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Flatlined
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Flatlined
Resuscitating American Medicine
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CONTENTS
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Preface
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Acknowledgments
xvii
PART ONE
10
An Eroding Infrastructure
16
25
35
PART TWO
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57
67
Dangerous Hospitals
77
10
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11
Unnecessary Surgery
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12
120
13
139
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CO N T E N TS
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PART THREE
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17
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18
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Establishing Standards
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20
232
21
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22
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Notes
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Index
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Figure 3.1
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7.1
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8.1
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9.1
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9.2
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11.1
Cross-sections of spine
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11.2
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12.1
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Table 12.1
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16.1
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PREFACE
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accounted for 23 percent of the federal budget and are on track to consume one-third of it by 2018. At any given time, 47 million Americans are
without coverage or access to standard medical care, but that gure
understates the problem. More than one-third of the non-elderly
population82 million peoplehas either insufcient, unstable, or no
health insurance coverage. As a percent of wages, business spending on
health care is at an all-time high; and small businesses are dropping coverage because they have been priced out. Health care costs are growing at
twice the rate of the economy; meanwhile, American businesses face
relentless global competition from companies that do not bear such costs.
The overall budget for health care is already exorbitant. But at least
30 percent (about 700 billion dollars) of all delivered health care services
are unnecessary for treating illness or ensuring wellness. Many procedures are also harmful. There is no just reason for a country as wealthy as
ours to be delivering and consuming large quantities of wasted medical
services when so many of its citizens have insufcient or unstable access
to standard medical care. There is no excuse for disenfranchising so many
people from medical services when they could be covered by the simple
creation of a more efcient system. Full-access coverage and the reform of
medical practice to reduce waste would also improve the quality of medical care. Too many people are victims, both the insured who get excessive
or poor-quality medicine and the uninsured who get too little care, too
late. Medical waste is a moral issue: it is the wrong use of money, and it
hurts innocent people.
When I began considering the best manner of paying for and providing health care in the United States, I did not begin with any biases. I have
visited Canadian hospitals, and I know many Canadian doctors. I have a
good opinion of that countrys health care system, which is managed
through the government as the single payer. But the United States, with
more than 300 million people, is not Canada, whose population is only
about 34 million; moreover, their cultures are different. After spending a
year in a Senate ofce watching the inner workings of Medicare payment
policy, I cannot support a single-payer system. In the short run such a
plan would reduce the considerable health care administrative waste, but
in the long run there is no doubt that it would bankrupt the United States
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Every American should have access to adequate and affordable health insurance regardless of their health or job
status.
Doctors and hospitals should be paid based on the quality not the quantity of care they deliver and the savings
from efcient practice shared with them.
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The United States pays at least two times more per unit of health care
services than any other country in the world. Why shouldnt the nation
develop the rst high-performance health care system in the world since it
is already paying for one? Before assuming that these proposals are too radical, too drastic a shift, consider the nancial industry itself as a model for
balanced regulation. Reforming U.S. medicine is like turning a giant aircraft carrier; compare it to the process of banking reform begun after the
Depression. It will take time; and if we do not start now, we may be too late.
When the Federal Reserve System was established in 1913, it was
designed as a quasi-public institution with both private and government
arms of oversight and management. Its functions have changed over the
years but always with a single purpose: maintaining a stable nancial system. I propose a similar model for health care, the creation of an
American Medical Quality System responsible for providing the information necessary to reduce waste and improve the quality of U.S. medicine
in each area of the country. The objective is to reduce the cost of health
care so that it is affordable for individuals, families, and the national
economy. Cutting the waste in health care will also free up money that
can be used for coverage of the uninsured.
The only obstruction to reforming American medicine is lack of political will, but both raw statistics and unnecessary individual tragedies justify
change. My hope is that Flatlined will contribute to public understanding
and ownership of our nations health care problems. My only goals are
accountability and justice. Americans want change, but we must rise to the
challenge because our problems do not belong to someone else. We all
must be willing to accept responsibility. With clear direction and sufcient
political will, more than enough wasted money can be extracted from U.S.
health care to cover all the uninsured, improve everyones quality of care,
and permanently reduce the cost of American medicine.
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ACKNOWLEDGMENTS
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AC K N OW LE D G M E N TS
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AC K N OW LE D G M E N TS
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information. Jerry Gross, who usually edits novels, helped organize the
cadence and transitions for the lay reader. My colleague, Dr. Len Nichols,
a leading health economist and policy analyst at the New America
Foundation, critiqued the policy sections, offering invaluable advice.
I owe the title Flatlined to Lawrence Wright, who won the 2007 Pulitzer
Prize for A Looming Tower. My son Dr. Guy Travis Clifton rened medical
aspects of the work. My editor at Rutgers University Press, Doreen
Valentine, was the rst enthusiastic supporter of this project in the publishing world and provided insightful advice on organization and skillfully
edited the nal drafts of the book. This book had many midwives, and
I am grateful to all of them.
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PART ONE
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Not Business As Usual
One hot Saturday afternoon in the summer of 1999 I was on neurosurgery call at Memorial Hermann Hospital in Houston, Texas, one of the
largest trauma centers in the United States. Houston is the fourth-largest
city in the country, and its metropolitan area is home to 5 million people.
The page operator connected me with an emergency room doctor in the
little town of Lake Jackson, fty miles south of Houston, and we began a
routine conversation for a busy on-call weekend.
Dr. Clifton, I have a forty-year-old woman who has a brain hemorrhage. The car she was driving struck a tree. She is unconscious but moving everything. Can I send her to you?
Well send the helicopter to get her, I responded. Is she intubated? Intubation is a procedure in which a tube is put into the airway to
control breathing and is standard practice in an unconscious patient.
Yes, I intubated her and gave her mannitol as well. Mannitol is a
sugar solution that extracts water from the brain and decreases brain
pressure for a little while until surgery can be performed to evacuate the
blood clot. The doctor in Lake Jackson was competent.
Hospital conversations between two doctors about a transfer are
always recorded and silently monitored by a nurse in the transfer center.
The recorded conversation provides proof of compliance with federal law
that governs the transfer of patients between hospitals. Dr. Clifton, the
transfer center broke in, We do not have any ICU [intensive care unit]
beds. We are on diversion.
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These were not words I had heard before, and my instant response
was a question: What do you mean we dont have any ICU beds?
Dr. Clifton, we are full.
After a moments thought I said, Let me go through the unit; I am
sure I can move someone out. . . . Doc, I will call you back.
The term diversion is used when a hospitals emergency room turns
away ambulances because either the ER or the hospital is full and cannot
accept any more patients. But at that time, it was a new word to me.
Memorial Hermann Hospitals neuroscience ICU has twenty-eight beds
and is one of the largest of its sort in the country. The hospital has always
cared for the regions worst neurosurgical emergenciesany time, every
dayying them over the citys clogged streets by helicopter. The hospitals
ICU is the citys core resource for emergencies of the brain and spine.
The charge nurse and I walked past one patient after another
ventilators pumping, heads wrapped, oxygen hissing, tubes projecting
from natural body openings and from openings we had made.
Can this one be moved to the regular ward?
No, Dr. Cliftontoo unstable.
What about this one?
No, she just had surgery.
In every bed lay patients too sick to move. I had been chief of the neurosurgery service at Memorial Hermann Hospital for ten years, and this
was the rst time I had ever turned down a patient for lack of a bed.
I thought the situation was strange.
I redialed the doctor in Lake Jackson. Doctor, I went through our
ICU, and I cant move anyone. I dont have anyplace to put the patient.
Through the phone I could feel his anger. Dr. Clifton, I have been
turned down by three other hospitals. I cannot nd a bed. What am I
going to do? This lady needs surgery and she needs it soon!
I gave him the name of two large nearby hospitals with neurosurgeons and said, I am sure they will help.
He curtly responded, Okay, I hope she lasts.
Several weeks later I was talking to Dr. Greg Bonnen, a neurosurgeon
who practiced at the University of Texas Medical Branch in Galveston
(UTMB) near Lake Jackson. Greg, I asked, Is UTMB turning away
transfers?
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* Herniation takes place when a blood clot in the brain causes so much pressure within
the skull that it steadily squeezes a small but critical part of the brain, called the brainstem, down through a hole in the base of the skull. Both Greg and I understood that if
the patient had been operated on to remove the blood clot within two hours after the
accident, she would likely have returned home to care for her children.
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We knew that the majority of our patients would die or be severely disabled and that our treatments were not very effective and often painful.
At the time we could not change those outcomes. Patients arrived in
dizzying numbers, some of whom had invited disaster by drinking and
speeding, others of them innocents selected by fate. Our best encouragement was that sometimes a patient we all thought would do badly woke
up in a few days and went home. Thirty years later, I still remember the
faces of such patients.
Until 1976 there was no computerized axial tomographic (CT) scan to
determine who needed surgery. In the hospital where I trained, a neurosurgeon determined if a patient had a mass in her head by rushing her
into a dark little X-ray room with a heavy metal table in its center, its
chipped paint a sign of heavy use. The patient was hastily laid on the table
and covered with a sheet. Then the neurosurgeon would loudly instruct
the confused patient not to move while he (at that time neurosurgeons
were almost always male) plunged a large needle through her neck into
an artery. An accurate penetration produced a two-foot stream of squirting blood. I practiced this and became expert at impaling the artery with
only one or two quick thrusts. Dye was then injected into the needle by
hand, and it streamed into the brains blood vessels. X-rays showed the
shifting of the vessels by the mass, so the surgeon could tell if its location
was right or left, front or back. But he could tell little else. No one could
actually see what was inside or how far it extended; so scalp incisions
were a foot long, and we made an opening as big as one-fourth of the skull
so as not to miss the mass.
Sometimes patients would be strapped into an ugly green metal
chair, also with chipped enamel but equipped with worn leather
restraints, for a procedure called a pneumoencephalogram. I had never
seen an electric chair, but I imagined that the devices were similar. We
performed a spinal tap through a hole in the back of the chairpatients
squirming, with their arms, legs, and head strapped to the chair; the surgeon yelling at them to keep still so they would not be injured by the
procedure. Air was then injected into the spinal column through the needle. The patients always groaned as the air bubbled over the brain, an
action that produced a blinding headache followed by waves of nausea.
The chair was then turned upside down so the air would stream into the
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such
as
implantable
deep-brain
stimulators
for
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were liberated from disease. I also saw a darker side of medicine, and I
have watched trends develop that I now believe to be inexorable unless
change takes place at the federal level.
I saw the educated and afuent undergo risky procedures that they
did not need, although they believed they were receiving the best care
available.
I saw both the uninsured and the insured suffer death and disability
from easily preventable diseases because they were ignorant about
basic preventive care, did not have access to it, did not know how to
get access to it, or their doctors did not provide it.
I saw the insured and uninsured die from delays in emergency care in
overloaded hospitals.
I saw patients whom I knew had no chance of recovery treated intensively for days because the technology was available.
I saw culture and mass communication legitimize an obesity epidemic that is estimated to account for more than one-quarter of the
yearly increase in the cost of health care.
I saw the development of a medical industry that so favors the unfettered use of expensive technology that it is pricing working families
out of health care and sealing the fate of the countrys 47 million
uninsured.
These are all symptoms of a health care industry that is so sated with
wealth that many of the people who populate its protected interests have
forgotten their purpose for coming to work. Health care has become a
consumer good with a price tag so high that it is only affordable if someone else paysan employer, a state government, or a federal government.
For many of us, no one else pays. The haves consume the health care of
the have-nots, to the disadvantage of both. The term structural violence
describes social structures that harm some members of society. A society
that indulges in excessive consumption of health care services at the
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expense of its low-wage workers and their families, who cannot afford
even basic services, is committing structural violence. This is what I see
happening in the United States.
I reluctantly concluded that health cares problems transcend state
and local government after spending several futile years working to help
the uninsured gain access to health care services in Houston and stimulate the development of a safe emergency services system for the region.
To address these two problems we created councils, performed studies,
released white papers, and acquired some funding. Although the community felt better, in the end our efforts to stabilize the regions emergency
services did little more to protect its citizens than the levees did to protect
New Orleans. None of these conclusions were evident when the crisis
began; their implications dawned on me slowly as I witnessed a series of
personal tragedies that began to morph into an alarming overall picture.
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Unreliable Emergency Services
The public should not look to the medical industry or to organized medicine for leadership in solving medicines problems.
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EMTALA has two qualiers that relieve the doctor and the hospital of
responsibility for emergency care. A hospital is only required to accept
patients who have an emergency if it has the capability and the capacity
to deal with that emergency. Capability means that if the hospital provides the service on a regular basis, it must provide the service on an
emergency basis. For example, if the hospital provides brain surgery during the day, then it must provide it around the clock. Capacity means that
emergency patients must be admitted if the hospital has room but not if
it is full. When hospitals are over capacity, they typically send out a diversion signal to notify ambulances that they cannot take any more patients.
Simultaneous diversion signals from every major hospital in the region
doomed the woman from Lake Jackson to end her days in a nursing home,
vegetative and tube-fed.
Federal law makes an important distinction between emergency and
non-emergency care. No hospital or doctor is compelled by law to provide
care to a patient with a medical problem that is judged by medical personnel not to be an emergency, dened as a condition that, if not treated
promptly, is likely to place the patient in serious jeopardy. Routine medical care of the uninsured is rationed and isolated from routine care of the
insured. For emergencies, however, there can be no distinction, a situation that has led to a growing problem for all members of society.
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Fragmentation
No organization was empowered to address the problem of emergency
services failure. So as the crisis worsened, two Houston businessmen and
I formed SAVE OUR ERS and organized a community-based board. SAVE
OUR ERS sponsored the studies of emergency services in Houston and
other parts of Texas that gave us the necessary critical insights to approach
the Texas legislature. The data from Houston could not be ignored in
Austin, the state capital, but the emergency room crisis in Texas was coincident with the most severe state budget crisis since World War II.
Like most states, Texas is constitutionally bound to a balanced budget.
An estimated 5 billion dollar shortfall on a state biennial budget of 117 billion dollars turned into a 10 billion dollar decit. Most of the Republicancontrolled house and senate as well as the governor had run on a no new
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taxes platform. SAVE OUR ERS retained two of the most effective lobbyists
in the state and then began to build statewide support for a bill providing
for uninsured trauma care. Our reasoning was that if we could nd
200 million dollars, existing trauma centers would voluntarily expand
capacity, and more hospitals would elect to become trauma centers.
I mistakenly believed that all of the states trauma doctors, nurses,
and hospital CEOs would support a bill to pay for uninsured trauma care;
after all, they had acknowledged to me that their trauma centers were not
able to meet their communitys needs and that diversion was a statewide
problem. But when it came time to talk about these matters publicly,
many became silent, embarrassed to air dirty linen. Others had their own
ideas of how to raise the money and were unwilling to compromise on the
method. I learned a critical lesson: one reason explaining why we had
such poor health care policy in Texas was the fragmentation of the health
care industry. The industrys componentsbig hospitals, little hospitals,
statewide medical societies, and specialty medical societieswould reliably protect their own interests rst, seldom taking a unied position.
I later found that this is also the case in Washington, D.C.
I remembered a management adage my father had taught me in college when I questioned him about the actions of a university department.
The rst energies of any organization are used for its self-preservation.
In other words, the public should not look to the medical industry or to
organized medicine for leadership in solving medicines problems.
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on the Mexican border, to San Antonio, more than three hundred miles
away. In Austin, at the center of the state, headlines announced that the
citys only major trauma center had signaled diversion for the rst time.
The attention of the states legislators was now secured; they and
their loved ones were at risk. Meanwhile, there were more stories. We
knew of ten deaths in the Houston area, and no one doubted that there
were many more.
The implosion of the trauma system hit the states newspapers within
the week. Doctors and hospital administrators were scared and uttered
the word crisis. The states legislators were suddenly barraged with their
calls. State representative Dianne Delisi and her staff found model legislation from New Jersey and applied it to Texass problem. House Bill 3588
would raise 180 million dollars per year to pay for uninsured trauma care
by ning habitual bad drivers, and the bill ultimately passed.
I never imagined that a bill to fund uninsured trauma care by taxing
bad drivers would be opposed by Democrats and supported by Republicans,
but that is what happened. The Democrats opinion was that the bill was
punitive to the poor. They rejected my responses that poor people do not
have to drive drunk and that paying for trauma care for the uninsured
beneted everyone. In the foyer of the Texas House I was profanely accused
by a prominent Democrat of being a toady for wealthy hospitals. After
these experiences I resolved to remain a political independent for as long
as I could.
Two years after passage of House Bill 3588, the Texas legislature nearly
gutted the bill by appropriating its funding to the states general revenue
instead of to hospitals. I watched as area hospitals took the money and put
it into their general coffers without using it to increase the number of
trauma patients they could care for. Houstons ambulance diversion rate
stabilized permanently at a dangerous 25 percent of all hours per hospital.
At this point I began to look around the country and talk to my colleagues. If the problem were structural, Houston could not be alone.
I soon found that the citys story was no anomaly. Emergency rooms were
failing spectacularly all over the southern and western United States,
including Florida and California and up the east coast. Once a community
experienced emergency room failure, the problem rarely disappeared.
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An Eroding Infrastructure
The value of treating emergency patients within the Golden Hour has
been drilled into me since the day I began my surgical residency in 1975.
The term refers to surgeons brief window of opportunity for saving
trauma patients, and the concept has been the linchpin of what is the
best emergency services system in the world, matched only by Germanys.
Yet the Golden Hour is not only metaphor but also an outside limit: the
sooner bleeding is surgically stopped and blood replaced, the greater the
likelihood the patient will be saved.
This insight came slowly, and its implications have only lately shifted
thinking about what is logistically possible. Military medicine led the way.
In World War II, 30 percent of injured soldiers died; 24 percent died in the
Vietnam War. By the time of the Afghanistan War and the second U.S.
invasion of Iraq, the mortality rate for combat injuries had fallen to an
astonishingly low 10 percent. The key seems to be very early surgery and
blood replacement as well as better body armor. Now the eld hospital
has moved to the soldier. In the current Iraq War, forward surgical teams
in Humvees quickly assemble tent hospitals behind the troops and operate to stop blood loss within moments of combat injuries, leaving the
wounds packed open for closure later. They then transfer the soldiers to
hospitals out of the country to be put back together physically and
mentally. As a consequence, the mortality rate of injured soldiers has
fallen to the lowest percentage in history.1
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San Francisco.2 The story was picked up by Associated Press and became
the subject of national attention.
The Orange County doctors challenged the studys validity, and the
Rand Corporation was retained to independently examine the data. West
said, They concluded that we got it wrongTrunkey and I had underestimated the number of preventable deaths in Orange County. After this, all
the opposition was silenced.
