Gawande's article in last week's New Yorker examining why healthcare is so expensive in the U.S. drew eurekas from hosts of readers. The main culprit, Gawande's exhaustive look at one of the country's most expensive healthcare markets suggests, is paying doctors by the procedure and thus creating financial incentives for prescribing expensive treatments. Gawande's Exhibit A is McAllen, Texas, where Medicare spends twice as much per capita as it does down the road apiece in El Paso. The reason seems to be that doctors in McAllen infected one another with an "entrepreneurial spirit":
One afternoon in McAllen, I rode down McColl Road with Lester Dyke, the cardiac surgeon, and we passed a series of office plazas that seemed to be nothing but home-health agencies, imaging centers, and medical-equipment stores.
“Medicine has become a pig trough here,” he muttered.
Dyke is among the few vocal critics of what’s happened in McAllen. “We took a wrong turn when doctors stopped being doctors and became businessmen,” he said.
Gawande's Exhibit B is the Mayo Clinic, where those incentives have been neutralized:
The core tenet of the Mayo Clinic is “The needs of the patient come first”—not the convenience of the doctors, not their revenues. The doctors and nurses, and even the janitors, sat in meetings almost weekly, working on ideas to make the service and the care better, not to get more money out of patients. I asked Cortese how the Mayo Clinic made this possible.
“It’s not easy,” he said. But decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focussed first on what was best for patients, and then on how to make this financially possible.
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.
Now listen to Obama, addressing Senate Democrats working on healthcare reform (as excerpted by Jonathan Cohn):
I want to just make mention of something that I've talked to many of you privately about. I want to say this publicly. As we move forward on health care reform, it is not sufficient for us simply to add more people to Medicare or Medicaid to increase the rolls, to increase coverage in the absence of cost controls and reform. And let me repeat this principle: If we don't get control over costs, then it is going to be very difficult for us to expand coverage. These two things have to go hand in hand. Another way of putting it is we can't simply put more people into a broken system that doesn't work.
So we've got to reform the underlying system. And this means promoting best practices, not just the most expensive practices. And one of the things I'm going to be discussing with the health and the finance committees is how can we change incentive structures so that, for example, places like Mayo Clinic in Minnesota are able to provide some of the best health care services in the country at half or sometimes even less of the costs than some other areas where the quality is not as good. What we should be--and by the way, that's not just unique to Mayo. The Cleveland Clinic in Ohio, same thing: top-notch quality, lower costs.
Now, the Mayo Clinic's success is not exactly a secret, and Peter Orzag, Obama's budget director, is one of the country's foremost experts on healthcare costs. So maybe this exhortation didn't come straight out of Gawande. But it's hard to shake the impression that the article was in Obama's mind.
UPDATE: Peter Orzag, Obama's healthcare brain, has been all over the Gawande article.