Medical economist J.D. Kleinke makes a revealing comparison between casinos and hospitals. Suppose you go to Las Vegas and after winning a few bets get hooked. When you start losing, you find yourself going to the cage and converting all the money in your wallet into chips. Next you max out your credit cards. Later that night, with Lady Luck still flirting but denying you the big score, you convert your checking and savings accounts into still more chips. When these are gone twenty-four hours later, the casino happily lends you another $25,000 worth of chips, which represents 40 percent of your retirement account and 30 percent of the equity in your home. Then, sipping on yet another free scotch, you make one big last bet at the craps table and are suddenly struck by a massive heart attack.
An ambulance rushes you to the nearest hospital. What’s different about your new location? For one, you’ve gone from an institution that knows lots about you and your past to one that knows practically, or maybe even literally, nothing. The casino, before it processed your credit cards or lent you money, used advanced but routine information technology to discover details about your life, such as your current employer, whether you’ve been caught at or suspected of cheating in another casino, your bank account balances, whether there are liens on your house, and whether your life insurance is paid up. All it needed to retrieve these details was your name, Social Security number, and a modest investment in information technology.
But the hospital you arrive at clutching your chest has no ability to retrieve the information about your past that it needs to do its job—unless, of course, it happens to be a veterans hospital. Sure, a clerk can check out your insurance status by telephone, assuming you’re conscious or remembered to carry your insurance card. A clerk can maybe even find out if you’ve met your deductible, assuming the insurance company’s computers are “up.” But outside the VA, only a handful of hospitals has made the investment necessary to retrieve electronically, even from its own records, the name of your primary care physician, for example, or what medications you’re on, your history of allergic reactions to various drugs, or even the name of your next of kin. Nor can most health-care providers even communicate internally without relying on hand-delivered, handwritten notes, so that when an emergency room doctor scribbles out a prescription for beta-blockers, you wind up getting, well, who knows what?
Casinos invest in information technology because it helps them with the business they’re in, which is encouraging impulsive gambling. Similarly, banks have found a business case for creating a highly integrated and sophisticated network of ATMs, to the point that you can draw cash from your account across the country and around the world. Yet hospitals make no equivalent investment in information technology to help them with the business they are presumably in, which most people would say is restoring people to health. Instead, American hospitals routinely endanger their customers and kill hundreds of thousands of them by clinging to nineteenth-century information technology. The question is why?
Kleinke has an answer that is as rude as it is true. It has nothing to do with technological feasibility. As far back as the 1970s, as we’ve seen, amateur programmers working on VA word processors were banging out the code for the VA’s proven health-care information management system. Instead, Kleinke argues, the answer has to do with health care’s dirtiest of many dirty secrets: “Bad quality is good for business. And the surest road to bad quality is bad or no information.”1
If this strikes you as too harsh, take a breath and consider. With the exception of the VA, what do most health-care providers get paid to do? Provide health? Hardly. They get paid to provide treatments, and there’s a big difference. This is not to suggest that most doctors are simply profit maximizers or indifferent to your health. Many in all walks of medicine are profoundly idealistic and believe in providing the highest-quality medicine possible. But given the system under which they operate, there is only so much idealism they can afford.
That’s because, according to Lawrence P. Casalino, professor of public health at Weill Cornell Medical College, “The U.S. medical market as presently constituted simply does not provide a strong business case for quality.”2
Casalino speaks from his own past experience as a solo practitioner and on the basis of over 800 interviews he has since conducted with health-care leaders and corporate health-care purchasers. While practicing medicine in Half Moon Bay, California, Casalino had an idealistic commitment to following emerging best practices in medicine. That meant spending lots of time educating patients about their diseases, arranging for careful monitoring and follow-up care, and trying to keep track of which prescriptions and procedures various specialists might be ordering.