The concept of the Golden Hour was born from this study. To reliably
provide trauma patients with care in the Golden Hour after injury,
trauma and emergency service systems were rapidly organized throughout the country. Hospital-based helicopters ew the most seriously
injured patients over trafc jams to specially designated trauma centers
that provide emergency services to patients with stroke, heart attacks,
and a variety of other time-sensitive emergencies. Today 84 percent of
U.S. residents live within sixty minutes of a major trauma center. Yet in
the coming years American trauma hospitals are estimated to lose 1 billion
dollars per year and to pay medical staff 485 million dollars per year to
take call.3
The advance of science has outstripped the nations ability to deliver
medical care. Treatments rendered within the Golden Hour can save the
lives of patients with trauma, stroke, heart attack, and cardiac arrest; but for
patients with stroke, cardiac arrest, and trauma, care is suffering. A minuscule percentage of stroke patients receive such therapies. Science is
moving into the next millennium, while the way we nance health care is
taking emergency medicine back to the sixtieswith the biting difference
that we in medicine now know for certain the right way to do things. The
Golden Hour after an emergency is becoming an impossible standard as
we witness the progressive structural failure of American medicine.
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uninsured rates are more than 20 percent, are most affected. For instance,
in four populous regions of California, including Los Angeles County, hospitals diverted ambulances about one-quarter of the time in 2005.4
Ambulance diversion is concentrated in large emergency hospitals
and trauma centers, where hours on diversion are often much higher
than they are in non-emergency hospitals.5 The very emergency conditions that tend to kill you if you receive late care are the ones treated only
in large emergency hospitals. Pray that such hospitals are not on diversion on the day you need them.
The Institute of Medicine provides science-based advice to the federal government using panels of medical experts to develop its conclusions and recommendations. The institutes ndings are devoid of
politics because it does not depend upon any federal appropriation and is
scrupulous in maintaining its objectivity. In June 2006 it released a three
hundredpage analysis entitled Hospital-Based Emergency Care: At the
Breaking Point that called for nationwide coordination of emergency
services. Echoing conclusions that I had already reached, the report
declared: The emergency system itself appears to be crumbling in major
cities. In Los Angeles, for example, eight hospital emergency departments
have closed since 2003, bringing the total closed countywide to over sixty
in the last decade.6
Dr. Arthur Kellerman, then chief of the Department of Emergency
Medicine at Emory University, co-chaired the report. He and I discussed
the risk of being sued for medical malpractice from mistakes caused by
the dysfunctional environment in chaotic, stressed emergency rooms. He
told me that he had never been sued but that, as the world of emergency
medicine became more unsafe, he had begun to pray for the welfare of his
patients before he went to work each day. He also told me that no federal
agency in Washington seemed particularly concerned about the report.
Fatal Delays
Ambulance diversion is dangerous. Chuck Begleys research, which showed
a 78-percent increase in mortality for serious injuries needing transfer
when ambulances were diverted in Houston, has been echoed by Dr. Linda
Greens in New York City. In the boroughs, where more than 20 percent of
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emergency department time was spent on ambulance diversion, the mortality rate for heart attacks in 19992000 was increased by 47 percent.7
Rapid access to denitive therapies is the reason that the death rate from
trauma and heart attack has plummeted over the years, so the cause of
the fatalities is sure to be delayed care. An ambulance driving around
looking for the right hospital is a death sentence for these patients and
for others with time-sensitive emergencies.
When ambulances are diverted from emergency rooms, critically ill
patients are also turned down for transfer from small hospitals to large
emergency hospitals. Ambulance crews routinely take serious emergencies such as the woman from Lake Jackson and Bill Huntsman to the nearest hospital for stabilization. If the patient needs specialized care, such as
cardiac or neurosurgical attention, the smaller hospital is often unable to
transfer the patient to a larger hospital for the same reason that ambulances are on diversion: full beds. The patient needing transfer just waits
as the blood clot expands or the heart attack becomes irreversible. If a
delay in care injures the patient, the family is unlikely to know. If a patient
dies from a delay and the family does nd out about it, there is no
one to sue: all the medical personnel did the best they could under the
circumstances.
Two million people a year are transferred from one hospital to
another that offers specialized care. If our experience in Houston is representative, this gure hides a tragedy in regions that are diverting
ambulances. In the Houston region in 2005, 15 percent of patients requiring transfer to a specialized hospital waited for more than eight hours.
Every small hospital in the region reported that patients were routinely
endangered by delays in transfer. Only 30 percent of patients could be
transferred within the recommended two hours.8
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118.3
120
Emergency room visits (in millions)
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114
110.0
108
111.1
112.6
105.6
103.1
102
99.5
97 94.7
93.1 92.8
94.8
91
85
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
FIGURE 3.1 Number of U.S. emergency room visits
Displaced Patients
The rst notion of most observers was that the increase in emergency
room visits was simply a ood of uninsured who had no place to go for primary care. The data, however, show that the uninsured and the insured
visit emergency rooms with about equal frequency. In contrast, the uninsured visit clinics much less often than the insured do; emergency rooms
are often their only source of care. A recent survey, in fact, found that the
uninsured are less likely than either Medicare or Medicaid patients to visit
emergency rooms, probably to avoid the expense. Communities with the
highest emergency room use are not those with the highest uninsured
rates but those with the longest waiting times for clinic appointments.10
The surge in emergency room visits is driven by everyone: the privately insured, Medicare patients, Medicaid patients, and the uninsured.11
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It is no wonderanyone who calls a doctors ofce at 5:00 P.M. or on weekends hears the same recording: If you think you have an emergency, call
911 or go to your nearest emergency room. In almost every survey, about
40 percent of emergency room visits are non-urgent or semi-urgent, and
only Medicaid patients stand out in their use of the emergency room both
for both urgent and non-urgent care.12 Not only are Americans displaced
from regular medical care, but they also appear to have gotten sicker over
the past decade.
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1990s was care provided by doctors and hospitals who had taken a
30 percent cut in pay. The only pretense of coordinated patient management was the intrusion of an insurance companys employees between
the doctor and the patient.
Managed care was summarily rejected by both physicians and
patients but not before it nancially destabilized hospitals and doctors.
When Americans rejected it, they found themselves displaced from medical care and often really sick. Now when they seek emergency care, they
are often faced with overcrowded emergency rooms and hospitals that are
turning patients away. The United States has paid a high price for the
managed care asco.
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Fifteen Years Lost
America has lost fteen years that could have been used to
improve the way the medical industry delivers care.
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Fee-for-Service Medicine
The managed care era cannot be understood without understanding how
doctors are paid. Insurers and government programs pay doctors directly
for each service they render, and they are paid separately from hospitals.
Years ago a group at Harvard University developed a payment system
called the relative value scale that is used by the Medicare program and
almost all insurers to determine physician fees. By means of this scale,
each of the thousands of services that doctors provide is assigned a
numerical level of difculty for performance; and the American Medical
Association regularly updates the scale. The level of difculty for a routine
ofce visit is low, that for heart surgery or brain surgery is high. The performance of procedures is always assigned a greater number on the scale
than is management of a patients health. A generalist managing a patient
with diabetes in a medical ofce is paid about the cost of a good restaurant meal for that service; a heart surgeon or a brain surgeon can make a
down payment on a car for performing an operation on the same patient.
Doctors contract with insurers, including Medicare. Their contract
agrees to a specic dollar gure that is then multiplied by the numerical
level of difculty from the relative value scale for each service the doctor
delivers. Medicare and Medicaids multiplier is set by law; the multiplier
doctors accept from private insurers is a matter of negotiation.
The product of the multiplier and the scales numerical level of difculty determines what the doctor is paid for each service. The dollar
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unnecessary procedures and good reason not to. Extra medical procedures would only cost the practice money. Protocols of treatment were
adopted to ensure that patients were not undertreated and that management was reasonably uniform among the clinics doctors. In the ensuing
years prepaid group practices were convincingly shown to save money by
reducing hospitalization, a feat accomplished by keeping patients well
and managing their diseases before they became emergencies.6
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medical care, all of which was true. In many markets two or three insurers dominated a region and could drive a hard bargain because they controlled so many patients. Physicians felt they had no choice but to accept
sharply reduced fees because, after all, there were too many specialists.
Hospitals were in no better position than doctors. In the early 1990s
hospitals usually stood alone and could not face down an insurer that
controlled one-quarter of a regions commercially insured patients; therefore, hospitals agreed to sharp price reductions. Before managed care in
1993, commercial insurers paid hospitals 30 percent above their cost of
care, but by 1998 the gure was only 14 percent.9 Prot margins were so
low that money normally used to fund the care of uninsured emergency
patients evaporated. Hospitals posted losses beginning in the early 1990s
and continuing into at least 2003.10 The Balanced Budget Act, which took
effect in 1999, was the coup de grace for hospitals and directly led to the
emergency medical services crisis.
In addition to reducing health care prices, managed care briey did
two good things. For the rst time in U.S. history every physician and hospital became aware that resources were limited. As if by common consent, they placed a lid on the use of medical services, and there is no
evidence that any population was harmed by it. The second achievement
was that patient care was coordinated, however intrusively.
Managed care was the right concept badly executed, and it was rmly
rejected. Neither specialists nor generalists were prepared to deal with a
third party inserted between them and their patients care. Patients were
not prepared for restrictions in selection of their doctors. By 1999 business was good, unemployment was low, and the labor supply was tight.
Destabilized hospitals, angry physicians, and disenchanted patients
rebelled; and by 1999 businesses and insurers had publicly abandoned the
most restrictive forms of managed care. Legislatures followed the winds of
popular change by passing patients bills of rights that held insurers liable
for restrictions in care.
Managed care had proven, however, that costs could be controlled
without hurting patients. Hospital spending actually decreased for the rst
time in U.S. history. Before managed care, overall health care cost growth
was in double digits, and it dipped to less than 1 percent by the mid-1990s.
Yet the subsequent disassembly of managed care let the genie out of the
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20
18.0
18
16
13.9
14.0
14
Percent
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12
11.2
12.0
10.9
10
8
8.5
8.2
9.2
7.7
6.1
6
5.3
3.7
2.6
2
0.8
0
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Kaiser Family Foundation and the Health Research and Educational Trust,
Employer Health Benets, 2007 Annual Survey (Menlo Park, Calif., September 2007).
bottle. By 2003 the medical industrys cost was again growing at doubledigit annual rates and has remained elevated ever since. Throughout the
past decade, ination and growth in workers earnings have remained far
below health care cost growth.
Figure 4.1 illustrates the percentage annual increase in cost of health
insurance premiums from 1988 to 2006, showing the dramatic decrease
in premiums that managed care produced and the equally explosive cost
growth when those controls were released. The rate of growth in workers
earnings and the general ination rate were far below the annual growth
in health care costs in this period and at present.
Managed cares poor implementation and its subsequent rejection had
pernicious effects. Doctors fee-for-service rates were undercut by managed
care and have never recovered. Doctors responded to decreased payment
for services by doing more procedures, ordering more tests, and seeking
income by referring their patients to facilities they owned, all of which
helped fuel todays resurgence of insurance premium growth. Hospitals
reacted to managed care by consolidating into regional monopolies that
could stand up to consolidated insurers and leverage high prices. In the
1990s hospitals learned how to reduce their exposure to the uninsured by
necessity, but many continue that practice in better nancial times.
Patients reacted to their release from the restrictions of managed care by
doctor shopping and self-management; these behaviors paralleled an
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Revelations
We know more about ambulance diversion in Houston than in most other
large cities because of the work of SAVE OUR ERS and its offspring organizations. The Houston region has sixty-eight hospitals. Within the city of
Houston is the Texas Medical Center, an eight hundredacre concentration of forty-two institutions including thirteen hospitals totaling 6,344
hospital beds, two medical schools, and eleven educational and research
institutions. For years the majority of the regions residents have come to
Texas Medical Center for treatment for complicated medical conditions.
The center was built by big-thinking wildcatters with oil money and by
big-thinking surgeons with money from the invention of heart surgery.
As a child, fascinated with medicine, I thought this was the center of the
universe. I wanted to be a big doctor in this very spot, and I eventually was.
In 2006 I wrote this section of the book in my ofce, looking down on
Fannin Street, a mile-long corridor that runs through the medical center,
lined on one side by four massive hospital complexes facing a continuous
row of ofce towers and outpatient centers on the other side of the street.
The hospitals are connected to their afliated skyscrapers by a series of
skywalks that bridge the street. Out the window of my ofce I could see
under construction along Fannin three new multistory professional buildings, a new heart institute, and a new medical school building; the
whirring and hammering was constantly audible through the window.
Behind the line of hospitals on Fannin Street is M. D. Anderson Cancer
Center, which, like the disease it treats, grew without normal control
mechanisms and occupies three square city blocks. When I took a break
from writing and drove around town, I saw three physician-owned
specialty hospitals being nished: one for spine surgery and two for
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orthopedic procedures. I knew that twenty-two physician-owned hospitals were in different stages of development in the area. Hospital nancing was clearly not a problem in Houston. A similar hospital building
boom is going on all over the United States. If they have insurance or cash,
Americans can be treated with the best medical technology in the world.
I should not have been surprised, therefore, when our 2005 studies of
the Houston area emergency services system found that the region had
more than enough hospital beds: 3.2 per 1,000 people, when the national
average is 2.8.11 Houston does not have a problem with hospital capacity,
just a problem with hospital capacity for emergency patients. I suspect the
same is true in every major city where ambulance diversion and emergency
room overcrowding are routine. Hospitals in urban areas all over the United
States are adding beds for insured patients with non-emergency conditions
that require knee replacements, hip replacements, heart procedures, back
surgery, diagnostic studies, and the like. I suspect that they are not adding
ICU beds and emergency rooms in areas of the country where people with
emergencies are likely to be uninsured. The problem with hospital capacity
for emergency patients would dissolve if every American had an insurance
policy. There is also a moral argument for covering the uninsured.
I once made the following statement to two conservative friends who
were both knowledgeable and concerned about Houstons health care
problems: Everyone in America deserves health insurance. They both
said no. I then reworded the statement: We should provide health insurance to every American. They both said yes. I repeated the word experiment with many other people. Conservatives acknowledged our obligation
but not their right. More liberal friends said yes to both statements. Both
groups reached the same conclusion but in different ways.
The sharp differences in opinion over what should be done about the
uninsured are not differences in what injustice looks like but diverging
views on the action required to rectify it. That divergence of opinion does
not excuse the lack of action, however. Lack of insurance is unjust
because the uninsured get miserable medical care.
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Handed Health Cares Leftovers
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because of a chronic medical condition. Initially the family bought individually purchased insurance at 325 dollars per month, a premium that
increased to 725 dollars per month within two years. By 2004 the
deductible was 2,000 dollars, and coverage was not affordable for all family members. What else could she and her husband do but drop it? She
concluded her talk with I have a little seven-year-old with a respiratory
condition, and I am worried.
No Small Problem
These are common stories. On any given day there are more uninsured
people in the United States47 millionthan there are people in all of
Central America or in the combined populations of our nations three
largest metropolitan areas: New York, Los Angeles, and Chicago. In other
words, 15 percent of the population is uninsured. One-third of the nonelderly population (82 million people) loses insurance at some time during a two-year period.1 According to Jeffrey Passel at the Pew Hispanic
Center, only 12.5 percent of the uninsured are illegal immigrants, although
that percentage is much higher in states such as Arizona, Texas, and
California.
Mostly the uninsured are the working poor. Eight in ten live in working families. More than half cannot afford to purchase insurance, and
their employers do not provide it, while 20 percent earn enough money to
purchase insurance but choose not to do so.2
Twenty-ve percent of the uninsured are eligible for public programs
but are not enrolled. Most low-income parents know about Medicaid, the
combined federal and state program that provides health insurance for
poor children in all states and their parents in some states, but many fail to
sign up because they think they are ineligible or cannot manage the enrollment hassles. For example, leaving work on a weekday every six months to
spend all day at the Medicaid ofce would cost a janitor a days pay or his
job. Contrast this situation with Medicare, where everyone eligible for
Social Security receives an enrollment package in the mail at age sixty-ve.
States do not go looking for people who are eligible for public programs such as Medicaid and the State Childrens Health Insurance
Program, and many states deliberately erect barriers, such as requiring
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Misplaced Trust
I have set a number of stories in the ctional Episcopal Hospital, a large
private hospital in Los Angeles, and the equally ctitious Bayview County
Hospital nearby. My character Simon Brown, a cardiac surgeon who works
at both hospitals, appears in several stories. Although the stories are ctions, they are faithful to events I have witnessed and that occur every day.
Juan Olivas had managed a group of laborers in a warehouse for ten
years and faced a dilemma when he received a memo about the following
years benets. The familys combined income was 50,000 dollars, which
included his wifes part-time job in the church ofce. (They still had a
high-school-aged daughter at home who needed supervision.) The family
had been covered by Medicaid when the children were young, but now their
income was too high. The companys new policy required Olivas to pay
20 percent of the 10,000-dollar family premium, but with a 5,000-dollar
deductible that would amount to 15 percent of the familys combined pretax income if they used the deductible. Olivas knew that one hospitalization or two diagnostic procedures would require him to pay all the
deductible, and his medications were very expensive. He dropped insurance
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rather than sell the house, borrow money, or take his older daughter out
of college. He also stopped taking his blood pressure medication, and
over the next year his blood pressure reached dangerous levels but with
no traceable symptoms.
Juan Olivass heart attack started as a vague internal uneasiness that
swelled to constrict his chest and nally prostrated him on the warehouse
loading dock. The ambulance took him to the nearby large private hospital, Episcopal Hospital, where he was quickly diagnosed with a heart
attack and placed in the coronary intensive care unit. Had a dark-skinned
man named Olivas had a heart attack at home or on the street, the ambulance crew would have assumed he was uninsured and taken him directly
to Bayview. Since he was at work and therefore likely to be insured, the
ambulance took him to the Episcopal.
Olivas stabilized after a few days and underwent a cardiac catheterization. In this procedure a thin plastic tube is threaded up to the heart
through an artery in the groin to look for blockages. The artery that had
caused the heart attack was completely blocked and could not be opened.
The heart was mildly damaged. But another artery of the heart was also
severely narrowed; this was the left main coronary artery, and it had not
caused this heart attack. Patients with narrowing of this artery live an
average of only six more years unless they have open heart surgery, but
they can live an average of thirteen more years if they have surgery to
bypass the blockage. When the left main artery occludes, the result is usually fatal. Therefore, blockages of this artery are normally operated on at
the same hospitalization in which they are diagnosed.6 In this case, however, no such treatment was offered because Olivas could not pay for
major surgery and had no insurance.
EMTALA required the Episcopal to treat the emergency condition (the
heart attack), but it did not require the hospital to provide non-emergency
care. Olivass chance of dying over a several-year period did not constitute
a medical emergency, and legally the hospital was not required to do
more than it did.
One month later, Olivas had a follow-up appointment at Bayview
County Hospital in the general medicine clinic. A young intern fresh out
of medical school reviewed the cardiac catheterization results. Mr. Olivas,
are you having any chest pain? queried Dr. Prater.
