Why' five times to get to the bottom of this problem.
There is a general perception that physicians are performing unnecessary or marginally indicated procedures and surgeries to increase their revenues. This results in a significant additional cost burden to our healthcare system and compromises the quality of care by inflicting unnecessary morbidity and mortality on the patients. Dissuading physicians from performing marginally indicated procedures and surgeries will obviate the associated morbidity and mortality (thereby improving overall healthcare) and go a long way in reducing healthcare costs.
The 1st Why
Why would physicians want to perform more procedures and surgeries?
Most policy-makers and payers (and some patients) are aware that physicians make most of their earnings from performing procedures/surgeries. The reimbursement for evaluating a patient in the physician's office (or in the hospital) ranges from 35 to 150 dollars. On the other hand, the same physician can make 250 to 1000 dollars performing a procedure or a surgery on this patient, in the same amount of time. As any rational individual would do, most physicians consciously or subconsciously are motivated to find an excuse to perform procedure or surgery on the patient. With this kind of financial incentive, it is not surprising that many patients are undergoing procedures and surgeries for weak and marginal indications.
The 2nd Why
Why and how do the physicians 'get away' with this fee structure that manipulates patients and the system?
Physicians 'charge' a low fee for evaluating a patient for a medical problem and 'charge' much more for performing procedures and surgery. Charging a ridiculously low fee to generate higher paying procedures and surgeries would be an example of a Low-balling technique. Such low-balling techniques are often used by unscrupulous businesses by offering a service at a ridiculously low price to lure a customer with the intent of then generating a much higher priced service(s) from that customer.
The question then arises: Why is this happening? How is it that talented, intelligent, well-intentioned young men and women who take up medical careers to help the sick and the needy are indulging in unscrupulous business practices immediately after completing their training? The answer lies in the way physician fees are set in our healthcare system. Unlike in other professions, physicians do not have the power to set their fees. It is set for them by CMS (Center for Medicare and Medicaid Services), a semi-government and quasi-political body. The fee structure set by CMS then serves as the basis for insurance companies to set their payments for physicians. Thus, even though the physicians might be guilty of 'exploiting' the fee structure to maximize their financial gains, the CMS is guilty of setting up this flawed fee schedule for physicians, which promotes overuse of surgeries and procedure.
The 3rd Why
Why and how did the CMS devise such faulty physician structure which creates perverse incentives?
What it the reason for such payment structure for physicians? Is the anomalous physician payment structure a result of chance or ignorance on the part of the policy makers or could there be secondary beneficiaries from the physician behavior that results from this kind of payment structure. Remember, most procedures and surgeries that the physicians are incentivized to perform to generate additional income for themselves are performed in the hospitals and/or involve use of medical equipment and medications. The total expense of performing this procedure/surgery and subsequent ensuing care commonly ranges from 2 to 50 fold (sometime much higher) more than the physician fee for that procedure. The financial windfall that results for the hospitals, the medical equipment suppliers and drug companies is much bigger than the modest amount of money that the physician gains from performing marginally indicated procedures and surgeries. Are hospitals, medical equipment makers and drug companies incidental beneficiaries of this good fortune? Wouldn't it be naïve to assume that the hospital administrations, suppliers of medical equipment and disposables and drug companies do not encourage the physicians to perform more and more procedures and surgeries?
The 4th Why
Why has the CMS not been able to do this simple assessment of incentives and cost calculations, and rationalize the physician fee structure? Why are they continuing to incentivize physicians to do these marginally indicated procedures?
CMS, a quasi-government agency that has been tasked with setting the physician fees, should not allow such obvious discrepancy in physician payments that encourages physician behavior that drives up our healthcare costs and worsens the quality of care. It is quite possible that such anomalous payment structure evolved over time without anybody realizing their implications. However, the biggest gainers of this payment structure, the hospital corporations, drug companies and suppliers of medical equipment have very deep pockets and considerable influence. They also have a strong incentive to keep this anomalous payment structure for physicians in place, since a major reduction in number of surgeries/procedures/therapeutic interventions would markedly reduce their revenues and profits. CMS being a semi-government and quasi-political organizations is not immune to powerful vested interests and lobbying. In fact, the way the fees schedule is set for various services provided by physicians is an intensely political process where the interests of the larger and more influential groups prevail.
The 5th Why
Why are the politicians, economists and policy makers who are interested in reforming healthcare not able to see through this obvious paradox and understand its significance? Why don't they try to solve this problem to 'reform' healthcare?
Reducing or eliminating the marginally indicated procedures, surgeries and diagnostic testing by making physicians “revenue neutral” between performing or not performing them will definitely lower healthcare costs dramatically without decreasing the quality of care (or in fact increasing its quality). In this day and age, when so much political capital is being spent on containing our healthcare costs and improving the quality of healthcare, rationalizing physician payments would deal with one of the root causes of ballooning healthcare costs and that too without inflicting any additional pain to the patients (this would not result in increased co-pays and/or restriction of benefits) or physicians.
However, accomplishing this would probably require the political will to take on the combined might of the hospital corporations, drug companies and medical device makers. Any step(s) that will reduce revenues for these all-powerful middlemen in healthcare will likely be strongly resisted by these 'players' with extremely deep pockets and very powerful political connections.
I would like to believe that the flawed physician fee structure that has created perverse incentive for physicians has developed inadvertently and nobody has had a chance to identify and rectify it. Even though the hospitals, and the drug and medical equipment companies benefit from overuse of surgeries/procedures, they do not actively promote it, and will not create roadblocks in its rectification of the physician incentives by rationalization of physician fee structure. The major push of the healthcare reforms has been to contain costs by reducing unnecessary and marginally indicated procedures and surgeries. ACOs and other payment models have been developed and are being tried for this purpose but have yielded inconsistent and very modest gains. Rationalizing the physician fee structure with the intent of removing the financial incentive to physicians for performing marginally indicated procedures and surgeries can potentially result in marked reduction in healthcare costs without decreasing physician's earnings and paradoxically an increase in the quality of care.
It leads us to another big question? What is the fair value of a physician's time? Is the society and the patients better-off discounting the value of intellectual input of the physician in evaluating and managing the patient's health problem? (And without performing procedures and surgeries) Currently, the time spent by a physician in history-taking and performing clinical exam is discounted to such an extent that physician time is reimbursed below the prevailing market prices of several blue-collared professionals. Is it unreasonable for physicians to expect the same hourly rate as other white collared professional counterparts, most of whom have had less years of schooling and training? By grossly underpaying physicians for their time when they use their intellect, knowledge and experience to solve a patient's health problem only discourages physicians to spend time doing this and rather focus on doing what pays better- surgeries and procedures. You could call the physicians greedy. To me, they are just following their incentives. Also please do always remember that the physicians have no say in setting these incentives.
The problem is persisting and growing only for want of politician(s) with sufficient courage and political capital, and a genuine desire to solve it.