Yet Casalino quickly found out that his commitment to quality wasn’t sustainable, given the rules under which he was operating. Nobody paid him for the extra time he was spending with his patients. He might have eased his burden by hiring a nurse to assist with all the routine patient education and follow-up care that was keeping him at the office too late. Or he might have teamed up with other providers in the area and invested in computer technology that would have allowed them to offer the same coordination of care found in veterans hospitals and clinics today. Both steps would have improved patient safety and added to the quality of care he was providing. But even had he managed to pull them off, he stood virtually no chance of seeing any financial return on such investments. As a private-practice physician, he got paid for treating patients, not for keeping them well or helping them to recover faster.
The same problem exists across all health-care markets, and it’s a major factor in explaining why the VA has a quality performance record that exceeds that of private-sector providers. For example, suppose a privately managed care plan follows the VA example and invests in a computer program to identify diabetics and keep track of whether they are getting appropriate follow-up care. The costs are all up front, but the benefits may require twenty years to materialize. And by then, unlike in the VHA system, the patient will likely have moved on to some new health-care plan. As the chief financial officer of one health-care provider told Casalino: “Why should I spend our money to save money for our competitors?”
Or suppose an HMO takes a more idealistic attitude and decides to invest in improving the quality of its diabetic care anyway. Not only will it risk seeing the return on that investment go to a competitor, but it will also face another danger. What happens if word gets out that this HMO is the best place to go if you have diabetes? Then more and more costly diabetic patients will enroll there, requiring more premium increases, while its competitors enjoy a comparatively large supply of low-cost, healthy patients. That’s why, Casalino says, you never see a billboard with an HMO advertising how good it is at treating one disease or another. Instead, HMO advertisements generally show only healthy families.
Indeed, any health-care provider in the private sector that holds itself out as providing high-quality care for chronic conditions risks financial ruin. That’s a lesson Beth Israel Medical Center in Manhattan learned after it opened a new diabetic center in March 1999. To publicize the new venture, Beth Israel convinced a former Miss America, Nicole Johnson Baker, herself a diabetic, to pose for promotional pictures wearing her insulin pump. She also posed next to a man dressed as a giant foot, a dark reminder of how poorly managed diabetes often leads to amputation.
To avoid amputation and other dire outcomes, such as blindness and renal failure, the new center adopted a model of diabetic care that rivaled the VA’s in its quality. Highly coordinated teams taught patients how to check their blood sugar levels, count calories, and find the discipline to exercise, all while undergoing prolonged and careful monitoring. Within months, the center succeeded in getting the blood sugar levels of 60 percent of its patients under control—a stunning result that brought it national attention.
But the idealists who conceived this program forgot the business they were in. Health insurers would pay only piddling amounts to cover the cost of a diabetic patient seeing a podiatrist, for example, though such care is essential to reducing the risk of amputation. And insurers would pay even less for nutrition counseling, much less exercise classes. At the same time, as word of the center’s excellence in diabetic care spread, patient volume increased by 20 percent a month. Soon the center was running a large deficit, and Beth Israel administrators felt compelled to shut it down. Between 1999 and 2006, three similar centers in New York folded based on the same model of care, and for the same reason. Quality doesn’t pay.3
It’s a similar story when it comes to the management of other major chronic conditions. For example, in 1995, Duke Medical Center had the bright idea of offering an integrated, supportive program for patients with congestive heart failure. Nurses regularly called patients at home to monitor their well-being and to make sure they took their medications. Nutritionists offered heart-friendly diets. Doctors shared data about their patients and developed evidence for what treatments and dosages had the best results. And it worked—at least in the sense that patients became healthier. The number of hospital admissions declined, and patients spent less time in the hospital. The only problem? By 2000, the hospital was taking a 37 percent hit in its revenue due to the decline in admissions and the absence of complications.4 Ten hospitals in Utah had a similar experience after implementing integrated care for pneumonia.5
Another example is Intermountain Healthcare, a network of hospitals and clinics in Utah and Idaho that many experts have described as a model for health reform. Intermountain is inspiring. Founded by the Church of Latter Day Saints, though now operating independently, it maintains a highly idealistic culture that is focused on measurement and a commitment to evidence-based medicine. Its CEO once explained to me that because of its large market share and comparative lack of churning in its patient base Intermountain has the same incentives the VA does to invest in effective disease management. This is no doubt true to a degree, but Intermountain still winds up being punished for doing the right thing. For example, when it developed a better protocol for taking care of premature babies, it managed to reduce the use of ventilators by more than 75 percent. Yet this triumph cost Intermountain $329,000 in foregone revenue it had previously been making off inferior care.6