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No, sir, I am walking three miles a day, and I feel ne. Can I go back
to work now? responded Olivas.
The young doctor knew that severe narrowing of the left main coronary artery was a time bomb. He also knew that all the specialty clinics
and operating rooms at County Hospital were backed up for more than six
months. He called the surgery clinic. I have a fty-year-old Hispanic male
who had an MI [myocardial infarction, or heart attack] one month ago. He
has a 70 percent stenosis [narrowing] of his left main. How soon can you
get him in for a surgery appointment?
Our next available appointment in clinic for a new patient is in four
months. I cannot tell you about a surgery date, the clerk said.
Prater responded, Let me talk to the clinic manager. Olivas was in
luck; few of the interns would have bucked the entrenched bureaucracy of
the hospital.
Dr. Simon Brown happened to be teaching in the cardiac surgery
clinic on the day Olivas was seen one week later, and the resident staff
presented his case to Dr. Brown. Brown stood a head taller than Olivas
and was as pale as Olivas was dark. He looked down at Olivas and said in
a bass voice, Mr. Olivas, you have a critical blockage of one of the arteries in your heart, and it needs to be bypassed. We have only one problem.
There is no time in the operating room to do this procedure. The operating room is often full of emergencies, and it may be a while before we can
get your procedure done.
The waiting list for non-emergency surgery at Bayview was six months
long, which practically meant that such surgeries were not available. The
occasional non-emergency case was scheduled by calling in the patient if
there happened to be a quiet day in the operating room; twenty-four
hours was all the advance notice a patient could get. In private hospitals,
non-emergency cases are scheduled weeks ahead. Brown felt that it would
have been cruel to tell Juan Olivas that he had a fair chance of dying
before the procedure was ever performed. He did not tell Olivas that he
would probably have performed his surgery at the Episcopal if Olivas had
been insured.
Dr. Brown did not feel responsible for this unseemly paradox, though
it bothered him. The uninsured were a large societal problem; and as a
responsible physician, he did all he could for Olivas. Brown had carved
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enough money out of his departments budget to buy pagers for fteen
patients who needed, but could not get, emergency heart surgery at
Bayview. A handwritten list on a yellow pad on the corner of Browns desk
contained the name, pager number, date of last clinic visit, and description of the heart problem of each patient who was waiting for heart surgery.
Take this pager, Mr. Olivas. Do not give the number to anyone else.
When it goes off, my ofce will be calling you to tell you that we can do
your surgery the next day.
Mrs. Olivas responded, Thank you very much, Doctor. We are so
grateful to you. We will wait for your call.
After the Olivas family had left the examining room, Brown turned to
the pack of young doctors and medical students trailing behind him and
said, You do understand, dont you, that at any private hospital an
insured patient with this problem would never have left the hospital without surgery?
About four months after his heart attack, while supervising the
unloading of a truck, Juan Olivas again felt crushing shortness of breath,
as if something alive were trying to crawl out of his chest. This time, however, his heart brillated so that it writhed rather than pumped blood,
and he lay gasping for air on the loading dock as his world became dark.
Mrs. Olivas returned the pager to Dr. Browns ofce as soon as she
had buried her husband. Dr. Browns secretary told him what had happened to Mr. Olivas, and he marked the event as yet another one of the
tragedies he saw ever more frequently at Bayview.
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her name.) Her craft supplements her income as a caregiver to the elderly.
I would sit in her home studio in downtown Houston on a Saturday morning and pick out materials, and then she would create striking pieces. Not
only did the women in my family like my gifts, but I looked forward to
the process because I enjoyed chatting with her over coffee about her
materials. I was introduced to Anne by my wifes close friend, Phyllis
(I have not changed her name), who was Annes high school classmate.
I was disturbed when Phyllis told me this story.
One day in early 2007 a black lump appeared on Anne Caseys neck;
she had the fair Irish skin that is prone to cancers. Because she could not
afford insurance, she paid cash for a dermatologist to biopsy it. The dermatologist was notably agitated after he looked at the biopsy under a
microscope (he saw malignant cancer cells) and told her she needed surgery right away but that he could not do it. Anne had malignant
melanoma, a potentially fatal skin cancer that is normally removed as
rapidly as possible to prevent its spread throughout the body. Her problem was that the down payment alone for a hospital admission would
have been 10,000 dollars, which she did not have. I suspected that this
was why the doctor could not do the surgery. Fearing for her life, Anne
Casey began the process of obtaining a gold card that would permit her
to enter the Houston public hospital system. Four weeks later she got the
card and four weeks after that a clinic appointment. In order to nd out
how extensive the cancer was, the doctors needed to perform an MRI and
other tests before doing surgery. The larger of Houstons two public hospitals sits in forlorn isolation in the back of the massive Texas Medical
Center, like the servants entrance to a large Victorian house. It contains
the only MRI in the countys public hospital system. Anne was admitted to
the hospital for the MRI and other tests normally performed as outpatient
procedures. She lay in the hospital for six days waiting for an MRI as the
hospital diverted ambulances because it had no available beds.
Phyllis, who each day was growing more anxious about Anne, called
a doctor friend who owns an MRI facility and he agreed to perform an
MRI for free. Anne left the hospital to undergo the donated MRI scan.
Meanwhile the black cancer was getting larger every week as the two
friends watched in horror, helpless. Weeks passed without the anticipated
call to come in for surgery. Finally Phyllis, desperate to help her friend,
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called the doctor who had performed the biopsy and insisted that he telephone the doctors at the public hospital to expedite the process. Phyllis
and her friends made calls directly to the CEO of the hospital district on
Annes behalf.
Four months after the diagnosis of a life-threatening malignancy,
Anne Casey nally underwent surgery to remove a visibly growing cancer.
She told me that she felt she had received excellent care and was glad for
it. She could not know that the delay had increased her chance of dying of
the cancer.
Anne had the advantages of being educated and having inuential
friends; her care was expedited. If she had been insured and her surgery
had been delayed for four months for any preventable reason, the responsible doctor would have had no defense if she had later developed widespread cancer. Her care would have been medical malpractice. Yet in
present-day America, Anne Caseys care was better than what many of the
uninsured can expect.
The uninsured problem has grown so large that it is now fully prevalent in the middle class. Everyone, regardless of income, knows someone
who has played by the rules, like Anne Casey, yet is without health insurance. Given current health care cost trends, all of us should care about
the uninsured because we ourselves may be next.
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The most likely explanation of all, however, is that people are simply
uninformed about how bad the problem isand I do not mean just average people. On July 10, 2007, President George W. Bush said The immediate goal is to make sure there are more people on private insurance
plans. I mean, people have access to health care in America. After all, you
can just go to an emergency room.13
Incensed Doctor
Doctors who work in public clinics and hospitals feel more strongly than
the public does about the injustice of uninsured care. The problem
becomes an urgent matter when, as a doctor, you make a referral for
someone to be seen in a specialty clinic, knowing that she cannot get in for
six months; or you tell a patient without money that she cannot get a treatment that she needs; or to avoid that conversation, you just order the test,
knowing that she will never get it and will never be back to see you. These
things do not bother people who do not have to do them, so it is easier to
brush them aside or work to remain ignorant about the real situation.
Doctors often play games with the system rather than leave their
patients to their fates. A friend of mine who is a primary care doctor in
Houston told me of two patients he had seen recently with hernias so
large that they could not button their trousers. Both hernias were painless
and produced no symptoms other than their size. One of the patients had
lost his job because of the hernia and could not get new employment
because of it. My friend referred his patients to the surgery clinic of his
own medical school at the public hospital. The patients were given
appointments for surgeries one year later because there was no space in
the operating rooms.
My friend then coached the two patients on how to answer medical
questions about the hernias when they went to the emergency room. The
doctor told the patients to give the emergency room staff a history of constant and worsening abdominal pain, a sign that the hernia is becoming
life-threatening. He taught the patients to groan and wince when a doctor
pressed on the bulging hernia sac, a warning signs that bowel is trapped
in the hernia. He then instructed the patients to go to the emergency
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45
room, now fully coached on what to say and do. Both were admitted and
operated on promptly. One procured a job some months later.
I did not see many uninsured patients in my clinic, though I cared for
many when I was on emergency call. When I did see an uninsured patient
in clinic who clearly needed surgery but was not an emergency case and
could not afford it, we developed a set routine. I or my colleague of many
years, a physicians assistant, would teach the patients in our clinic to
come to the emergency room at an appointed time in the early morning
when it is usually quiet. The patient was then instructed to lie to the
emergency medicine doctor in a precise way, describing steadily worsening neurological symptoms consistent with the patients primary problem.
On a few occasions I think we even taught the patients how to feign weakness when examined. This combination of contrived history and examination would guarantee the patients emergency admission at the
hospitals expense. We would also tell the patient not to eat after midnight the night before so he would be ready for surgery on the day of our
scheduled emergency admission. I then operated on the patient that
same day. I never lost sleep over this deception because I felt I was
acting in the patients best interest. It cannot be credibly argued that the
uninsured in America receive acceptable health care, a problem that is
inextricably linked to its high cost.
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PART T WO
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Where We Are Headed
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growth rate, then the formula adjusts Medicare payment rates to doctors
downward. The only way the target can be exceeded is if the growth in the
number and complexity of physician services exceeds the number judged
to be scally sustainable.
The overall growth in physician services has been so great that the
formula had to call for a pay cut to physicians beginning in 2002. Four
times, including in 2007, Congress overrode the formula and held physician payment levels or allocated an increase.1 The net result is that the
growth rate of physician services is unsustainable because it can never
match the levels called for by the sustainable growth rate formula.
Congress is only delaying an unpleasant, politically risky, and complicated decisionto change the way physicians are paid by Medicare.
Politicians do not know how to do it, and neither do the doctors.
The Senate Finance Committee is responsible for the Medicare and
the Medicaid programs. On March 1, 2007, committee chair Senator Max
Baucus of Montana held a hearing on the sustainable growth rate in the
Dirksen Building near the Capitol in Washington, D.C. Four witnesses testied: Glenn Hackbarth, the director of the Medicare Payment Advisory
Commission (MedPAC); Dr. Cecil Wilson, president of the American
Medical Association (AMA); Dr. Byron Thames, a member of the board of
directors of AARP; and Dr. Peter Orszag, director of the Congressional
Budget Ofce, the independent budget advisor to Congress.
The geography of the room was fascinating. Twenty-one senators sat
next to each other at a sixty-foot-long horseshoe-shaped desk in a room
with two-story ceilings like a church. In the center of the horseshoe and
positioned about two heads lower than the senators, the four witnesses
sat at a narrow rectangular table, looking up into glaring lights as they
were questioned. They reminded me of mice encircled by cats.
The AMAs president, Dr. Wilson, solemnly and slowly said that his
organization supported changing the system to pay doctors by annually
increasing the Medicare fee schedule to account for medical ination and
ignoring the growth in complexity and volume of services that physicians
were providing.
Dr. Orszag said that implementing the AMA plan without decreasing
the volume of services would result in annual outlays for physician
services increasing by almost three times that called for by the formula.
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He testied that the AMAs plan would cost 252 billion dollars between
2007 and 2017. Even by Washington standards, this is a big number.
Dr. Thames of AARP pointed out that Medicare patients premium
payments had already doubled since 2000, partly to pay for physician
services, and that 21 percent of beneciaries report that they have to cut
back on groceries in order to afford their premiums, co-pays, and other
health care expenses, which average 25 percent of income.2 Every senator
seemed to swallow hard at these numbers. All the witnesses testied that
this was not the way to pay doctors.
Glenn Hackbarth of MedPAC gave the senators three other options:
regional caps on physician expenditures, a state-based sustainable growth
rate, or a completely different way of paying physicians based upon as yet
undened performance targets.3 There were no details about this new
method, only vague platitudes about a diaphanous concept. Everyone knew
that if the doctors pay were reduced too much, Medicare patients would
have trouble nding a doctor. There was no question that doctors were
going to get their pay increase and that this scenario would play out again
until it nally hit bottom. By the end of the hearing, I thought that the cats
had no fangs and the mice had grown to be rodents of unusual size.
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Medicare in 2019
The scattered warnings from health economists and civil servants that
Medicares costs were unsustainable went unnoticed and unheeded until
2019. No policymaker intending to remain in ofce could discuss the
status of Medicare nancing with any force because there was no answer
for it, and any hint of rationing care to elders was political suicide. Action
a decade earlier would have averted disaster, but in 2019 Congresss
choice was to allow Medicare to draw 73 billion dollars per year (in 2005
dollars) from the governments general tax revenue, a gure that would
rapidly increase each year, or to cut the rates paid to doctors and hospitals.7 It chose the latter and nally cut the Medicare fee schedule.
As a result, many doctors no longer took Medicare patients or took no
new ones. In 2019 52 million seniors16 percent of Americanssuddenly
found themselves unwelcome at the countrys best hospitals and doctors
ofces.8
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then complete the required licensing tests. In past years foreign medical
graduates went looking for U.S. training programs; now U.S. training programs went looking for them. Bayview was not one of the better surgical
residencies, and Chatterjee knew it. But he was glad to be in America.
There was little supervision of surgery by experienced physicians at
this public hospital. The senior surgeons would scrub in on a portion of
most cases but only long enough to say that they had been there. The hospital was chronically undernanced. Time in the operating rooms was
rationed. Chatterjees service operated only on Mondays and Tuesdays,
and it was already booked for the next three months.
Ellen Howards colonoscopy and MRI had shown a colon cancer
extending through the wall of the large intestine. Chatterjee explained to
her about the waiting list for the operating room, and she left that day with
the surgery scheduled for three months later. When her turn came,
Dr. Chatterjee, assisted by a young doctor who had himself only just nished training, operated on Ellen Howard. Chatterjee carefully excised two
inches of colon on both sides of the mass along with the attached fat and
lymph nodes. However, because the dissection had come close to the aorta
(the main trunk of arterial blood located in the abdomen), the inexperienced surgeons had become timid, fearful of causing bleeding from aortic
branches. They left cancer-laden lymph nodes in the remaining fatty tissue.
Ellen Howard returned home after an uneventful surgical recovery. But she
still harbored the cancer that the team had missed. It would only have been
removed during a determined dissection by an experienced surgeon.
Despite chemotherapy and radiation treatment, the missed lymph
nodes spread the cancer throughout Ellen Howards abdomen. Neither
she nor Dr. Chatterjee ever knew this. Nor did they know that the cancer
would have been contained within the colon had Mrs. Howard undergone
surgery seven months earlier, when her rectal bleeding started. Over
time, a pattern of increasing cancer mortality rates began to emerge in
Medicare beneciaries and it became clear that the reductions in payment were causing more than just an inconvenience for seniors.
The story of Ellen Howard is not demagoguery designed to scare
by exaggeration. If it is in error, it is only in predicting that Medicares
problems will wait until 2019. Already today there are underfunded public
programs such as Medicaid that limit access to medical care.
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is expanding but still not fast enough to keep up with the decline in
employer-based coverage. The result is growing uninsured.
A Reverberating Circuit
Over many years, as the cost of health care to businesses has increased,
the number of uninsured has increased proportionally in a predictable
mathematical relationship.12 Yet as the numbers of uninsured has risen,
the cost of their care has driven up the cost of commercial insurance in a
never-ending cycle. One group calculated that more than 8 percent of the
cost of health insurance premiums has been the result of hospitals shifting their losses from care of the uninsured by increasing charges to private insurance. In states with high uninsured rates such as New Mexico,
West Virginia, Oklahoma, Montana, Texas, and Arkansas, the portion of
insurance premiums accounted for by cost shifting were found to be up to
double the average gure.13 There will be no end to this vortex until
health care costs are reined in and the uninsured covered.
A New Problem
High health care costs have created a new phenomenon, the underinsured. In order to keep premiums affordable, individuals and businesses
are purchasing policies that have high deductibles and co-pays. From
2001 to 2004, deductibles in the least restrictive kinds of employer-based
insurance rose by 40 percent as employers shared the high cost of health
care. Some people think they have insurance but do not when they buy
mini-med policies that may cover only the rst 10,000 dollars of care.
All forms of cost shifting to employees have been on the rise since 2000.
When medical costs exceed 10 percent of an average familys income,
researchers consider that family underinsured; and an estimated 16 million people are underinsured in the United States. Eighty-two million people lose insurance sometime in a two-year period.14 Forty-seven million
are uninsured on any given day. These gures mean that more than onethird of the U.S. non-elderly population has either insufcient, unstable,
or no health insurance coverage. Something must change because these
trends cannot continue.
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30 Percent Wasteor 50?
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59
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Doctors do not sit together in a room and decide to build more hospital beds so they can admit more patients, collude to order more diagnostic tests, agree to perform more minor procedures so they can make
more money, or keep patients in the hospital longer when they are dying.
In fact, practicing physicians are unaware of these regional differences
and of their role in producing them. Rather, this wastage reects the
unrestricted application of medical services without public reporting,
without uniform standards of medical practice, and without a full understanding of which patients benet from which tests and procedures. The
differences reect local custom. The habits and circumstances of
Minnesota physicians are not the same as those of Florida physicians. For
instance, there are no national standards for how often a patient should
be seen after a heart attack or for heart trouble. If a town is home to many
cardiologists, they naturally want to be busy. They all fully book their clinics, so patients with heart trouble in that community are seen more often
than they might be in another community. A doctor who is liberal with
patient visits is liberal with testsand the more a doctor looks for, the
more a doctor nds. Thus, excessive testing leads to unnecessary procedures. Half the variation among regions in the number of visits to cardiologists is explained by the number of cardiologists in the community.8
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The United States spends 2,797 dollars more per capita on health
care than do other industrialized countries. Awards, legal fees, and underwriting costs of medical malpractice litigation account for only about
twenty-two dollars of the per capita cost. The practice of defensive medicine (ordering unnecessary tests and procedures to avoid a lawsuit)
accounts for 3 to 9 percent of spending, so any differences in the practice
of defensive medicine would be only a component of an overall attack
on cost.18
I found that wasteful spending is a feature of all health care systems.
