Spending Spree Atul Gawande wrote a recent article for the New Yorker in which he discusses the disparity of cost in various parts of the country.  He visits McAllen, TX, where the cost of care is nearly double that of the national average.  Initially it is not clear as to why the cost is so high, as the burden of disease, mix of payers, and number of specialists are not consistent with this town's cost of care.  But soon it becomes clear that the reason for increased cost: overuse of medical services.

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.

Why is this town so prone to overuse of services?  While he doesn't explicitly state it, he describes a culture among physicians in that town where overuse is encouraged.  The hospitals profit from it,  doctors thrive in it, and insurance companies continue to pay for it.  In short, they do more, charge more, and make more because they can.

In the heart of this culture are the physicians, who are the drivers of healthcare cost:

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.

My Temptation


So how should we react to this?  Do the doctors in this town have lower moral standards than the rest of us?  Does the air in this town somehow move physicians to be greedier than elsewhere?

This article reminded me of an experience I had in my own practice a few years ago.  Another group of physicians in the same building have x-ray equipment and, to diffuse their own cost, approached us with the offer to buy-in to own this equipment.  This would allow them to lower their overhead while giving us another avenue for income.

Having access to this equipment would let us order x-rays and look at them immediately.  Prior to this we had to send patients to a radiology facility where we would only get results after the x-ray was read by the radiologist.  This would take time and would inconvenience the patients.   It seemed the right thing to do, so we agreed to buy-in.

I saw the benefits of this right away, looking at films and making immediate decisions based on their results where previously the process would take several days.  I didn't change my ordering criteria; I just enjoyed the convenience.  My partners agreed that this was a nice arrangement for us and for our patients and we looked forward to seeing the revenue from this.

But that never happened.  When the end of the first month came around, our volume was not enough to keep up with our side of the overhead.  The other physicians who were used to access would order chest x-rays at least twice as often as we would.  But we weren't used to this access and so had adopted a much more conservative approach to ordering tests.  The end result was that we didn't order many x-rays.

This put us in a quandry.  Do we become profitable by ordering tests that we had previously thought weren't necessary?  We could "justify" these tests enough to get insurance to pay for them.  The cost wouldn't be increased significantly for our patients either, as we would order tests that would be covered by insurance.  Nobody would be hurt, right?

I am fortunate to work with physicians who have similar values to me.  I really didn't feel right ordering what I thought were unnecessary tests simply to make money, and neither did my partners.  As tempting as it was to seize an opportunity like this, we had practiced without it long enough that we couldn't justify this to ourselves.  So we backed out of the deal with the other practice in our building.

Camrys or Ramblers?

Any profitable test or procedure puts us in the same dillemma.  Since I am a primary care physician, I don't have to deal with this decision much.  Procedural specialists, on the other hand, are forced to decide between prudence and profit on a regular basis.  It is at the heart of our pay-for-procedure payment system.  The more cardiac catheterizations a cardiologist does, the more money they make.  This must cloud their judgement.  If they have 10% of my self-advancement instinct, they struggle with this greatly.  Fortunately, I am not faced with this very often.

Gawande points out that the higher consuming markets (like McAllen) do not have proportionately higher quality of care; in fact the relationship is inverse, with higher quality care happening in markets that spend less.  He goes on:

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.

All of us physicians are faced with that choice at some time: do good business or do good medicine.  Why must this be a choice?  Do we reward car manufacturers for making bad cars?  Well...yes, and look what it got us.  Do we want our healthcare system to produce Camrys or Ramblers?


Any reform must address this.  It's not unique to private payers, in fact the low pay from Medicare makes docs more dogged in their search for more dollars.  Socializing medicine won't do a thing to fix this problem.

How do we fix it?  There are lots of good answers, and lots of dumb ones as well.  The bottom line is the bottom line, though.  How you pay docs will determine what happens.  It's America, after all.  It's what makes us great.  Right?

Yeah.  Just like Ramblers did.