In many other realms of health care outside the VA, no investment in quality goes unpunished. Another telling example comes from rural Whatcom County in Washington State. There, idealistic health-care providers banded together to form a creative “Pursuing Perfection” initiative designed to bring down rates of heart disease and diabetes. Following best practices from around the country, they organized multidisciplinary care teams to provide patients with counseling, education, and navigation through the health-care system. They developed disease protocols derived from evidence-based medicine. They used information technology to allow specialists to share medical records and to support disease management.7
But a problem arose: it created many winners but also threatened powerful interests in the local medical establishment. The initiative greatly improved public health. It also brought much more business to local pharmacies because more people were prescribed medications to manage their chronic conditions. It also saved Medicare lots of money. But because it improved the quality of health care, it reduced the revenues of the local hospital and of the county’s medical specialists.8 One group of sixty doctors at the Madrona Medical Group of Bellingham took part in the planning but chose not to participate in the program when they realized how much the project would cost them. “We were seduced by the concept,” Erick Laine, Madrona’s chief executive, told the New York Times, “but it doesn’t work.” An idealistic commitment to best practices in medicine doesn’t pay the bills.9
For American health-care providers outside the VA system, improving quality, more often than not, makes no financial sense. Yes, a hospital may have a business case for purchasing the latest, most expensive imaging devices. The machines will help attract lots of highly credentialed doctors who will bring lots of patients with them. The machines will also induce lots of new demand for hospital services by picking up all sorts of so-called pseudo diseases. These are obscure, symptomless conditions, like tiny, slow-growing cancers, that patients would otherwise never have become aware of because they would have died of something else long before. If you’re a fee-for-service health-care provider, investing in technology that leads to more treatment of pseudo diseases is a financial no-brainer.
But investing in any technology that ultimately serves to reduce hospital admissions, like an electronic medical record system that enables more effective disease management, is likely to take money straight from the bottom line, however much benefit it might bring to your patients and to society. Because of its fragmented, profit-driven system, the United States now lags at least a dozen years behind other advanced industrialized countries in its application of information technology to health care. In France today, every citizen over fifteen carries a Carte Vitale, a green plastic card with a small gold memory chip that contains in encrypted form the owner’s complete medical records going back to 1998, including doctor visits, prescriptions, and a complete billing history. Germans carry encrypted smart cards, which allow authorized health professionals to retrieve their complete medical histories wherever in Germany they may happen to fall ill.10
The big exception to the generally laggard performance in U.S. health information technology (IT) is the VA’s VistA program. It’s been installed in only a handful of American hospitals outside the VA, such as Midland Memorial Hospital in Texas and the public clinics of West Virginia. But it has been widely adopted by health-care systems abroad, where profit maximization isn’t an issue, including the public-health systems in Finland, Germany, Egypt, Nigeria, Mexico, India, Pakistan, and Uganda.11 Dr. Ian Reinecke, the man in charge of Australia’s program to bring electronic medical records to every citizen, has recruited VA officials to aid in the effort, explaining to his countrymen: “the U.S. Veterans Health Administration is regarded as one of the best and most successful e-health systems in the world.”12
You might wonder why market forces don’t drive the rest of the U.S. health-care system to keep up with the rest of the world in the use of information technology. How is it that people in Uganda, Pakistan, and Mexico enjoy the benefits of VistA, but most Americans are stuck with doctors who use nineteenth-century information technology? Aren’t Americans who buy health care concerned about its quality? If Honda can win over customers and make money by selling quality automobiles, why doesn’t some other company come along that does the same for health care?
It’s not as if American consumers demand low-quality, dangerous, overpriced health care. If health care were like most other markets, a Honda of health care might well emerge in the private sector. But purchasers of health care usually don’t know and often don’t care much about its quality, so private health-care providers can’t increase their incomes by offering it.