The United Kingdom, Canada, the United States, New Zealand, and
Australia all report an unacceptable level of medical errors, problems
with access to care, poor coordination of care, and poor physician-patient
interaction. One-third of Americans, Australians, and New Zealanders
think their entire health system needs change.19
I always imagined that the United States had vastly more hospital
beds, more MRI and CT scans, and more doctors per capita than did other
industrialized countries. The resulting overuse would explain the high
cost of U.S. health care. Our nation, however, has fewer physicians per
capita than do France and Germany and only slightly more than Canada
does. U.S. patients visit a doctor 3.6 times per year compared to 6.2 times
a year in other industrialized countries. Americans spend far fewer days
in the hospital than do Germans, Japanese, Canadians, and Britons. The
United States has fewer hospital beds and ranks in the middle in the number of CT scanners per capita among industrialized countries. Seven of
thirty industrialized countries have more MRIs per capita.20
I thought that the queues in which people wait for certain procedures
in other countries would explain the cost differences. But the procedures
for which there are queues in other countries account for only 3 percent
of US spending.21
The United States does have a fondness for high-tech medical procedures. For all the weaknesses of the our medical industry, its great
strength is the ready availability of high-quality procedures for the insured
and the rapid development of new medical technology. The United States
exceeds the average number of heart procedures in other countries by
several times. It is 50 percent above the median of industrialized countries in knee replacements; and Americans are far more likely to undergo
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heart, liver, and kidney transplants than are residents of any other industrialized country.22
What stands out, however, is the price we pay for medical care.23
Americans pay 2.7 times more than Canadians per day of hospitalization,
5.6 times more than the Japanese, and four times more than Germans. In
2003 the United States spent 1,271 dollars per capita on physician services
compared to the median of 428 dollars in other industrialized countries
and 287 dollars in Canada.24 But for all our spending on physician services, American generalists have the same income as Canadian generalists, whereas American surgeons are paid about 50 percent more than
their counterparts in Canada. In 2005 the average income of American
surgeons (general surgery, neurosurgery, thoracic surgery, plastic surgery, orthopedic surgery, and ophthalmology) was 437,000 dollars,
whereas the average income of Canadians in the same surgical specialties
was about 300,000 dollars.25
High spending on U.S. physician services has three causes. The nation
has somewhat more doctors than Canada (2.3 doctors per 1,000 people,
as opposed to 2.1).26 Higher specialist incomes also account for some of
the difference, but a major cause is administrative waste. In 1999 U.S. doctors spent 29.6 percent of their gross income on administrative overhead
such as billing and collections, medical malpractice insurance, ofce
staff, and ofce rental. The gure in Canada was 16.1 percent.27
The price of pharmaceuticals has been a hot topic in the past few
years, but these prices only parrot the prices of doctors and hospitals. In
2003, the United States spent 728 dollars per person on pharmaceuticals,
more than twice the median for other industrialized countries. Some of
the difference came from the nations increased consumption, but much
of the difference was in pricing. A market basket of thirty drugs costs 47
to 59 percent more in the United States than do the same drugs in
Canada, France, and the United Kingdom.28
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18
16.5
15
Percent of GDP
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10.5
9.6
9
6
4.6
3.4
3
National Housing
health
expenditure
Food
National
defense
2.8
Motor
Gasoline,
vehicles fuel oil, and
and other energy
parts
goods
Source: Medical Cost Reference Guide (Chicago: Blue Cross/Blue Shield Association, 2007).
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Poor-Quality Primary Care
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some days later. Had the medical staff correctly diagnosed him and
treated him in the emergency room with intravenous clot-busting drugs
within two hours of the onset of pain, he would have been discharged
three days later at a fraction of the cost incurred by the hospital and paid
by Medicare. Elaines grief, however, could not be so easily quantied.
If the emergency room had been functioning properly that night, the
same medical staff that failed to treat him would have made the correct
diagnosis and provided treatment. But the reality is that Ed Fitzsimmons
was one of 11,000 Americans in 2000 who had a heart attack but was misdiagnosed. As a result, about ve hundred of them died. The problem is
so common that a 2004 article in the Wall Street Journal told readers how
to reduce the chance that it would happen to them.1
Eds wife and family never knew about the emergency rooms error,
but that was only one of the lapses in his management. The other lapse
was a medical system that did not pay doctors for prevention of illness or
coordinated management of chronic disease. Ed Fitzsimmons had managed his health care with the aid of six doctors. One-third of Medicare
patients in Los Angeles have at least as many doctors.2 A single attentive
doctors strict management of Eds diabetes, high cholesterol, and high
blood pressure would have delayed his heart attack by years. Measuring
by the yardstick of American health care today, Ed received effective treatment. Judging by cause and effect, he did not.
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the blood test known as hemoglobin A1C is the best index of how well
blood glucose is being controlled over a period of time.
Every Medicare patient should also have regular tests of blood cholesterol because, like diabetes, high cholesterol aggravates hardening of
the arteries. Cholesterol can be lowered by medications and a low-fat diet.
Research is demonstrating more clearly every year that treatments to
keep the levels of glucose, cholesterol, and blood pressure to near normal
levels are powerful in preventing the complications of heart disease and
diabetes.
In the years before Eds death Dr. Susan Greenberg was his diabetes
doctor. Sometimes Ed had difculty getting an appointment; and when he
did, the waiting room was packed with dgeting patients. Over the years
Dr. Greenberg had found herself being paid 40 percent less to see 50 percent more patients. Medicare paid only sixty-ve dollars for a moderately
complex clinic visit and nothing for patient education. So after covering
practice overhead, paying malpractice premiums, seeing thirty-ve to forty
patients a day four and a half days a week, and working sixty hours per
week, Dr. Greenberg had to do more each year to maintain her income of
150,000 dollars per year. She had not undergone nine years of training to
work in an assembly line practice analogous to a 1950s Detroit car factory.
At age fty-ve, Greenberg had become dispirited. She and her partner both felt they were marking time until retirement. First, they stopped
taking patient calls after hours: the practices answering machine was
turned on at 4:00
P.M.
days. Its recorded message advised, If you believe you have an emergency,
go to your nearest emergency room. Most other doctors were following
the same protocol, one reason for the citys overcrowded emergency rooms.
Dr. Greenberg and her many colleagues did not intend to burden the
citys emergency resources. She was worn out after thirty-ve years of
school, training, and practice. Now, in middle age, she was faced with
being paid less to do more. She liked medical practice; but for the rst
time she realized that her friends in business were paid more to do less as
their businesses matured and they got older. They made money while they
slept, and she now earned less per hour than she had in her youth. Many
of her business friends had even been able to retire by her age, and this
soured her. Like taking time to educate her patients, she was not paid to
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take after-hours phone calls. These were courtesies, and the time for
courtesies was long past.
At appointments Greenberg would spend about fteen minutes with
Ed Fitzsimmons, using much of that time to review his chart. She would
typically say, Ed, your A1C is too high. I am going to increase your diabetes medicine, and you need to eat fewer carbohydrates. Come see me in
six months. She repeated these remarks as she stared down at Eds chart.
Eds cardiologist, whom Greenberg knew only casually, typically said
to him, Your cholesterol is too high, so lets increase your cholesterol
medicines. You need to eat less fat. Let me see you in a year.
But Ed never found a palatable diet that was low in both fat and
carbohydrates. His glucose was never well controlled because one of the
drugs that the cardiologist had prescribed to lower cholesterol prevented
the intestine from absorbing a drug that Greenberg had prescribed to
lower glucose. Both doctors, on the run, had prescribed blood pressure
medicine and cholesterol medication without knowing that another
physician was duplicating treatment of the same disease. Neither had a
holistic understanding of his history. Neither had tight control of Eds
hypertension or increased cholesterol as a goal of management, even
though the difference between a blood pressure of 130/85 and 130/95 is a
50 percent increase in risk of heart attack or stroke. The seemingly small
difference between a blood cholesterol of 180 and one of 200 milligrams
per deciliter is a 20 percent increase in risk.4 Yet Eds medical management was better than the care of at least 50 percent of Medicare patients
and probably equal to most of the other 50 percent. He died seven years
earlier than he would have if his health been rigorously managed. Yet if Ed
had been an adult in 1955, he would never have lived to age seventy.
Medical science has developed stunning technology, but it could be
applied better. For this the United States needs a different mix of doctors
paid differently as well. The high prices paid for U.S. medicine should be
buying high-quality medical care, but the data indicate the opposite.
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Preventing people from crossing the line from health to disease and
then developing chronic conditions
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Avoidable Hospitalizations
Avoidable hospitalizations are hospital admissions that could be avoided
if preventive measures had been taken before the problem became an
emergency. Minorities and the uninsured are always at more risk for
avoidable hospitalizations, but the single factor that dwarfs all others in
causing avoidable hospitalizations is lack of access to primary care.
One-third of childrens admissions to the hospital and the ICU could have
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been avoided by primary care. About 15 percent of adult hospital and ICU
admissions are avoidable.8
Preventable hospitalizations account for about 6 percent of hospital
spending. Comparing avoidable hospitalizations in Canada (where everyone has access to primary care) to those in the United States (where many
do not), I estimate that the incidence of avoidable hospitalizations in the
United States could be reduced as much as tenfold simply by providing
universal access to a primary care doctor.9
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The quality of medical care does not respect the source of payment.
Uninsured and Medicaid patients have less access to care than do
Medicare and privately insured patients; but when they go to the doctor,
all four groups, regardless of race and economic status, have about the
same 54 to 57 percent chance of getting recommended care.15
The United States ranks last among industrialized countries in its percentage of low-birth-weight infants and infant mortality, but I have never
known whether the fault was just lack of insurance or also the effect of
poverty. When infant mortality was examined among states, an increase of
only one primary care doctor per 10,000 people was associated with a 2.5
percent reduction in infant mortality and in low birth weight. Poverty is a
hard thing to x, but there is strong evidence from several studies that
access to primary care mitigates the effects of poverty on health of patients
of all ages.16 Irrespective of other factors, the United States looks bad on
international comparisons of deaths from diseases that are preventable or
treatable by primary care such as asthma, pneumonia, and cardiovascular
disease, even when adjusted for the effects of factors such as wealth and
smoking. In 1998 the U.S. mortality rate from thirty-four such diseases was
sixteenth among nineteen industrialized countries, whereas Canada
ranked fourth. By 2003 the United States had dropped to dead last in international rankings of deaths that can be prevented by primary care.17
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diabetics every two years to detect eye disease before it becomes untreatable, and discontinuing after hospital admission certain heart medications that can make a stroke worse or fatal. All twenty-four measures are
inexpensive, safe, and highly effective; and all require a doctor to order
them. In some states 95 percent of patients received them, in others only
11 percent. Low-population states and the northeast ranked the best;
high-population states and the southeast consistently ranked the worst.
What can possibly explain why only 58 percent of Alabamans but 86
percent of New Hampshire residents ever received a drug that reduces the
mortality from a heart attack by 15 percent? A second group of investigators decided to nd out. They designated states with high quality of care
as those in which patients received a high percentage of the twenty-four
life-saving treatments. A ranking of 1 designates a state in which a high
percentage of patients received the twenty-four measures; a ranking of 51
is where this measure of quality is lowest. The relationship between quality and spending was a straight linein the wrong direction. The highestspending states provided the poorest care, low-spending states the best
care. Figure 8.1 shows the results.
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NH
VT
ME
UT ND
IA
WI CO
CT
11
CA MN
NE
MT
DE
MA
HI
RI
VA
21
SDWA
AT
IO
NC
NY
MI MD
IN
MO
AZ KS
31
PA
SC
AK
WV NV
NM
CH TN
41
KY
FL
AL
NJ CA
IL OK
AR LA
TX
51
MS
LA
3,000
4,000
5,000
6,000
7,000
8,000
Annual medicare spending per beneficiary (in dollars)
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Dangerous Hospitals
Poor management of medical resources is not only expensive but dangerous. In 1999 the Institute of Medicine published To Err Is Human, a landmark book based on a study of medical errors.1 The institute concluded
that medical errors in hospitals kill between 44,000 and 98,000 people per
year. According to the authors, this number of deaths is equivalent to the
death toll from the crash of one jumbo jet per day, making medical error
in the United States the fth-leading cause of death (if we apply the larger
estimate of victims). They also concluded that the primary problem was
not bad doctors but bad systems. The Institute of Medicines conclusions
were based upon studies that reviewed the medical records of 30,121
patients in New York in 1984 and 15,000 patients in Colorado and Utah in
1992.2 While these gures were old when To Err Is Human was published in
1999, everyone believed that they had remained accurate, although critics
argued that the numbers were inated because some of the patients would
have died anywaycold comfort to the patients.3 As a consequence of this
study, the institute set a ve-year goal of reducing death from medical
error by 50 percent. Though there has been some progress from voluntary
programs, no one believes that this goal has been met.
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78
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79
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The temporary nurse twice paged the wrong doctor, who was not available
to answer; then the nurse gave up. The patient remained in agony all
night as the blood vessels to her hand constricted and nally closed off.
By morning when I saw her, her right hand was dark blue. Only her little
nger was spared. As I walked in, her husband said to me without anger
but with great disappointment, Dr. Clifton, where were you? They could
not nd you all night. A quick response would likely have saved her
hand, and he knew that. She left the hospital with only her little nger
connected to a sliver of hand that projected like a pencil from her wrist,
a bizarre and useless appendage. Disgusted, I moved my regular practice
to another hospital for two years, returning only when there was enough
money for the hospital to have put its systems back into order.
Hospitals are at their best when they function like military operations, with rules that are followed, provisions for the unexpected, and
advance planning. A doctor or nurse never knows when a critical piece of
equipment, a supply, or a medication will be needed immediately. Human
bodies do not behave like machines; their responses to injury, illness, and
surgery cannot be perfectly predicted. For these reasons a hospital only
functions safely if its stafng is adequate for the inevitable ebbs and ows
of patients needs, if its staff is trained, if its facilities are sufcient, and if
its rules are followed. In nancially unstable hospitals patients may lose
more than their hands. Stories such as the following are not unusual
when hospitals are overloaded.
M & M at Bayview
Dr. Simon Brown had been the personication of order at both the
Episcopal and Bayview County Hospital. The recent death of Juan Olivas,
an uninsured man who died of untreated heart disease, was fresh on
Browns mind when he attended the monthly morbidity and mortality
conference at Bayview.
All surgery training programs have morbidity and mortality conferences, usually referred to as M & Ms. At these conferences all deaths in the
hospital and all hospital-acquired complications of management are
reviewed. One purpose is to teach staff members who may have erred as
well as other attendees; the other is to prevent morbidity and mortality in
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Tom, the chief resident, had described a very large blood clot compressing the brain that had been recognized and removed much too late.
It was disturbing that this had happened not only in the hospital but in
a hospital ICU, whose central purpose includes early detection of complications in vulnerable patients.
It was clear to everyone that if the patient been in the neuro ICU, the
nurses there would have contacted the neurosurgery resident on call
when the patient became agitated, a CT scan would likely have been
ordered, and the patient would have been promptly taken to surgery. On
the neurosurgery service everyone knew that an agitated patient probably
meant a developing blood clot. In the SICU, where there were normally no
patients with head injuries and half the nurses were temporary nursing
staff, no one understood this distinction.
Browns next question was Who would give Versed to a patient with
a brain injury who was under observation?
Tom covered for his junior resident, who sat in the back of the room
wanting to crawl under his chair. Dr. Brown, on the night this patient was
admitted I was in the OR or the ER all night and the junior resident never
left the ER. We did not have enough ICU beds in the hospital, and we
could not even clear the trauma rooms in the ER fast enough to make
room for the next patient. It was like we were the only trauma center in
town. We should have evaluated the patient at 3:00 A.M. and done a CT
then rather than sedating him, but we could not physically leave the other
patients to evaluate him.
In fact, most of the other trauma centers were on diversion that
evening. In the midst of the warlike scene in the overburdened trauma
room, a patient who became agitated in an ICU was prioritized as a common and insignicant problem. Everyone knew that, with the closure of
so many emergency rooms in Los Angeles, patients with lesser injuries
that could have been cared for in the nearest emergency room were all
being shipped to the trauma centers. The residents on call during the
night were faced with an impossible task.
At this M & M there were no accusations. The residents mistake was
acknowledged. The nurses mistake was not worth bringing up; a nurse only
lasted on average about one year at the hospital anyway. The two residents
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were among the best in the program. The systems problems were beyond
solution. Brown said nothing more.
Hospitals put little money and effort into error prevention, and they
differ widely in their approach to error.
Medical malpractice suits have almost no effect on a hospitals policies toward error, but adverse publicity has a galvanizing effect.
System Failure
Error is the product of a series of misjudgments and failures.
One major contribution of the Institute of Medicine study has been its
success in shifting our thinking about error in medicine from the concept
of individual blame to one of institutional failure. I agree with the physician leader who has said that good people will routinely be defeated by
bad systems, no matter how well-meaning or hard-working they are.7
Over the years, I have investigated any number of errors involving surgeons, and I have lived with my own mistakes. In every case, a series of
mistakes or mischances permitted the nal error to occur.
In one case an experienced and dedicated surgeon, a close personal
friend, performed an emergency procedure to remove half of a young
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patient after another all day and night until Monday morning, when he
nally saw her again. On Monday morning, he found the patient quadriplegic. The bones in her neck had moved sometime over the weekend,
compressing the spinal cord, a fact that no one had noticed for twentyfour hours; she was permanently paralyzed.
The surgeons error was that he did not see the patient Saturday
evening and Sunday when the problem could have been identied early
and corrected. He also did not sleep Saturday night because he was operating. The hospitals system error was that the patient was admitted to the
wrong ICU because the hospital was overloaded. Had the patient been
admitted to the neuro ICU, where she was supposed to be, the surgeon
would have monitored her throughout the weekend because he was
either there or in the operating room almost continuously. The nurses in
the neuro ICU were used to the neurosurgical regime and would likely
have quickly detected the change in the patients neurological status
when it could have been reversed. The only change made as a result of
this error was that we established a backup call schedule in case a weekend got too busy for one surgeon. The basic problem of overloaded
trauma hospitals continues in many trauma centers, and there are innumerable examples of related or comparable errors.
I knew and worked with both of these doctors, and they were responsible, caring, and procient. They made mistakes, and the people that
worked with them made mistakes. This will happen. The errors, however,
could be prevented or diminished if doctors and hospital administrators
emphasized error prevention and designed systems to reduce mistakes
and complications. The lack of consistency and will is the problem.
Indifferent Hospitals
Hospitals put little money and effort into error prevention, and they
differ widely in their approach to error.
Some hospitals where I worked were much more serious about quality
and error than others were. National data now show what is described as
a quality chasm between the best U.S. hospitals and the others.8
A mistake I never made (and always feared) was to operate on the wrong
patient or on the wrong side of the right patient. Doing so inadvertently
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is easier than might seem possible but nevertheless is rare. The specialties where this error is most likely (in decreasing order) are orthopedic
surgery, general surgery, neurosurgery, and urologic surgery. Wrong site
and wrong patient surgery are uncommon errors but ones without
defense.9 Yet only in 2004, when the accrediting body for hospitals, the
Joint Commission on Accreditation of Healthcare Facilities, required hospitals to institute procedures to eliminate wrong site, wrong procedure,
and wrong patient surgery, did anything happen about this phenomenon
throughout the hospital industry.
Before the Joint Commission mandated standardized procedures,
I observed very different attitudes among hospitals about this well-known
problem. Before patients are brought into the operating room and put to
sleep, they lie undressed and covered with thin sheets on wheeled gurneys
lined up side by side in a holding area. Here a nurse asks each person who
he is and matches the answer against the bracelet on the patients arm.
