Ten years after “The Cost Conundrum” – How much has changed?

May 3, 2019 / By Steve Delaronde

McAllen, Texas is a border town in the Rio Grande Valley with a metro population of 839,000. On May 25, 2009, Atul Gawande published The Cost Conundrum in which he described McAllen as one of the most expensive healthcare markets in the United States. Within 10 months after Gawande published this landmark article in The New Yorker, the Affordable Care Act was signed into law on March 23, 2010. How much has changed in the past 10 years?

Somewhere between 1992, when the average cost per Medicare enrollee in McAllen was the same as the national average, and 2006, when McAllen’s costs were twice the national average, something changed. Gawande concluded that the high cost of health care in McAllen was the result of a culture of over-utilization in a fee-for-service system among healthcare providers.

Compared to El Paso, Gawande discovered that Medicare patients in McAllen received 40 percent more surgeries and two to three times as many pacemakers, cardiac bypass operations, carotid endarterectomies and coronary stents. Per-capita spending on home-health services was five times higher than in El Paso.  Yet there was nothing to indicate that patients in McAllen were sicker or received more expensive services than Medicare recipients across the country—they just received more services.

Gawande revisited McAllen six years later when he published Overkill in 2015. He discovered that McAllen had changed. From 2009 to 2012, costs had decreased by an average of $3,000 per Medicare recipient and there had been a 10 percent reduction in hospital admissions, and a 40 percent reduction in spending for both home health services and ambulance rides. He acknowledged that changes in physician behavior had initially occurred due to increased scrutiny and the threat of more negative publicity and lawsuits. However, he credited primary care and the debut of the accountable care organization as the force that maintained this change.

Paying for quality and allowing physicians to share in the savings that are generated from better care makes sense. This is particularly true for the 30 percent of Medicare ACOs that are led by physicians. Primary care physicians account for a small percentage of healthcare costs but have tremendous influence on specialist referrals that lead to elective procedures, screening tests, diagnostic imaging and lab tests. These are the very services that are most likely to be unnecessary, and the ones that physician-led ACOs, like the top performing Palm Beach (FL) ACO, are able to reduce.

Financial incentives are not the only way to reduce unnecessary care. Most physicians are ethical and not intentionally prioritizing their purses over their patient’s well-being. In some cases, they are responding to pressure they receive from their own patients to provide a drug or medical procedure rather than rely on behavioral changes like diet, exercise or stress reduction. Gawande describes how one of his own patients insisted that he remove her thyroid when a 5-mm nodule was discovered, even though he felt the risks of surgery outweighed the benefit of watchful waiting.

The best way to reduce unnecessary care may be the promotion of a medical culture that is not only patient-focused, but also enables physicians and medical staff to work together as a team. In Gawande’s original article, he cites the Mayo Clinic as one of the highest-quality, lowest-cost healthcare systems in the country. Not only do physicians spend more time with their patients at the Mayo Clinic compared to other health systems, but they collaborate more with each other and work as a team. Patients feel prioritized and supported by the system.

Patient-centricity and teamwork are basic tenets at Mayo. Physicians are salaried and do not receive incentive payments for providing more services. According to Gawande, “No one there actually intends to do fewer expensive scans and procedures than is done elsewhere in the country. The aim is to raise quality and to help doctors and other staff members work as a team. But, almost by happenstance, the result has been lower costs.”

As the awareness of unnecessary services has increased through such initiatives as Choosing Wisely and other published research, there has also been a greater focus on healthcare prices, which is the primary contributor to healthcare spending in the United States. Recent movements such as Kaiser Health News Bill of the Month and renewed interest in public payment programs, such as Medicare-for-all, are positive signs. Ultimately, however, change may not truly be achieved until physicians and patients can work together in an environment that prioritizes health over revenue, and teamwork over individualism.

Steve Delaronde is director of consulting for populations and payment solutions at 3M Health Information Systems.