To begin with, most Americans don’t buy their own health care; their employers do. How did this arrangement come about? It’s not because most employers have, or have ever had, much financial interest in the long-term health of their employees or even much stake in their short-term health—unless it involves an on-the-job injury for which they might ultimately have to pay.
Before government created workers’ compensation, most employers invested little or nothing in their workers’ safety, much less their long-term health. In 1907 alone, various explosions and accidents killed 3,242 American coal miners, while 4,534 railroad workers also lost their lives to workplace accidents. In 1911, when New York’s Triangle Shirtwaist Factory caught fire, 146 immigrant workers perished because the owners kept the doors locked to prevent pilferage. It wasn’t until progressives ranging from Teddy Roosevelt to Mother Jones at last won the fight for workers’ compensation that anything like a safety-first culture began to emerge in American industry.13
So it is quite an irony of history that Americans ever entrusted their health or their health-care system to the control of their employers, but that’s what happened without anyone giving it much thought. America’s employer-based health-insurance system came about during World War II when the federal government imposed wage and price controls on the economy. To get around these wage and price controls, some companies started offering workers health insurance in lieu of raises.
Soon, the group health insurance business was flourishing. It managed to entrench itself further by winning generous tax subsidies, whose value increased as the burden of taxation borne by the rest of the economy grew. Even with these subsidies, however, it took a strong, and often militant, labor movement, and deep fear of Communism and “socialized medicine,” to convince corporate America that it had better take responsibility for providing workers with health insurance. Today, as the labor movement fades in strength, fewer and fewer employers see any need to provide any health insurance at all, much less take an interest in whether that insurance actually buys high-quality medicine. Only 69 percent of firms without union workers today even offer health insurance.14
Worse, even among the dwindling number offering health insurance, few pay any attention to the quality of care their workers receive. This is true even when the price of that care becomes a major threat to the bottom line. Why?
Consider this example. Recently, I was brought in as a consultant to an old-line Fortune 500 company that is facing ruinous health-care costs. The very survival of the company is at stake. The company’s human relations officials, who are responsible for securing its health-care contracts, were even more alarmed and outraged when I pointed out, using publicly available data, the wide disparities in practice patterns, outcomes, and costs per patient among the different hospitals with which the company does business across the country.
This preeminent manufacturing company would never stand still to see its other suppliers, such as those from whom it buys microchips or steel, deliver products of such uneven quality, cost, and safety. So why wasn’t it jawboning its health-care suppliers, I asked?
Because, it was explained to me, the human relations department lacks much power within the company, and even if it had more, nobody there really has any idea how to contract for better quality health care. Not only do those in the department lack medical expertise and any real leverage over the hospitals with which they work, but insisting on higher quality would just be too upsetting to the normal ways of doing business. Typifying the company’s relationship with its health-care providers, it turned out the head of one its major business units is on the board of a particularly expensive hospital that dominates its local market and routinely dictates prices to the company.
As consolidation among health-care providers continues to mount in many markets, even big employers are discovering that they really have very little leverage to negotiate for better health-care quality for their workers. Better just to cozy up to the local hospital by, for example, serving on its board and hope that this is taken for an act of community mindedness.
This problem of health-care monopoly power is getting worse fast. According to Patricia M. Wagner of Epstein Becker Green, one of the nation’s largest health-care law firms, “50 percent to 60 percent of physicians and hospitals are exploring ways” to merge.15 Though often done in the name of coordinating care and realizing economies of scale, the real motives are often simply to stifle competition and thereby dictate prices. Internal documents revealed by recent court action show, for example, that the recent merger of Toledo’s two major hospitals was motivated by a desire to “stick it to employers, that is, to continue forcing high rates on employers and insurance companies.”16
Unable to stand up to monopolistic hospitals, many employers are instead taking the problem of runaway health-care cost out on their own employees. They are doing this by raising their workers’ share of premium costs, for example, and often all the more so if a worker engages in selected bad habits or has a certain body size. At some companies, such as ScottsMiracle-Gro, it is now a firing offense if you test positive on a nicotine urine test. Others engage in active discrimination based on an employee’s body mass index.17 Libertarians who fear that the coming of “socialized medicine” will lead to a “nanny state” should consider this other ongoing scenario.