The patients are also quizzed about what surgery they are having and who
is going to perform it. In one hospital where I worked, the patients would
not be wheeled back to the operating room until the surgeon had personally talked to the patient, conrmed that this was the correct patient, and
conrmed the procedure with both the patient and the nurses. Deliberate
conrmation before the patient is allowed into the operating room is the
proper procedure.
Just down the street in another hospital, the patient would be anesthetized and positioned before the surgeon ever saw the patient, and the
procedure was never conrmed with the surgeon. At this hospital one of my
patients had a near miss. She was rolled into the wrong operating room and
was then told that Dr. Jenkins was ready to perform her surgery. Despite
sedation she was able to ask for the identity of Dr. Jenkins since Dr. Clifton
was supposed to do her surgery. Had she been too sleepy to answer, I think
she would have had a knee operation rather than the warranted back
operation. Years later, the patient still has ashbacks of the event.
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doctor. But hospitals cannot avoid really sick patients, so they just accept
the inevitability of suits. Lawsuits are blunt instruments, and their cost to
a hospital is manageable; therefore, hospitals have no nancial justication to expensively reengineer processes and practices to avoid being
sued. This means that the role of the legal system in error prevention in
medicine, particularly in hospitals, is negligible.
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Each patient in our hospital had a paper chart. When we arrived on the
ward for rounds, these charts could be in the patients room, at the nursing station, with another doctor, or misplaced. Doctors, nurses, and therapists wrote their notes, often unreadable, in longhand. A doctor in a
hurry sometimes simply issued a verbal order, later recorded by a nurse.
I did so many times. Each doctor and nurse who came on duty had to either
read these notes or talk to someone to understand the patients issues.
Such are the antiquated systems used in most hospitals. Nothing
could be more conducive to error, and such methods cannot be replaced
soon enough. Although nearly one-quarter of hospital chief information
ofcers (CIOs) report they have fully operational electronic medical
records and another 40 percent say they have signed contracts for such
services, I am skeptical about the accuracy of such self-reported data in
the absence of good denition of a fully operational electronic medical
record.11 How many hospital CIOs would say that they either do not use
or have no plans for a fully operational electronic medical record? The
hospital industry is a long way from replacing paper records.
Figure 9.1 shows a typical handwritten patient progress note. Doctors
and nurses record the details of a patients medical progress daily. The
notes are handwritten and often cannot be deciphered, as in this example. Interpreting these illegible notes becomes important in the event of a
lawsuit. The usual rule in such suits is that if it was not recorded, it did
not happen. Progress notes thus serve two purposescommunication
among medical staff and their legal protectionso they can be lengthy.
The problem is that they do not perform either function very well.
I know from working in hospitals that serious medication errors
occur every day, and they are largely preventable with information technology and attention to the problem. In the course of writing this chapter,
I was called by a Houston hospital representative about the case of an
elderly woman who was given another patients blood thinner. The
result was a fatal brain hemorrhage. The representative asked, Could the
hemorrhage have happened anyway? I advised the hospitals legal
department to settle.
Such experiences are ubiquitous in all hospitals. Twenty percent of
all complications in hospitalized patients are from medications, and
almost one-third of these are preventable. The estimates of preventable
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order. Once the medication is given, errors result most commonly from
the wrong dose. When physicians enter their medication orders on computers, the rate of serious medication errors is reduced by 50 percent.13
Computerized physician order entry is the industry term for a medical
staffs use of computers to order medications and treatments. In a technique pioneered by the Veterans Administration, bar codes match the
medication dose to the patient. The nurse administering a medication
then matches the medication bar code to a bar code on the patients wrist
bracelet. According to one Veterans Administration hospital, when bar
codes are combined with computerized physician order, medication
errors are reduced by up to 75 percent. Still, the matter is as much about
culture as about tools: with structured attention to medication errors and
without information technology, harmful medication errors were reduced
eightfold in one community hospital.14
The medical industry suffers from lack of a clear vision or standard
for what a fully integrated information system in a hospital should look
like and how it could be integrated with clinical practice. As I will discuss,
there is no business case for the use of information technology because of
the way in which hospitals are paid. For these reasons, use of that technology among various hospital departments varies widely. For instance,
most hospitals record the results of blood work from their laboratories
electronically because information systems naturally integrate with laboratory machinery. Integrating information technology with people is a
more arduous task, so other hospital departments are less likely to
employ it. All hospitals have incorporated computerized billing systems
for years: collections are a priority.
When strict criteria are applied, only 5 percent of U.S. hospitals have
fully implemented computerized physician order entry, eliminating
handwritten orders such as those in gure 9.2. About one-third of U.S.
hospitals are believed to have adopted some form of electronic medical
records. Nonetheless, the charts in three-quarters of doctors ofces and
at least two-thirds of hospitals look like the handwritten progress note
illustrated in gure 9.1.15
Figure 9.2 shows a typical physician handwritten order sheet. The
only way to know who wrote these orders is to be familiar with the doctors
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Violation of Dignity
The End of Life
Not only are patients rights at the end of life often violated, but money
is also wasted. Indeed, at least a quarter of Medicare costs are spent on
the last year of life.1 This in itself is not necessarily a bad thing, but how
the money is spent is another matter.
The manner of Ed Fitzsimmonss death, the patient we met in Chapter
8, illustrates the point. Shortly after Ed suffered his heart attack in the
Episcopals ER waiting room, his breathing became so rapid that a tube was
put into his airway and a ventilator attached, and he was rushed to the cardiac ICU. Elaine Fitzsimmons suspected then that her husband was dying.
The doctors in the ICU took three-day rotations. Dr. Parsons, the physician on duty when Ed arrived, was a fastidious person, so precise in speech,
appearance, and bearing that even his expressions of concern seemed
studied. He attended, even fussed, over every detail of management.
After his rst heart attack Ed had specically told Elaine that he did
not want intensive care if he could not come out of it with high odds of
being able to walk outside and live without assistance. To be sure that his
wishes were met, he had lled out a standard advance directive: If at any
time I should have an incurable condition caused by injury, disease, or
illness certied to be a terminal condition by two physicians, and if the
applications of life-sustaining procedures would serve only to articially
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postpone the moment of my death, I direct that those procedures be withheld or withdrawn and that I be permitted to die naturally. He assumed
that this directive would clearly tell his doctors what he wanted.
Unfortunately, advance directives are not specic documents and do
not provide doctors with precise information. No reasonable person
would wish to be kept alive if they were inevitably to die during a hospitalization, so the language in Eds advance directive told physicians only
what they already inherently understood: that he did not wish to be kept
alive if the prospect of recovery was hopeless. But left undened were the
terms prospect of recovery and hopeless. One person might want everything
done, no matter the cost and consequences to his family, for a slight
chance of high-functioning recovery, even when the downside is a very
high chance of living in dependence, severely disabled. Another might
view those odds with more horror than a certain death. Much depends
upon how a patient views his life before the hospitalization and what he
is willing to accept after it.
Doctors mostly rely upon their own judgment and the wishes of the
family in deciding on life assistance or its withdrawal. That judgment
depends upon doctors views of life and death but also upon their habits
of practice. Some doctors think about such matters and make careful
individual judgments, but many simply apply technology by reex. And Ed
Fitzsimmonss physician, Dr. Parsons, would not let anyone die on his
service if he could prevent it.
Under sedation and with tubes projecting from his mouth, Ed was
mute. Nurses pushed his bed down to X ray day after day for new studies;
more tubes each day exited his arms, mouth, penis, and chest. On the
sixth day of Eds hospitalization, his ngers and toes had taken on a blue
tinge, and the family requested a meeting with Dr. Parsons.
Well, Dr. Parsons began, he is not doing very well today. His heart
failure is worse. Were using high doses of dobutamine for blood pressure
support. He has some peripheral ischemia. This is why his ngers and
toes are cyanotic.
Dr. Parsons, Elaine interrupted, do you really think that my husband can survive this?
Well, Parsons responded, he is very sick, but we have to keep
working to turn his heart around.
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But what are his chances, Doctor? We dont know if he would want
this, interjected Jennifer Allen, the Fitzsimmonss oldest grandchild.
Dr. Parsonss response was His chances are not very good, but there
is always hope. He could turn around.
Just as Parsons applied his skills without much thought for the consequences, he spoke with families without the ability to imagine himself
in their place. Doctors vary in their ability to make value judgments. Most
get better at such value judgments as they gain more life experience, but
Parsons was not among them. His statements were technically true, if
sometimes undecipherable. Eds condition at this time statistically yielded
a probable survival rate of 5 percent. If he lived, his remaining cardiac
function would permit only the exertion that walking around the house at
a slow pace would afford. Parsonss view was that this constituted hope,
not to mention an opportunity for himself to use his considerable abilities. Family members did not know how to ask for the explicit detail that
would have allowed them to make an informed decision, and Dr. Parsons
did not volunteer it. But they suspected that Ed was dying, no matter what
the doctors might do.
Elaine took charge of the situation: Let us talk about it among ourselves, Dr. Parsons.
After Parsons left, the family conferred with Eds nurse, who had
attended the session. She told Elaine condentially that Dr. Parsons never
took anyone off life support and that the family was correct in the judgment that Ed was dying. The nurse explained the process of withdrawal of
care and told them that he would probably live only a short time without
the ventilator and the drugs, but he would not be in pain or suffer. The
family spent two days comparing their observations of Eds physiologic
state as they stared at the monitors. During visiting hours they made mental notes of his heart rate, his blood pressure, his response to medications.
Each day brought worse numbers; and after a resigned family meeting and
reassurances from his nurse that he was dying, the family simply asked the
nurse to convey to Dr. Parsons their wish that the breathing tube be
removed and the medications stopped. The scene was a common one in
the ICUs small pods: a family transxed around a bed in suspense that
each unnatural gasp would be the last. The older grandchildren were sobbing, having never imagined anything like this. The adults worked to bring
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dignity to Eds death by retaining their composure. Finally Elaine whispered to him, Ed, let go, its all right, after which he died.
Ed Fitzsimmons, against his wishes, had expended more than 50,000
dollars in medical costs during the ten days of his ICU stay and had undergone a series of fruitless medical interventions that he did not want but
was powerless to deny.2 From the moment his heart failure became so bad
that he required a ventilator and his blood pressure so low that medications were required to support it, his outcome was certain.
Ed Fitzsimmonss stay in the ICU had consumed enough resources to
provide health insurance for a year to thirty-three uninsured children. Had
he been able to discuss his options with his physician in an ofce setting
before his heart attack, the doctor would have told him that his heart disease was so severe that his likelihood of dying or needing a ventilator if he
had another heart attack was 95 percent, with severely limited independence if he should survive. Ed would have responded that he wanted everything done up to the point of being put on a ventilator, but no more. The
family endured ten days of gnawing anxiety and powerlessness that robbed
their grief of peace and left unresolved doubt in the family. Whether they
had done the right thing was a topic of family discussion for the next year.
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responses of our sister hospitals as they, too, turned the patient down.
I had either worked in or visited most of these hospitals and had spoken
to the referring physicians many times, so the scenes in my mind were
very specic. As the incidence of slowly dying patients in their seventies
and eighties intersected with the crisis of the uninsured, my own emotional and ethical resources were taxed.
The nurses almost always knew when it was time to stop treatment or
when ICU care should not be started in the rst place. Our nurses would
often come to me, frustrated, when a doctor, often one of the younger
ones, would neither stop care nor take the time to explain to the families
that further care was futile. At our regular service meetings I would
emphasize the need to clarify early decisions about withdrawal of care
when care was futile. I would discuss how a doctor should talk frankly to
a family. I would tell the doctors that they should recommend a course of
action to the family and defend it, an approach that helps to relieve family members of guilt and dissension later. As soon as my attention turned
to other matters, however, care of the terminally ill drifted back to its
baseline state. There was a good reason: all of doctors nancial incentives and training made it more natural for them to apply their skills than
to take the time to help families work through emotionally difcult decisions at the end of life.
Some of the surgeons were eager to operate and eager to cure. They
were good at both. The families were always stunned in such emergencies,
unable to absorb their potential loss. Conversations occurred hurriedly in
the emergency room or in the cold, tomblike consultation room of the
ICU. The matter would be presented to the family as We have to perform
surgery right away or your father will die. In these situations, a family
usually says, Whatever you think, Doctor. If families are told in understandable terms about the best and worst cases for disability, their
response is usually Oh, he would never want that. Without this conversation, they typically embark upon the long road to a slow death.
People who talk about this problem believe that an unreasonable
public demands excessive care in the face of hopeless injury; yet the medical literature indicates that this happens in only about 4 percent of cases,
and my experience is the same.3 I only remember three or four cases out
of maybe a thousand that I managed in which a family insisted that we
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No Personal Autonomy
The problem here is not with the families. It is with the doctors, which
should surprise no one. My observation is that doctors, or at least surgeons, have been drilled since medical school on not making mistakes, on
death as the enemy, on the assumption that a bad result is the doctors
fault except in the most hopeless cases. When skills are developed and the
doctor is paid to employ them, what else is he to do? This attitude is one
explanation for why the best of American medicine is among the best
medicine anywhere. Doctors do not easily move from an ingrained lifesaving mode of action to the recognition that they have nothing to offer.
Doing so is an acquired skill that some never acquire.
In a life-threatening condition only the patient knows how much
treatment she desires. When people who are not patients are asked if they
would want life-sustaining treatment in the event of coma with the chance
of recovery, 43 percent want treatment, and 15 percent want everything
done even when the outcome is dementia.4 When 9,000 hospitalized
patients were asked whether they were willing to live in a nursing home,
slightly more than half were unwilling or preferred death. A familys and a
physicians ability to predict patients wishes are no better than chance.5
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By 1992 every state had some legislation legalizing advance directives, and
such regimens are widely used.
Yet for several reasons, advance directives have not had the hoped-for
impact on end of life care. Many patients do not have them, or they get lost
in the hospital.6 Their language is vague, and physicians do not pay attention to them. One-third of physicians say they will continue life support
even when they know the patient does not want it, and the majority of
physicians will decide on their own to withhold or withdraw life support if
they judge it to be futile. Physician judgment is biased by the patients diagnosis or the physicians own religious or ethical practice or lack thereof.7
Doctors, whether old or young, may professionally view death as the
enemy. Like Dr. Parsons, they may feel they have in some measure failed
if a patient dies on their watch. Young doctors may not have seen enough
of life to understand that there are human conditions worse than death.
Sometimes doctors make independent judgments about ending or continuing care out of arrogance, as a way of avoiding having to talk with the
family or because they underestimate the ability of normal people to
process medical probabilities. Biases about the outcomes of given diseases are common. I know many neurosurgeons who view a patient with
a severe brain injury as a hopeless case, recommending withdrawal of
care for patients whom I would expend all resources to save. But I have
spent my professional career trying to improve the outcomes for patients
with severe brain injury, whereas my colleagues who seldom care for such
patients may only remember the vegetative survivors, not the ones who
return to work. As a combined result of these complex and very human
reasons, advance directives have not saved money.8
An Important Experiment
A study called SUPPORT dispelled any illusions that money could be saved
and patient autonomy preserved by encouraging doctors in hospitals to
use intensive care more judiciously. By the early 1990s researchers had
made the puzzling observation that death rates for the same conditions
varied widely among U.S. hospitals. The corollary was that no one knew
what the death rate for various conditions ought to be. Without measures
that allowed prediction of terminal illnesses, researchers could not
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SUPPORT who lived through their rst hospitalization and then died
within six months, 81 percent wanted to die at home, but only about half
got their wish.10 SUPPORTs extensive on-site and real-time physician education had no effect whatsoever on physician behavior toward patients at
the end of life. Reading between the lines of these scientic papers, I felt
the investigators anguish. I think these researchers did not want to
believe the results they were reporting but knew they were accurate.
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Unnecessary Surgery
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U.S. regions) have divided surgeries into those that are always indicated
when they are performed and preference-sensitive surgeries whose
use depends on the surgeons opinion and the patients wishes. While
preference-sensitive surgeries are always valuable in some group of
patients, their value in other groups is untested and unknown.
Preference-sensitive procedures have another characteristic: their
frequency of performance varies considerably among hospital referral
regions. Procedures that are always indicated, such as surgical repair of
hip fractures or removal of colon cancer, vary in frequency by a factor of
two to four among regions. But in 2003 preference-sensitive surgeries
such as heart bypass operations, knee and hip replacements, surgery for
vascular problems of the legs, and prostate surgery varied in frequency
among regions by factors ranging from four to twelve. Back fusion is
among the most highly variable of procedures. For example, the frequency
of performance of spinal back fusion varied by seven times more than the
frequency of hospitalization for hip fracture among hospital referral
regions in southern Florida.4 If there are best practices for these procedures, no one knows what they are.
When I examined the costs of hospitalization in the United States for
2002, I found that the classes of procedures that the Dartmouth investigators consider to be preference-sensitive accounted for 18.3 percent of
the total charges of hospitalization for all causes, and these are not the
only such procedures in medicine. According to an estimate based upon
a review of the medical literature and the cost of preference-sensitive surgery, as little as 4 percent and as much as 8 percent of U.S. hospital spending is for surgery that might be unnecessary or unwanted if patients and
doctors were to have full information.
In the absence of denite information about who does and does
not benet from a procedure, doctors rely on their own experience and
judgment. Such conclusions can be colored by self-interest, limited by
personal experience, and complicated by a lack of big-picture information,
including an understanding of a problems natural history without the
treatment in question. And sometimes surgeons like Raymond Alford just
decide to get very busy.
In areas where Medicare spending is high, concentrations of specialists hospitalize patients with chronic diseases, test them extensively,
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the back. In fact, the only two reasonably objective studies of fusion for
low-back pain versus physical therapy came to opposite conclusions.5
Back fusion has been proven to make one group of patients with
degenerative spine disease better: those with a mechanical slippage of the
vertebrae in their low backs.6 Spinal fusions with hardware have been
such a breakthrough in the treatment of spinal fractures that no reputable doctor would consider large-scale testing of fusion surgery with
instrumentation versus surgery without instrumentation.
I performed more than 1,000 fusions of the neck (called cervical
fusions) and thought that my patients beneted from them. Like most
surgeons, I maintain that I never performed a procedure on a patient if
I did not believe that person would benet from it. That said, however,
I relied upon the incomplete information of personal experience. During
my three decades of practice, spinal surgery changed radically without
any formal evaluation of the effectiveness of those changes.
Twenty years ago surgeons treated spinal degenerative conditions
that produced nerve pain by removing bone or disc material that pressured the spinal cord or nervesprocedures called decompressions. With
reasonable certainty, clinical trials have proven common decompressions
of the low back to be more effective than nonsurgical management.7
While surgeons still perform these simple operations, half of all spine surgeries are now fusions, usually performed along with decompression.
Before discussing how simple procedures have been converted to
much larger ones without benet of evidence, lets take a look at how the
two procedures differ. Figure 11.1 illustrates a normal spinal vertebra in
the low back in cross-section, as if one were looking down on the spine
from above. The roof covering the uid-lled nerve sac is the bony prominence of the spine that can be felt under the skin in the middle of the
back. The round block of bone in the front is called a vertebral body, and
it supports the weight of the body above it and projects into the abdominal cavity. It cannot be removed because of its load-bearing function. The
nerve sac is the stippled triangle in the middle of the vertebra, each nerve
a black dot oating in white spinal uid. The nerve sac has ample room
to accommodate the bundle of nerves and the surrounding uid.
In the cross-section of the compressed spine, the nerve sac is attened
and the spinal uid squeezed out so the nerves have no room, causing
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Vertebral
body
Nerve
sac
Roof
Normal
vertebra
Compressed
nerve sac
Decompressed
nerve sac
back pain, leg pain, and weakness. The decompression procedure involves
removing the roof. As a result, the nerve sac bulges out of the new opening, and the uid level bathing the nerves is restored. As surprising as this
seems, only a few patients suffer weakening of the back as a result of such
decompressions.
Decompression with spinal fusion goes a step further. Large screws are
placed into the vertebrae. At least two pairs of screw heads are inserted,
one set in each vertebra. The screws in the successive vertebrae are held
together from top to bottom by steel rods attached to the screw heads. Bone
from the hip is molded around the screw heads, and over time the bone
grows together. The hardware alone is insufcient to stabilize the spine.
Figure 11.2 shows the view of a lower back from behind as if looking at
someones back. On the left is a normal spine with the roof covering the
spinal sac. The section marked decompression shows what the surgeon sees
Screws
Rod
Nerve sac
Source: Roy Prichard, Ofce of Communications, University of Texas Medical School, Houston.
Sacrum
Roof of spine
Roof of spine
removed
Nerve sac
With decompression
and fusion
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Vertebrae
Nerve sac
With decompression
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after removing the roof of the spine that compresses the spinal sac. The
section marked decompression and fusion shows the surgeons view after
screws and rods are added to the decompression. The internally implanted
devices hold the spine immobile while the bones grow together. Without
the stability provided by the hardware, the fusion rate is low. The hardwares contribution to surgery was to dramatically increase the rate at
which bone implanted in the back turns into a solid fusion.
It is not difcult to understand why a surgeon would be paid more for
a decompression and fusion than for a decompression alone: the procedure involves more than twice the work. But one of the rationales for fusing a back without a slippage is faulty, and the other is unproven. One
common justication for fusion and decompression of the low back is to
prevent the decompressive surgery from destabilizing the spine. But only
about 2 percent of decompressions weaken the back, and the complication rate of fusion is several times higher than thatwith the side-effect
of leaving the patient with an immobile spine. Knowing those odds, who
would want this operation?
Another more common rationale for fusion is the assertion that eliminating the spines ability to bend and turn will relieve pain, an untested idea
and the one used to justify Jennifer Allens surgery. The opposite may as
likely be true: fusion in people without slippage may cause low-back pain.
Nearly one in ve adults has back pain sometime during a one-year
period. One-third of asymptomatic individuals over forty years of age have
degenerative changes in their cervical spine. A 1994 study showed that 64
percent of people without back pain show degenerative changes in their
low backs on MRI. Only 6 percent of women and 1 percent of men have
slippage of the bones in their back, and many of them have no symptoms.8 The human spine is therefore a fertile area for surgeons with an
operation to cure back pain, no matter that the proven indications are
narrow.
My analysis of U.S. hospital data shows that, in 2005, 44 percent of
the patients who underwent back fusion had either a slippage or a traumatic injury. The remainder underwent back fusion for unproven indications. Cervical fusion has never been studied in the way that lumbar
fusion for spondylolisthesis has, yet cervical fusions made up about 40
percent of all spinal fusions performed in 2005. So in that year 62 percent
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2.5
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er
rg
1.5
1.0
sio
su
Fu
Decompressive su
rgery
0.5
0.0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
FIGURE 11.3 Spinal surgery as a percentage of U.S. hospital charges
Source: Authors compilation of data from the Agency for Healthcare Research and
Quality, Hospital Cost and Utilization Project, Nationwide Inpatient Sample,
19932005.
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500
475
450
425
400
375
350
325
300
275
250
225
200
175
150
125
100
75
50
25
0
Marginal benefit
Proven benefit
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
FIGURE 11.4 Number of U.S. hospital admissions with coronary catheter procedures
Source: Authors compilation of data from the Agency for Healthcare Research and
Quality, Hospital Cost and Utilization Project, Nationwide Inpatient Sample,
19962005.
heart attack (proven benet) and those for patients admitted with stable
chest pain (marginal benet).15 Figure 11.4 shows the number of U.S. hospital admissions for both types of patients. Since 1996, the number of
catheter procedures performed for stable angina has remained at double
the number performed for heart attacks, suggesting that the indications
for performance have changed little over a long period of time, despite a
decade of randomized trials showing that catheter procedures for heart
attack have effect on the rate of heart attack. The gure illustrates why
new technology, even if it is less expensive and more effective than older
technology, increases the cost of medical care.
On March 27, 2007, a group of investigators funded by the Veterans
Administration published a study of 2,287 patients with stable angina
from heart disease. They compared aggressive medical management plus
the most advanced catheter procedures available versus aggressive medical management alone. Like all previous studies, this one found no difference in the future rate of heart attack and death.16 Catheter procedures
decreased the percentage of patients with symptoms of angina by 13 percent in the rst year. (Sixty-six percent of medically treated patients still
had anginal symptoms versus 58 percent in the group treated with
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catheters.) This small effect decreased each year, and by ve years there
was no difference in the rate of angina between the two groups.
Like all previous studies, however, these ndings are not likely to have
a great effect on the proliferation of these expensive procedures. According
to the Washington Post, the cost of each of the catheter procedures is 50,000
dollars.17 More than 484,000 catheter procedures of marginal benet were
performed in 2005, with a total cost of 25 billion dollars. Now consider the
situation of the State Childrens Health Insurance Program (SCHIP), which
is similar to Medicaid and provides health insurance to poor children. In
2007 the program only had enough federally allocated money to cover
about 70 percent of eligible children, leaving 2 to 3 million uninsured but
eligible children unenrolled in the program. The annual cost to the federal
government of insuring those missing children plus all eligible children for
one year is about 12 billion dollars. A bill to fully fund this program was
vetoed twice by President George W. Bush. In 2007 the bill failed to pass the
House and the Senate with a veto-proof majority primarily because of the
cost, leaving at least 2 million children eligible for coverage but without
enough money to cover them. How is it right that so much money was
wasted on procedures of marginal value while there was not enough money
to insure poor children? Medical waste in the form of unnecessary procedures is an issue of justice as well a disservice to those who undergo them.
Later in this book I will propose steps to decrease the rate of dissemination of such procedures. But I will not propose that any third party
insinuate itself between the doctor and the patient in judging who needs
procedures that are likely to have marginal benet; such matters are not
always black and white. For instance, in some clinical trials, as many as 60
percent of patients with angina have symptoms so severe that they cannot
walk over two blocks without chest pain. Many but not all can be treated
effectively with medical management. After weighing the complication
rate of the catheter procedure, which is a 0.4- to 4.9-percent rate of heart
attack, against a chance of being free of symptoms, those with severe
symptoms might opt for surgery.18
Why are doctors and hospitals so aggressive about promoting poorly
evaluated procedures and those with marginal benets over medical management? The reason is the perverse nancial incentives provided by feefor-service medicine and unexamined medical practice.
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12
Perverse Payment Incentives
Fee-for-service medicine combined with poorly evaluated technology has produced a medical arms race.
Medicare and private insurance pay doctors for each service they provide, no matter the circumstances or the results. Both have historically
controlled their costs by setting the price they will pay doctors per service
and then cutting prices across the board when the number of services
becomes excessive (regardless of whether the services are required by the
patients condition or are just medical waste). This fee-for-service payment system has created perverse incentives in medicine. It could also be
called fee-for-process.
Everyone is familiar with how cars are priced. But what if cars were
priced like health care services? Imagine that each step involved in making a car is priced at a xed rate, as each medical service is priced by
Medicare. Rather than paying for the car itself, each consumer pays for the
number and the complexity of processes that went into making the car:
the more complicated and numerous the processes, the higher priced the
car. Do you think a car manufacturer would produce a car as efciently as
possible or try to exploit such a payment system by adding processes?
Manufacturers of cars produced under a fee-for-process payment system would drive up car prices by adding unnecessary steps until cars
became unaffordable. If the car industry were like Medicare, then the government would be forced to take action to limit the prices that manufacturers can charge for each process so that the public can afford to buy
cars. The car industry would then respond by adapting its manufacturing
so that the steps in making a car are more complex and numerous. This
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12
10
8.6
7.5
5.7
6
Percent
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2
0
2
1.9
Wage and
price
controls
4
6
8
1.7
Voluntary
Effort
1.3
1970
1975
1980
1.0
Fixed
payments
to hospitals
1985
Fixed
payments
to doctors
1990
1.4
Price cuts to hospitals
and nursing homes
1995
2000 2002
FIGURE 12.1 Annual changes in Medicare spending per beneciary with federal
actions
Source: Authors compilation of data from the Centers for Medicare and Medicaid
Services, Per Enrollee Expenditures and Growth in Medicare Spending and in Private
Health Insurance Premiums: Calendar Years 19692004 (Baltimore, 2005); Louis D.
Johnston and Samuel H. Williamson, The Annual Real and Nominal GDP for the
United States, 1790Present (Oxford, Ohio: Economic History Services, October
2005), http://www.eh.net/hmit/gdp/.
cost escalation surged until 1997. The Balanced Budget Act of 1997 cut the
prices that Medicare paid to hospitals and nursing homes, bringing the
programs cost growth into negative numbers. This legislation, combined
with the payment cuts of managed care during the 1990s, precipitated the
emergency room failures we experience today.
I once imagined that insurers and businesses that operate in a competitive market were more nimble than federal or state governments in
controlling their health care costs. I thought that large employers that do
business in a globally competitive world understood how to create a competitive environment for medicine. On the contrary, with the single exception of managed care in the 1990s, only government intervention has
decreased the growth of private insurance spending, just as it did in the
Medicare program. And in the same way, after each round of price controls, doctors and hospitals just increased the number of interventions
they provided to patients, meaning that prices were never controlled for
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9.0
8
8.3
6.7
123
Average annual
change in private
per capita
national health
8.9
spending,
adjusted for
inflation (3.7%) 6.4
12
7.0
6.0
4.9
Percent
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3.5
3.8
2.9
1.1
0.2
Voluntary Effort
1.5
Wage and
3.0
4
price controls
Medicare and
medicaid implemented
8
0.9
1.9
0.5
1.2
Managed care and
threat of health reform
1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2004
FIGURE 12.2 Annual changes in private per-capita national health spending with
federal actions
Source: Kaiser Family Foundation, Trends and Indicators in the Changing Health Care
Marketplace (Menlo Park, Calif., May 2005).
long. Figure 12.2 graphs the annual escalation in private insurance spending over forty-two years.
The rst decrease in private spending came with the 1965 creation
of Medicare and Medicaid during the Johnson administration. Private
health insurance spending fell because businesses no longer bore the full
costs of their retirees health care. The wage and price controls of the
Nixon administration brought down private health care spending, just as
they did for Medicare spending. Except for a period during World War II,
this was the only time that economy-wide price controls were ever
applied. They lasted until 1974, and the reduction in health care cost
escalation also lasted only that long. The hospital industry dismantled
its self-imposed Voluntary Effort in the 1980s, and health care ination
rapidly escalated.
The governments next initiative, the proposed Health Security Act,
took place during Bill Clintons administration and was an effort to implement federally mandated managed care coupled with mandated insurance coverage of the entire U.S. population. The act was a creation of
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health care economists, who estimated that health care costs could be
reduced by 30 percent if they were managed. Of course, they were right.
The Health Security Act did not become law because of Republican
opposition, political mismanagement, a 50-million-dollar advertising
campaign by the health insurance industry, physician opposition, business opposition, and public fear of allowing a new unresponsive federal
bureaucracy to manage their health care. Still, it had sweeping effects on
the private insurance market because it stimulated the rush to cut health
care prices in the name of managed care. Nonetheless, health care prices
were muted for only a few years.1
Those who fear any form of government intervention in controlling
health care costs should look at history. No other action has ever managed the cost escalation of either government- or privately nanced
health care. Those who think that fee-for-service medicine is a sustainable way of paying doctors should consider its forty-year record in
Medicare and Medicaid. And those who believe that the private insurance
industry as it currently functions controls cost better than governmentnanced health care should compare the two. There is not much difference. Clearly, we must regure how doctors and hospitals are paid and
how the insurance industry functions.
The question of how to reduce health care cost usually devolves into an
argument over a single-payer versus a private health care market. However,
that is the wrong question. Based upon the past history of Medicare and private insurance, neither public nor private payers have been able to manage
a cost that grows at double the rate of the economy. The critical questions
are what services are paid for and how providers are paid for providing
them. Paying doctors and hospitals by fee-for-service with price cutting to
manage cost has not only failed to control health care cost, it has devalued
primary care and produced a destructive change in the culture of medicine.
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TABLE 12.1
Mean income
(in 2005 dollars)
Number of clinic visits
Number of hospital
encounters
1990
1995
2000
2005
$168,835
$181,319
$176,868
$180,490
4,553
4,529
4,307
4,182
341
680
917
841
TABLE 12.2
Mean income
(in 2005 dollars)
Number of clinic visits
Number of hospital
encounters
1990
1995
2000
2005
$475,237
$455,431
$450,116
$460,464
1,975
1,880
1,863
1,882
538
1,125
1,284
1,193
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A Business Culture
Medicine has developed into a business culture, one in which the business of medicine has trumped the vocation. This phenomenon reects
the American consumer society in which doctors live and practice. It is
also driven by the attitude of patients who view themselves as consumers
of medical services rather than patients of a given doctor.
The problem started with managed care in the mid-1990s. Managed
care arrangements always featured patients restricted access to a small
group of doctors, a feature that aided in cost control. Unfortunately, many
patient-doctor relationships that had developed over years were abruptly
severed. I remember sad conversations in which I advised long-time
patients whom I had come to know personally about which neurosurgeon
on their new plan would take the best care of them. The sudden reduction
in fees and abrupt patient displacement broke a nancial and social contract between doctors and patients all over the United States.
A severing of accountability and responsibility accompanied this new
relationship, rst evidenced when specialists began to refuse to take
emergency call. Since my training days, there had been an unspoken
understanding that staff doctors at a hospital took call for emergencies
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every night, weekend, and holiday of the year. It was part of our job to
keep the emergency room covered by each specialty all the time.
But call has downsides that go beyond simply being in the hospital
when most people are home with their families or asleep. The patients
whom surgeons admit when they are on call are usually in a critical state
and may remain in the hospital for days or weeks. Many are uninsured.
Surgeons on call only earn signicant income when they operate on
insured emergency patients, and surgery accounts for only a small part of
on-call work; most time is spent going in and out of the emergency room
to evaluate either a mortally wounded patient who cannot be helped or
someone who proves to have a minor injury who does not need help.
When I took neurosurgery call, these evaluations went on day and night,
and they were exhausting. Another deterrent is the belief among surgeons
that a doctor is more likely to be sued by emergency patients than by
patients who come through the ofce, though the evidence, at least in
neurosurgery, is to the contrary.
But regardless of these downsides, we were all trained to take call,
and the job had to be doneuntil sometime in the late 1990s, concurrent
with fee reductions, when surgeons and other specialists concluded that
it did not have to be done. When the Texas emergency services system
imploded during the middle of the 2003 legislative session, a crisis that
led to passage of a bill funding uninsured trauma care, hospitals refusal
to meet neurosurgeons demands for substantial on-call payments in
three different Texas cities had precipitated a simultaneous near-closure
of several trauma centers. The hospitals were already faced with losses
from uninsured trauma care and balked at accepting the new, large,
ongoing expense of paying doctors to take call.
The problem is national in scope. For example, one morning in 2004
I received a telephone call from a representative of a hospital in Orlando,
the only level 1 trauma center in all of central Florida. The hospitals
entire neurosurgery staff had refused to take call unless they were paid
3,000 dollars a day at a yearly cost of 1.1 million dollars to the hospital.
A major trauma center cannot function without neurosurgeons, so their
ultimatum to the hospital was to either pay or close to trauma. I advised
the hospitals administrators to meet the demand because they would
have difculty recruiting neurosurgeons to replace this group. The
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Conict of Interest
A second telephone call removed any doubts I may have had about
whether or not the business of medicine has trumped vocation. In 2004
a friend who is a spine surgeon called me to say, Guy, have you heard
about the new spine hospital that is going up? I had not, so he continued,
If you put in 40,000 dollars, you can make 40,000 dollars a month from
owning a share of the hospital. Most of the doctors you know are going
in as partners. He then gave me a long list of some of the busiest neurosurgeons and orthopedic spine surgeons in Houston.
I asked, Whats the downside?
He responded, Its unlikely to fail, but we would all be on the hook if
it should.
My next question was Do I have to operate on my patients there?
After a long pause he said, You dont have to, but you would probably want to.
He said this because he knew that a physician-owned specialty hospital has several advantages for its doctor-owners. Efciency of practice
drives physician ownership of hospitals at least as much as direct nancial incentives. A surgeons life revolves around access to the operating
room, and a surgeon can usually perform several times more surgeries per
day in a hospital he or she owns. Another attraction is that most doctors
believe that nursing care is better in physician-controlled hospitals. Also
by operating in hospitals they own, doctors can avoid taking care of the
uninsured: the emergency rooms of such hospitals exist in name only.
Finally, physician-owned hospitals are lucrative.
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hospitals? Or are the physicians who own these centers telling their
patients what medical services should be performed in them? Is their
growth fueled in part by the performance of procedures that have questionable value?
Physician-owned ambulatory surgical centers increase the total volume
of outpatient surgeries in a community by about 9 percent. Further, the procedures performed in them have not slowed the growth of Medicares cost
or the frequency of hospitalization per beneciary.11 How many procedures
performed in physician-owned ambulatory surgery centers are necessary?
How many are not? The answers are unknown, but the data raise the suspicion that the number of unnecessary procedures could be signicant.
The problem of conict of interest extends to all forms of medicine,
including cancer care and treatment of kidney disease. Doctors buy drugs
for cancer and kidney failure, mark up the price, and then administer
them to patients in their ofce. The prots from drug administration
often account for the majority of cancer doctors income. Questions have
long been raised about the appropriateness of care rendered with such
nancial incentives. A study of Medicare patients in Massachusetts and
California found that one-third of cancer patients received chemotherapy
in the last six months of life and that patients with cancers known to be
unresponsive to chemotherapy (that is, the drugs were useless for slowing
the cancer) were as likely to receive chemotherapy as patients with cancers known to be responsive to this treatment.12 A New York Times story
reported on a group of six cancer doctors who received 2.7 million dollars
in rebates for prescribing 9 million dollars in drugs administered. A similar pattern of apparent overprescribing and huge rebates occurs in the
treatment of anemia for renal failure.13
Conicts of interest clearly drive medical waste, and so does fee-forservice medicine. It is against human nature for doctors to practice efcient medicine when they are paid so well for inefcient medicine.