We all should consider, too, why so few companies have wellness programs, as opposed to policies that discriminate against workers on the basis of lifestyle. It turns out that when employers do hard-nosed cost/benefit analyses of wellness programs, most cannot build a business case for investing in their workers’ health.
Spending $500 to help a worker quit smoking, for example, may (but often won’t) succeed in getting the worker to kick the habit. And even if it does, the payoff for such an intervention is uncertain. It may (or may not) cause the worker to avoid some day getting lung cancer or heart disease, because that worker may well first die of something else, such as a car accident or disease unrelated to smoking. And at least some smokers remain healthy to a ripe old age.
Moreover, any cost/benefit analysis of a smoking cessation program has to take into account that even if the intervention does prevent a future diagnosis of lung cancer or heart disease, the associated savings are not likely to be realized for years if not decades into the future. And by that time the ex-smoker will likely to have moved on to another employer, which means the return from the investment goes to another firm. Or consider that the ex-smoker may well live to retirement age; if he happens to have a company pension, the extra years of life he enjoys as an ex-smoker will cost the company money.
Though many consultants try to make a living by pushing wellness programs on to corporations, they have to hope that the bean counters are not too shrewd about medical economics. Hundreds of studies have shown that, even for the population as whole, let alone individual companies, prevention usually adds to medical costs instead of reducing them. As a recent survey of the literature published in Health Affairs summarizes, “medications for hypertension and elevated cholesterol, diet and exercise to prevent diabetes, and screening and early treatment for cancer all add more to medical costs than they save.”18
How is that possible? It’s easy to forget that the many people who are prescribed, say, statins to control their modestly high cholesterol levels, would run only a small risk of developing heart disease even if they never took the medication, and that moreover they do not eliminate the risk by taking their pills. Similarly, it is easy to forget that such people in any event run a not inconsiderable risk of dying of something else first that is unrelated to their cholesterol levels. Indeed, even those who avoid a heart attack by taking statins become for that very reason more likely to live long enough to contract cancer or Alzheimer’s, along with other costly chronic conditions of aging.
Even for an institution like the VA, with its near lifelong relationship with its patients and liability for the cost of their long-term chronic conditions, the dollar and cents return on many forms of prevention is still not always positive. This fiscal reality underscores the importance of the VA’s being a mission-driven organization that is not responsible for generating profits. And it underscores how important it is that the VA does not waste resources engaging in overtreatment. A long and healthy life will always be among the highest ends of human existence, and the VA model provides a sustainable means of achieving that end.
But for employers, with their limited scope of interest in their employees’ long-term health, there is nothing even approximating a strong business case for investing in quality medicine or prevention. Otherwise, all companies would long ago have started wellness programs and banded together to compel health-care providers to offer more preventive services and effective disease management.
Thus, those who argue that pressure from employers will one day force health-care providers to compete—for value— are deluded. They cannot explain why employers have not long since done so, or even if they could, given the increasing tendency toward monopolization among health-care providers. It’s a happy thought that healthy workers make for more productive workers. But the reality is that most people who meet a payroll don’t think that goal is worth the cost and effort of intervening to keep their workers well, and from their limited point of view, they are right.
You might also ask about employees themselves. Don’t they care about the quality of their health care? Well, of course we do. But we either don’t trust, or more often don’t have, the information we need to determine, say, which hospital is safer than another, much less which individual doctor is more likely to perform unnecessary surgeries.
Most of us certainly know how to compare the nominal costs of different health-care plans. And we can see to what extent these plans limit access to various specialists. But there is little we can tell about the quality of care those specialists and other doctors might provide, especially before that care is actually delivered, and often even afterward.
To take my own example, not long ago I was once again forced to find a new primary care physician. Like many Americans, I’ve had to do this many times before, sometimes because I moved, sometimes because I changed jobs, and oftentimes because my employer switched health-care insurers in an effort to save money. So what did I wind up doing this time?