Several reforms are needed, but one is paramount. The payment system
must be changed so that a doctor who is managing a patient shares in the
savings from efcient, high-quality medical practice (better outcomes)
rather than prots from inefcient practice (more use). Inefcient doctors should lose money in such a payment system. A core purpose of this
book is to show how to accomplish this goal.
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and
obstetricians
(commonly 100,000
to
200,000
dollars
per year) typically rose far more than 10 percent during this period.
In 2002 and 2003 some Texas neurosurgeons and obstetricians moved
their practices from highly litigious communities where juries were
known to be unsympathetic to doctors, leaving them without those
specialties.
But I never believed it was simply the cost of malpractice premiums
that drove specialists away. If a practice is collecting 1 million dollars per
year, common for some surgical specialties, an additional 50,000 dollars
in overhead for malpractice premiums would not compel anyone to
move. I think specialists got tired of being harassed by frivolous suits and
living in fear of being tagged with a career-ending, multimillion dollar
judgment. That was certainly my attitude.
States have reacted to these periodic spikes in malpractice premiums
by capping the size of awards. Punitive damages are the awards that a jury
levies to punish a doctor or a hospital, and they can be large if a jury is
outraged. States have commonly placed limits on punitive damages: Texas
set the limit at 250,000 dollars in 2005, and California has had a similar
cap since the 1970s. If medical malpractice were the major driver of
health care costs and caps on punitive damages were the answer, then
California should offer the cheapest health care in the United States. But
it does not. The best evidence is that state caps on damage awards do
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reduce the frequency of suits, the size of awards, and insurance premiums
and may increase the number of doctors in the state.15
The other component of an award is money used to care for a patients
needs as a result of the medical injury. Such awards may be small in older
patients with short life expectancies, even though their life may have been
shortened by a mistake or possibly an egregious medical error. When the
award for damages from a medical error is small because a patient wont
live very long, older patients and those without money to pay for a lawsuit
may not be able to nd a lawyer to represent them in states where punitive
damages are capped. The cost of conducting the suit may be too great in
proportion to the expected award. Such caps, in other words, solve one
problem but create another. The evidence is that litigation does increase
health care costs but not nearly as much as is popularly imagined.
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Three Pathways to
Hospital Profitability
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served on the hospital board, Jack concluded that it must possess purity
of purpose.
Jack found a friend on the boardcardiac surgeon Simon Brown. He
was one of the few physicians on the Episcopal board and was widely
respected, if not widely loved, by the hospital staff. Brown did not gracefully tolerate mediocre performance. He had been one of the hospitals
top-ten producers for years, was a professor at the medical school, and
also taught residents and medical students at nearby Bayview County
Hospital. (Both the Episcopal and Bayview served as teaching hospitals for
the medical school.) Brown had managed to bridge the opposing camps of
the medical school, the hospital, and the private doctors by always coming
down on the side of good patient care, no matter what the dispute.
In his new job Jack began to calculate the winning and losing cost
centers dispassionately and accurately, just as he had done in industry;
and his regular meetings with Brown provided critical insights into the
Episcopals workings. Sixty percent of the hospitals patients were commercially insured, 25 percent had Medicare, and the remainder were
either uninsured or insured by Medi-Cal (Californias Medicaid program).
Three groups were responsible for the hospitals nancial losses: emergency Medicare patients, Medi-Cal patients, and uninsured patients. In
Los Angeles County, 20 percent of the public was uninsured and 24 percent
were on Medi-Cal; and numbers of people from both groups appeared in
the hospitals emergency room.
The Episcopal could encourage protability by caring for privately
insured patients and Medicare patients who needed total knee and hip
replacements, back fusions, and heart procedures and by avoiding
Medicare emergencies. The trick therefore was rst to reduce the volume
of emergency Medicare business and eliminate Medi-Cal and uninsured
business without compromising the hospitals non-emergency business
and then to promote surgeries in the freed-up space.
An analysis of the hospitals intensive care units identied the
sources of prot and loss. The ICUs for heart and transplant surgery were
protable. The neurosurgeons patients were mostly non-emergencies
and not very sick, so a small ICU that functioned more like an observation
unit than an ICU sufced for their care. This little ICU offered a positive
nancial prole, and both Jack and the neurosurgeons wanted to avoid
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emergencies. Expanding the unit would make room for them, so there
was no consideration of enlarging it. The units showing major losses
tended to be the medical ICUs, which housed older patients with heart
failure, diabetes, stroke, lung failure, and infections and usually served
emergencies.
Jacks rst recommendation was to halve the number of medical
intensive care beds and to freeze or increase the capacity of the specialized
surgery units. It was not possible to close the emergency room: hospitals
are required to have them, and the Episcopals commercially insured
patients needed emergency services. So he proposed to keep the emergency room at its current size, despite increased demand, and to maintain
only two ambulance bays for unloading patients. A temporary chain-link
fence that had originally marked a construction site was left permanently
in the driveway to further complicate ambulance access. When either the
emergency room stretchers or the ambulance bays were full, the hospital
would simply announce itself to be on emergency room diversion.
When Jacks suggestions were implemented, the Episcopal began to
post a prot. From his fourteenth-oor ofce, Jack looked out of his window and dreamed good dreams of service to the community coupled with
rational protability. He wasnt alone: similar decisions were being
enacted all over Los Angeles County.
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Marcia also hoped to travel and play tennis. Retirement was a longawaited reward for both of them.
Taylor had undergone one heart surgery already and had managed
his insulin-dependent diabetes with scrupulous attention to detail since
he had developed the disease in his twenties. Recently, however, he had
developed an irregular heart rate; and one of the complications of this
condition was that his heart could throw off blood clots. He prevented
this problem by taking powerful blood thinners daily. Yet for reasons that
his doctors could not explain, the dose of the blood thinner had to be
continually changed. On one day his blood might clot normally, as if his
body were immune to the medications; on the next day, he was overthinned and at risk of hemorrhage. So in addition to paying close attention to his diabetes, Taylor had to carefully monitor the condition of his
blood. Though he regularly saw a doctor at nearby Foothills Regional
Hospital, a small facility, Taylor already knew so much about his own
health that the doctors acted almost as consultants to him.
Since his retirement, Taylors habit each morning was to sit on his
open patio, where he would drink coffee, watch the jays squawk in the
cedars, and listen to the LA trafc reports with a sense of satisfaction about
no longer needing them. Marcia would sit next to him and read the paper.
On a Sunday morning in 2007, however, he noticed a dull headache. By the
time he had nished his second cup of coffee, the headache had become so
severe that he mentioned it to Marcia. Within half an hour his speech had
became garbled. His wife called 911, and an ambulance promptly took him
to Foothills.
The Albrittons had no way of knowing that, at this time, San
Fernando Valley had the highest ambulance diversion rates in the state.1
Typically, big hospitals with large emergency rooms and full technological
capability were the ones most often on diversion. At small Foothills, a
one-hundred-bed community hospital, the cause of Taylors headache
could be diagnosed but not treated.
Dr. William Garza had been an emergency room doctor at Foothills
for ten years. His greatest frustration lay in the problems he encountered
when trying to transfer seriously injured or ill patients. He never got used
to contacting one LA hospital after and being told that there were no beds
but we will call if one opens up. Eventually a bed always did open up,
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but frequently the call came too late. Dr. Garza knew good medicine from
bad medicine, and he resented being implicated in the practice of bad
medicine. He was powerless to do more than care for each patient as well
as he could.
Marcia Albritton sat in the busy waiting room, alone and helpless,
while Garza worked. An emergency CT scan of her husband showed a subdural hematoma: a blood clot between the brain and the skull, a critical
surgical emergency. In one of its wide swings, the blood thinner had overthinned Taylors blood; and as frequently happens in such cases, a small
blood vessel had burst on the surface of the brain. Garza immediately
gave him a drug to counteract the blood thinner in order to stop further
bleeding, but he needed a neurosurgeon to remove the blood clot. In an
attempt to transfer Taylor to a facility with a neurosurgeon, Garza made
calls to eight LA hospitals but was turned down by one after another. He
knew the Episcopal did not like emergencies, but it was his ninth and last
option. He telephoned and asked, May I speak to the neurosurgeon on
call? This is Dr. Garza at Foothills.
Within a few minutes, Dr. Raymond Alford identied himself as the
neurosurgeon on call. Garza continued, Sir, this is William Garza. I have
an elderly male with a subdural hematoma and a declining level of consciousness who came into our ER this morning. He is on Coumadin, but
I have reversed it with factor 7.
Curtly, Alford responded, I do not have any ICU beds. I cannot help
you. If a bed opens up, we will call you. He hung up before Garza could
plead further.
Dr. Garza went back to evaluate Taylor Albritton, who had slipped
into a coma that was rapidly becoming irreversible. He intubated Taylor
to support his breathing and decided that he needed to talk to Marcia
Albritton about the problem. He walked into the emergency rooms waiting area, called her name, and then led her to the sidewalk outside so that
their conversation would not be overheard in the crowded room. Because
of Garzas sense of urgency, he had not even stopped to use one of the
hospitals quiet little consultation rooms for this conversation.
Mrs. Albritton, the headache that Mr. Albritton developed was from
a blood clot on the surface of the brain. He has gotten worse since he
arrived, and I have had to put a tube in his windpipe. The problem is that
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never made the link between his moves to protect the Episcopals bottom
line and the death of Taylor Albritton.
After her husbands death, Marcia Albritton, devastated and quite
alone, sold their home and moved to live near one of her daughters in a
Dallas suburb. Despite the fact that she had known someone in the hospital business, her actions had not been enough to save him. Only a properly
functioning emergency services system could have done so. Position and
connections are no insulation against the failures of the medical system.
My ctional character Taylor Albritton is based on a real-life patient
with the same problem and the same outcome. In 2003, this man was
transferred three hundred miles by air to Houston for surgery because
there was no bed in any nearby hospital that had a neurosurgeon. The
patient and his wife had retired from the California information technology industry and had settled in the temperate and inexpensive Texas
Valley. After the patients death I talked with his wife, who had no idea
that her husband could have been saved if he had been treated promptly.
She was packing to return to California.
Hospital Prots
The functioning of the medical industry, like that of most other industries, is driven by nancial incentives. People think that health care is
expensive because of hospitals, insurers, and pharmaceutical companies excessive prot making. The evidence does not support that contention, at least with regard to hospitals and insurers. Hospital prots are
healthy but not excessive when compared with those of other industries.
For example, in 2004 hospital prots averaged 5.2 percent. In the same
year the net prot margin of Wal-Mart was 3.5 percent; Exxon, 8.5 percent; Microsoft, 22.17 percent; and Dell, 6.38 percent.2
But while hospital prot margins as a percent of revenues may not be
excessive, hospitals do undeniably sell excess products at excessive prices.
Why? Because for a hospital to be protable, it needs to do just three things:
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Some version of this story has played itself out locally all over the
country.5 Between 1994 and 2000, nine hundred mergers took place.
When one hospital system dominates a region, it functions as a monopoly.
When two dominate, they function as an oligopoly (dened as a small
group of sellers). Both monopolies and oligopolies can drive up costs
because they have little or no competition. A third hospital system in a
community generates competition, but a fourth creates little more competition than three.6
Hospital monopolies and oligopolies can negotiate very high prices.
In markets with many hospitals and hospital systems, such as Los Angeles
and San Diego, hospital consolidation is estimated to account for only
5 to 10 percent of hospital pricing power. But when three hospitals in
a community become two, as they did in San Luis Obispo, California,
hospital prices can rise by 50 percent. Mergers of hospitals in geographic
proximity are highly inationary, increasing prices by 40 percent.*
Hospital consolidation does not inherently improve quality, reduce cost,
or improve efciency, but it does improve protability.7
Do not think I am advocating the disbanding of hospital systems.
Regional hospital monopolies include some of the better U.S. hospitals
and also house leaders in biomedical research. My point is that the public should expect more transparent pricing from an industry that receives
a handsome tax subsidy in repayment for ill-dened and unmeasured
public services.8
The Federal Trade Commission (FTC) is well aware of the effect of
hospital monopolies on health care costs, but it has had little success in
controlling them. Between 1991 and 1998 the FTC was one-for-seven in
trying to prevent mergers that would produce extreme hospital monopolies or oligopolies.9 I asked a former federal prosecutor for the agency why
the FTC had lost so many cases. His response was The lead prosecutor
says that the only two possible explanations for our failure are either that
* Some metropolitan areas are dominated by only two hospital systems where little
competition can be expected. Examples are San Francisco (Sutter Health and
University of California San Francisco Medical Center), Pittsburgh (University of
Pittsburgh Medical Center and West Penn Allegheny Health System), Minneapolis
(Fairview Health Services and Allina Hospitals and Clinics), Cleveland (Cleveland
Clinic Health System and University Hospitals of Cleveland), and Boston (Partners
Healthcare System and Care Group).
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we did a bad job or that the federal judges that ruled had friends on the
local hospital boards and did not like outsiders coming into town. At
least one presiding judge expressed great faith in the board of a consolidated local hospital system, declaring that it would never allow the hospital to overcharge. After all, the system was a not-for-prot with a
community board.10 I am not condent, however, that the well-heeled
(and well-healed) board members of not-for-prot hospitals effectively
shield the community against overcharging.
The structure of hospitals group purchasing organizations is another
reason to conclude that hospitals are not competitive in the usual business sense. These purchasing organizations contract for supplies on
behalf of a group of hospitals with the purported object of buying at the
lowest prices. But the sellers (medical device and supply companies), not
the purchasers (the hospitals), manage the organizations and pay signicant sums of money for their operation. Group purchasing organizations
avoid violating the federal anti-kickback statute of the Social Security Act
only because of exemptions in a 1986 federal law.
You might expect that such arrangements would diminish expected
savings. You also might conjecture that, because large suppliers pay the
bulk of the operations fees, small suppliers, even those with innovative
products, would have limited access to hospitals. There is considerable
evidence that this is exactly what happens.11
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of private not-for-prot hospitals that care for the most uninsured delivered four times more uninsured care (as a percentage of total revenue)
than did the group of private hospitals that provided the least.13 Yet all
have the same tax-exempt status.
The safety net hospitals are not average for other reasons. Half are
trauma centers, three-quarters are key centers for care of high-risk
neonates and psychiatric emergencies, and many are academic medical
centers.14 The nancial failure of such hospitals endangers the entire
community because anyone needing high-level emergency care is taken
to one of them. These hospitals often have prot margins below the magic
2-percent gure for solvency.15 Yet remember that private not-for-prot
safety net hospitals care for many more insured than uninsured patients,
and an undernanced, overloaded hospital is not safe for anyone.
Hospital pricing practices also have a pernicious effect on the uninsured. When the uninsured can pay, they often pay much more than the
insured do.16 When a hospital admits an uninsured emergency patient, a
nancial counselor meets with the patient or her family. If they judge that
patient is indigent and can never pay, then the hospital writes off the
charges. If, however, the uninsured patient has resources, they are charged
and may be expected to pay at the full rate, which is three to six times
what any insurer pays.
One Sunday afternoon, my son, then twenty-two years old, called me
from the waiting room of an urgent care clinic in Arizona. He was accompanying a young uninsured laborer who had a severe sore throat.
According to my son, the only other person in the waiting room had been
there for four hours with a leg that was bent the wrong way after a car
accident; she told the boys that she had no insurance. Hours before, my
son had observed staff members ushering the presumably insured occupant of the other car out of the waiting room into the clinics examination
room. He was calling to ask me how much the visit would cost his friend
and wondering if they also would have to wait for four hours.
I told him to ask the desk clerk if they could have a Medicare rate and
to tell the clerk that they would pay cash up front. In a few minutes my son
called back and said, Dad, she looked at me like I was crazy. She said that
Medicare rates are only for Medicare and Blue Cross patients. When
the boys parents called the front desk with a credit card number, however,
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Promote Surgery
Hospital protability depends on encouraging doctors to perform highly
paid procedures. A hospitals patients come in two varieties: those admitted for procedures (surgical patients) and those admitted because their
conditions need acute medical management (medical patients). Medical
patients usually have heart failure, pneumonia, or respiratory failure and
are admitted for therapies such as intravenous uids, ventilation, and
medications when their conditions are not manageable in the clinic or at
home. Doctors and hospitals that care for medical patients are paid feefor-service. (In the case of Medicare, hospitals are paid a at rate that is
increased if the patient has had procedures and complications at the time
of discharge.) The fee-for-service payment system is based upon the manual difculty of delivering a service, not the cognitive difculty and certainly not the outcomes of care. The more manually involved a medical
service, the higher the payment. I cannot defend such a payment policy
because it makes no economic sense. For instance, it is much harder work
to take care of a sick trauma patient in the ICU, for which a neurosurgeon
is paid 100 dollars a day, than to perform a two-hour spine procedure, for
which a neurosurgeon is paid 2,500 dollars.
Because of this payment policy, medical patients contribute half as
much as surgical patients to a hospitals bottom line. In 1999 about 40 percent of U.S. hospital admissions came through emergency rooms, and
more than 70 percent of them were low-prot medical patients with fewer
than 10 percent needing procedures.17 Surgical patients, on the other
hand, are admitted to a hospital to have prescheduled, non-emergency
procedures and are always insured. These patients form one-third of U.S.
hospital admissions, half of hospital charges, and probably well over half
of hospital prots.18 In short, emergency rooms cost hospitals money for
two reasons: they care for the uninsured, and they expose hospitals to lowmargin medical patients. The prot margin from care of medical patients
is so narrow that a hospital would not be economically viable if it did not
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neurologists do not perform procedures. So when it came to getting hospital resources, my friends in medical neurology never had a chance.
In a 2001 publication, the advisory board ranked specialties as most
favored, preferred, and least favored based on their protability.
High-end, high-volume procedural specialties such as cardiac surgery and
neurosurgery generated nearly 1,000 dollars per day per patient in hospital prots. Cognitive doctors who manage patients without procedures,
who include least favored practitioners such as medical oncologists and
primary care physicians, generated half that much. By referring to these
statistics, I was able to explain every hospital and medical school resource
decision during a fteen-year period.19 The entire health care industry is
tilted toward performance of procedures, not prevention of disease or its
management.
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charged roughly 244 percent above their costs. The forty most expensive
U.S. hospitals marked up operating room use, drugs, and medical supplies by 1,000 to 5,000 percent.21 When California required its hospitals to
publish their prices, journalists and health economists had a festival with
the information. The charge for a chest X-ray, for example, varied from
100 dollars in San Francisco to 1,500 dollars in Modesto.22
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never compel doctors to write discharge orders early in the day to free up
needed beds. For hours, fully clothed patients sat among owers in their
rooms waiting for doctors to write simple discharge orders. All the while,
sick patients needing admission languished on stretchers in the emergency
room, not always safely, for lack of a hospital bed.