I make my living as a “knowledge worker.” And I’m certainly no innocent when it comes to using government databases, NexisLexis, or the Internet. But none of those could provide me with anywhere near enough information to make a rational decision about which particular doctor might be better than another.
With a good deal of time, money, and know-how, you can usually figure out if a doctor has been sued for malpractice or convicted of some crime. You can also tell whether a doctor is licensed and board certified. A very few insurance companies, as well as the Centers for Medicare and Medicaid Services, also allow their computer-savvy customers to glean some data on what doctors and hospitals actually charge for different procedures. You can also find much better information these days than in the recent past on how hospitals compare in their rates of infection, patient satisfaction, and certain outcome measures, such as their death rate for heart attack patients.19 But as for any substantive indicator of any particular doctor’s quality and performance, it’s pretty much a shot in the dark. Even if a doctor has admitting privileges in a hospital that generally ranks high in quality measures, that tells you nothing about how well or poorly he or she will look after you, much less coordinate with all the other providers who will be involved with your care while you are in that hospital.
I’m somewhat embarrassed to admit that the best strategy I could come up with in choosing a new doctor was to limit my search to those who were in group practices within ten miles of my house, graduates of medical schools I had heard of, and had Web sites. This last criterion may seem silly, but I hoped it would stand as an indicator of those comfortable enough with information technology to be likely to use electronic medical records.
My strategy worked, sort of. The one time I saw my doctor, he did come into the examining room with a laptop and was personable enough. He was even more or less on time. But the new commercial software he and his practice were trying to master allowed him to write me a prescription for blood pressure medication without indicating the dosage, much to my pharmacist’s bewilderment and my own consternation.
More recently, I found myself once again in the market for a primary care physician, this time because the insurance company my employer picked out for me decided it was time to drop my previous doctor and his whole group practice from its network. As of early 2010, there was only one primary care physician in the entire Washington metro area who was both in my new insurance network and listed as taking new patients. He turned out to be a sole practitioner and did not return my phone calls. Because primary care physicians don’t have many opportunities to overtreat patients with unnecessary surgery and expensive scans, and because they are not well compensated by insurers, there is a shortage of them and an excess of specialists.
And so we wind up making choices in health care based on whether a doctor is in the “preferred provider network” and is taking new patients. Or maybe your best friend recommended someone. Or perhaps you selected a doctor who agrees with your diagnosis and refills the Ambien prescriptions you want. We use criteria such as liking a doctor’s bedside manner or the fact that all the rich people in town go to this hospital. According to a recent survey, Americans spend twice as much time researching a car or computer purchase as they do selecting a doctor, which is not surprising given the scarcity of useful information about any provider.20 Those of us who are truly diligent might consult rankings of different hospitals such as those published by U.S. News & World Report—as Robin and I did when we needed to decide on a cancer clinic—or consult similar Web sites. But such surveys rely primarily on surveys of reputation—that is, on word of mouth—and give little weight to objective, statistical measures of quality. If they did, as we’ll see in the next chapter, most of today’s highest-ranking hospitals would be revealed as among the nation’s most dangerous and ineffective.
Not knowing how to judge the quality of care that doctors provide, we place inordinate value on our ability to switch doctors. If one disappoints us for whatever reason, we can move on to another. “Choice of doctor” has become in most Americans’ minds the single greatest measure of the quality of any health-care plan—a sad irony indeed since the poor quality and fragmentation of the U.S. health-care system are ultimately both causes and consequences of our insistence on choice above all else.
And thus we see results like what happened in Cleveland during the 1990s. There, a well-publicized initiative sponsored by local businesses, hospitals, and physicians identified several hospitals as having significantly higher-than-expected mortality rates, longer periods in the hospital, and worse patient satisfaction. Yet not one of these hospitals ever lost a contract because of its poor performance.21 To the employers buying health care in the community, and presumably to their employees as well, cost and choice counted for more than quality and safety. Unfortunately, as we’ll see in the next chapter, the cost of this market failure in money, injury, and death can only rise as American medicine adopts more and more expensive, complicated, and often ineffective or dangerous technologies.