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Pharmaceuticals
Remarkable Innovation, Shameless Puffery
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Each segment of the medical industry generates excess cost in a different way: hospitals by inefciency, excessive pricing, and promotion of
unnecessary procedures; doctors by inefciency and provision of unnecessary services and procedures; the pharmaceutical industry by creating a
sense of need for products of marginal value, which results in their overuse and justies their overpricing. Compared to older, cheaper versions of
the same drugs, three-quarters of new prescription medications probably
have little or no additional value, although they are marketed and priced
like essential breakthroughs.
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drug after seeing a prescription drug ad. In 1997 the FDA issued a guidance that allowed manufacturers to identify specic products in direct-toconsumer advertisements. From 1999 to 2000, the fty drugs that were
most heavily advertised to consumers accounted for almost half the
increase in sales of prescription drugs.7 A study by the U.S. Government
Accountability Ofce found that pharmas spending on direct-to-consumer
advertising increased twice as fast from 1997 through 2005 as did spending on research and spending on promotion to physicians. The funds were
well invested. For each dollar spent on direct-to-consumer advertising,
pharma enjoyed a $2.20 increase in sales. The volume of advertising is so
great that it has overwhelmed the FDAs ability to police it.8 Such marketing was particularly effective for the COX-2 inhibitors. In 2000 Merck
spent 160 million dollars marketing Vioxx. In contrast, Pzer spent
71.2 million dollars marketing Celebrex to consumers during the rst
nine months of 2004. The funds were well invested. Merck sold 1.5 billion
dollars worth of Vioxx, and Pzer sold 2 billion dollars worth of Celebrex
within a year of their introduction.9
Most of the billions of dollars in sales of COX-2 inhibitors were waste.
Soon after FDA approval of the drugs, researchers clearly established that
COX-2 inhibitors do not offer better pain relief than older, cheaper drugs
do. Such quick, well-established ndings are not typical of other drug
classes. But even at the time of approval, the data showing that COX-2
inhibitors better reduced the risk of gastrointestinal bleeding were so
doubtful that the FDA did not allow the companies to make that claim on
their labels.10
But like me, most doctors give patients what they ask for if it is suitable for their condition.11 If the patient has prescription drug coverage
and is not required to pay part of the cost of the prescription, neither doctors nor patients care about the cost of the drug. In 2007, 90 percent of
Medicare beneciaries had prescription drug coverage, and 98 percent of
employer-based insurance plans offered the benet. The Medicare
patients most likely to receive COX-2 inhibitors were not those with risk
factors for gastrointestinal hemorrhage; rather, they were patients with
prescription drug coverage.12
In May 1999 the FDA approved the marketing of Vioxx for treatment
of the common arthritis that affects aging knees, hips, shoulders, and
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spines and for pain associated with menstrual cycles.13 Arthritic aches
and pains are a ubiquitous part of the human condition, and there is no
telling how much money might have been spent on these drugs if a problem had not been discovered after their widespread dissemination.
In 1999 Merck sought to expand its approval, hoping to market the
drug for treatment of rheumatoid arthritis, a common and disabling condition in which the body attacks its own joints. It launched a study of more
than 8,000 patients, comparing the effectiveness of Vioxx to prescriptionstrength Aleve in relieving pain. Although Vioxx was found not to be more
effective than Aleve in pain relief, the study showed that it decreased the
risk of gastrointestinal hemorrhage. But it also showed that patients
treated with Vioxx had an increased risk of heart attack. In a conjecture
that went far beyond the strength of the data, the authors promoted the
idea that Aleve prevented heart attacks rather than concluding that Vioxx
produced them.14 They seem to have gotten away with that conclusion
because the FDA approved Vioxx for treatment of rheumatoid arthritis.
Five years and many billions of dollars of drug sales later, the editors
of the New England Journal of Medicine, publisher of the Vioxx study on
rheumatoid arthritis, found evidence in an internal memorandum made
public in Vioxx litigation suggesting that the authors knew of data from
three patients that were not included in the published analysis. Inclusion
of those data in the publication would have further demonstrated Vioxxs
cardiovascular risk, and their absence led journal editors to question the
integrity of the data on adverse cardiovascular events in this article.15
In 2003 Vioxx constituted 11 percent of Mercks revenue, so the company resisted removing it from the market. But when a study testing Vioxx
for prevention of precancerous colon polyps showed an 80-percent
increase in risk of stroke and heart attack when the drug was taken for
eighteen months, the company voluntarily withdrew it. In the meantime,
however, there were more allegations that the company had been involved
in deliberate statistical manipulations that favored the drug in this study.16
In 2004 the FDA asked Pzer to voluntarily suspend direct-toconsumer advertising of Celebrex and in 2005 asked the company to
withdraw its other COX-2 inhibitor, Bextra, from the market because of
evidence of cardiovascular risk in other clinical trials. Yet in fact, when it
comes to knowing about the effectiveness of new prescription drugs
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the price? The situation is the same for drugs, so the prices of unique specialty drugs are about the same in foreign countries as they are in the
United States. Our nation, however, spends twice as much per capita on
such pharmaceuticals because of greater use.23
But for most drugs, foreign governments pay less. In Canada, for
example, drug prices are regulated by the Patented Medicine Prices
Review Board, which establishes a national ceiling on prescription drug
prices based upon the average price in seven other countriesFrance,
Germany, Italy, Sweden, Switzerland, the United Kingdom, and the United
States. Canadas national insurance program does not provide drug coverage, but all Canadian provinces provide some prescription drug plan, at
least for seniors. The provincial governments purchase 42 percent of all
pharmaceuticals bought in Canada, so they buy large quantities of drugs.
Because of the federal price ceiling and the purchase volume, the provinces
get better prices than U.S. consumers do.24
U.S. consumers pay such high prices for drugs partly because they are
willing to pay through the nose for me-too drugs that countries buying
drugs for their populace often will not purchase at all. Such countries, as
well as pharmacy benets managers that purchase drugs, have a formulary (a preferred list of drugs) that limits the number of drugs covered by
a prescription drug plan and therefore the number of drugs available to a
patient. Unless an insurer or a government is authorized to have a formulary that excludes many drugs in a therapeutic class, it has no basis for
negotiating a lower drug price.
Of 250 leading active pharmaceuticals, 2,196 different presentations
(which might be, for instance, one drugs combination with another in a
single pill) were purchased from nineteen U.S. manufacturers. For the
same 250 active pharmaceuticals, residents of Canada, Chile, France,
Italy, Japan, Mexico, and the United Kingdom consumed half that number
of presentations, which they purchased from fewer than seven manufacturers.25 New me-too drugs cost more than older drugs, and many of the
drugs Americans purchase are more expensive only because they are
offered as the latest thing.
The Medicare Prescription Drug Improvement and Modernization
Act (MMA) of 2003 permits importation of drugs from Canada if the
secretary of the Department of Health and Human Services certies that
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the practice is safe and saves signicant money. The secretary, however,
has never provided such certication. The pharmaceutical industry
opposes drug importation because it views the practice as de facto price
setting in the United States, though their ofcial position is aligned with
the FDAs, which opposes importation because the agency has no way of
guaranteeing the origin or safety of imported drugs.
The Congressional Budget Ofce (CBO) is a politically neutral agency
comprised of specialized budget analysts supported by advisory boards of
national experts in every area. The CBO provides members of Congress
with the projected costs of their legislative proposals and enacted legislation. A congressional committee that asks the CBO for an opinion had
better be condent about its inquiry because the budget ofce releases its
answer regardless of whether or not it is the answer the committee desired.
Regarding drug importation from other countries, CBO experts have
estimated that it would reduce U.S. pharmaceutical costs by only 1 percent.
They conclude that if the United States attempted to import drugs on any
scale, drug makers would contractually exclude medications that they sell
outside the United States from being imported into the country at lower
prices. The CBO has also determined that, because of the size of the U.S.
market, America could not import from just one country. For example,
Canadas population is about one-tenth that of the United States, so only
large-volume importation would produce any savings.26 In short, importation would be a legally complicated undertaking, difcult to regulate
and fraught with safety concerns about counterfeit drugs.
Drug importation is also not practical because the U.S. pattern of
drug use is different from that of other industrialized countries. Canadians,
the French, Germans, and the British consume about the same amount of
drugs per capita as Americans do, but Europeans use of new drugs is onethird less expensive per capita. Compared to Canadians, Germans, and
the French, Americans consume about twice as many new drugs (those
less than ve years old).27 European countries are not willing to buy metoo drugs at a premium when older, cheaper drugs will sufce; therefore,
many of the drugs that U.S. direct-to-consumer marketing so effectively
promotes would be unavailable for importation. American consumers
would have to wean themselves from a cafeteria of me-too drugs to consider drug importation on a large scale. But even then the safety issues
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in all formularies, with its use limited only to high-risk patients. While
such a trial (or trials) would have cost millions of dollars, it would have
saved billions.
If you doubt the need for such a trial, consider the position of any
managed care organization that had questioned the safety and effectiveness of Celebrex and Vioxx and had chosen not to purchase them for its
formulary in 1999 or 2000. Expert opinion already suggested that Vioxx
carried excessive cardiovascular risk, but the rst clinical trials were not
designed to detect such risk and so underestimated it. Moreover, the
information may have been suppressed anyway.33 At the time there was
insufcient proof to convince the FDAs examiners that the drug actually
decreased the risk of gastrointestinal hemorrhage. Yet even with such weak
proof of COX-2 inhibitors effectiveness, what would have happened to any
managed care organization that decided to save money by not covering
Vioxx and Celebrex, limiting their use to high-risk patients, or threatening
to leave Vioxx off its formulary and purchase only Celebrex unless the
manufacturer accepted a lower price? In the face of a 160-million-dollarper-year direct-to-consumer advertising campaign, whoever made this
decision would have endured a beneciary and provider revolt over a
drug that proved to be worse than worthless.34
While the Vioxx and Celebrex story is revealing, uncertainty about
relative effectiveness and relative risk exists for many groups of highly
touted pharmaceuticals. The data are lacking that would allow managed
care organizations to further narrow their formularies or approved uses of
pharmaceuticals without being pilloried by both pharma and beneciaries.
Better to get accurate information on what a drug is really worth and how
safe and effective it is so that prices and inclusion in formularies can be
negotiated based upon fact, not the puffery of advertising or the results of
deceptively designed clinical trials.
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15
Private Health Insurance
No Added Value
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should result in higher prots and more business for insurers, whose core
business is to broker the sale of health care services and then manage
them. The fact that insurers have not taken the initiative to control health
care costs and improve quality more effectively indicates that they are in
a relatively noncompetitive business.
In fact, between 2000 and 2003, as the cost of their insurance product grew, so did their prots. In 2003, when the premiums charged by
insurers such as Aetna and UnitedHealth grew by 12.7 percent, their profits grew by 8.5 percent. In a more usual business, when the cost of goods
sold increases, prots decrease. Medicine is not, however, a usual business.
It is a business in which prots are disconnected from cost and inefciency is rewarded by increased revenues.
We are not in this situation because the health insurance industry
cannot reduce health care costs. It has the market power to drive down
costs because it consolidated to implement the managed care plans of the
1990s and has been consolidating ever since. If we were to consider the
nonprot Blue Cross/Blue Shield plans, which are state-based but cooperate across state lines, to be a single rm, we would say that it controls 31
percent of the U.S. market. Wellpoint, UnitedHealth, Aetna, and CIGNA
are the four largest for-prot rms; and most of the U.S. health care insurance market is controlled by these four rms and the not-for-prot Blue
Cross/Blue Shield plans. Together they control more than 60 percent
of the market in thirty-four states. In sixteen states the one largest rm
controls more than half of the market. WellPoint and UnitedHealth insure
more than 50 million people. That is real market leverage.2
In the United States, the existence of multiple health care payers
results in administrative waste among hospitals, doctors, and insurers.
One reason for high medicals costs is the fact that doctors and hospitals
must complete a different set of paper forms or computerized screens for
each insurer. Insurers impose a series of barriers before doctors and hospitals can collect for services they render. Providers are forced to spend
hours and resources on revising claim forms, offering additional information, or justifying the provision of a service to a patient. For high-dollar
procedures, a doctors staff may repeatedly negotiate with insurance clerks
before nally, and belatedly, being paid. In the practice I managed, three
months was the usual turnaround time for a medical claim submitted to
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Creating Competition
The key policy question is how to create cost competition among insurers
that will ow down to create cost competition among providers. The goal
of consumer-directed health care is to make people more judicious in
their use of medical services because it requires them to pay directly for
the rst several thousand dollars of services used each year. Proponents
of free markets in health care have seized on this idea. Its shortcoming is
that such policies force the individual to make decisions about needed
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medical services that only a doctor should make, such as Should I ll this
prescription for high blood pressure or not? or Should I really get the
1,200 dollar CT scan that the doctor ordered for my headache? or
Should I pay the cost of going to the doctor to check on my high cholesterol and blood pressure when I feel ne?
Consumer-directed health care pairs a high-deductible health insurance policy (a deductible of at least 1,100 dollars in 2007) with a taxadvantaged health savings account that can be used to pay for the
deductible. Americas Health Insurance Plans reported that in January
2007, 4.5 million out of more than 200 million privately insured Americans
were enrolled in these plans, which were rst allowed in 2004.9 According
to this line of thinking, because policyholders must pay for the rst services they use, they will be more judicious; therefore, health care cost escalation will be controlled. Early experience with high-deductible policies
shows that consumers use fewer services and pay smaller premiums than
they do with traditional plans. The results on quality, however, are mixed.10
For healthy individuals, such policies make sense: they reduce cost by
decreasing frivolous use of medical services such as unneeded emergency
room visits. But for the 12 percent of Americans who are hospitalized each
year, that deductible is gone within days. And for the chronically ill, who
are responsible for 75 percent of health care costs, such policies can be
dangerous.11
The idea for high-deductible policies was derived from a 1970 study,
the largest insurance experiment ever conducted.12 It showed that the
higher the co-pay, the less often people use health care services, except
perhaps for hospitalization. Even better, it showed that most patients are
not hurt by forgoing services. The exception is patients with chronic illnesses, especially if they are poor. Both the 1970 study and subsequent
research found that high-deductible policies lead such patients to decrease
their use of drugs and ofce visits while increasing their hospitalizations.13
A poor mans 1,000 dollars is equivalent to a rich mans 10,000 dollars.
As a result, the poor and the chronically ill forgo both needed services and
frivolous services, whether or not they can tell the difference.
It is no mystery why consumers say that they do not have enough
information to make educated decisions about use of medical services.
What patient really knows if he needs both the CT scan and the MRI study
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insurance, and employer-based health care. For this kind of cost sharing
to be implemented, however, there must rst be benchmarks of medical
practice and the grading of medical services as necessary, unnecessary, or
marginal. Such standards of medical practice do not now exist for most
conditions.
Reforming the insurance industry so that it competes on cost and
quality will require a change in its regulation from the state to the federal
level. Because insurance is regulated differently in each state, insurers
function as state-based oligopolies. They make prots by estimating the
likely cost of an individual beneciary or group of beneciaries based
upon their age and medical history or by excluding pre-existing conditions. If insurers set their premiums high enough so that they do not lose
money, prots are assured; there is little if any price competition. If the
insurance industry were regulated nationally so that insurers could operate in any regional market under the same regulations and with similar
distributions of high-cost and low-cost beneciaries among plans, then
there should be competition. This goal, resisted by insurers, is entwined
with the decision about how the country will cover its uninsured.
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PART THREE
Reforming American
Health Care
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Three Options for Covering
the Uninsured
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Helpless Employers
U.S. health care is broken, and continuing to nance and manage it by the
current model presents a number of challenges. It is, however, the most
politically palatable. In 2005, 158 million Americans were insured through
their employers. Fourteen million purchased their own insurance (called
individual insurance), and 47 million were left uninsured. Seventy-ve
million were covered by public programs.3 Remember that 82 million people lose coverage sometime in a two-year period, and 16 million are underinsured, totaling more than one-third of the non-elderly U.S. population.
Expanding the present system has the advantage of not interfering with
the coverage of 70 percent of the American public who are secure in their
Medicare or private coverage.
Businesses nance the largest number of insured Americans, so why
have they been unable to control health care cost? The answer is that no
one business, however large, can face off against the medical industry
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average subsidy of 2,780 dollars for families with incomes over 100,000
dollars and an average subsidy of 102 dollars for families with incomes
less than 10,000 dollars.6 The tax code is also unfair to self-employed and
contract workers. They pay full cost for their health insurance while their
counterparts who perform similar jobs for big businesses are subsidized
by federal tax dollars that the self-employed pay. Employer-based health
care nancing subsidizes the health insurance of 60 percent of the population while leaving more than half of the uninsured, who are ineligible
for public programs and cannot afford insurance, to pay full price.
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184
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The Cranes were a thirty-six-year-old married couple with a ten-yearold daughter and a twelve-year-old son who had asthma and recurring ear infections. They received sixty offers, but nine excluded their
son. Most of the policies excluded the sons ears or respiratory system.
Seventeen offers increased the familys rate by 20 to 50 percent
because of the ear infections and asthma.
Denise was a forty-eight-year-old actress and a seven-year breast cancer survivor. She was rejected twenty-six times and received eleven
clean offers. Half of the offers had riders excluding cancer treatment
of any kind or mastectomy treatment.
Overall, the premiums of the seven applicants were increased by an
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because otherwise my family and I are uninsured. Individually purchased insurance would be unaffordable, so he continues to work, walking with a cane and putting his health at further risk.
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Expanding Medicaid
The other means of leveraging the existing system is to expand eligibility
for federal health care programs. Medicaid is a joint federal and state
health insurance program that provides coverage for the poormainly
children, elderly, and the disabled. More than half of Medicaid enrollees
are children, about 23 percent are adults, 10 percent are elderly, and 15
percent are disabled adults.25 SCHIP, a twin federal and state health insurance program, is designed to cover poor children whose families earn too
much money to be eligible for Medicaid but not enough to afford health
insurance.
A key feature of both Medicaid and SCHIP is that is that they are statemanaged and partly state-nanced. On average, the federal government
funds 57 percent of the costs of Medicaid and 70 percent of the costs of
SCHIP, with the individual states funding the remaining portion. So it is
clearly impossible to expand coverage through these programs unless the
federal government pays the full cost. Twenty-ve percent of the 47 million
uninsured are eligible for Medicaid and SCHIP yet are not enrolled.26
States will nd and enroll only as many eligible residents as they can afford
because they do not have enough money to cover everyone.
For instance, between 2003 and 2005 Texas chose to turn down
536 million dollars in federal money and dropped 175,204 children from
health insurance enrollment in order to save about 200 million dollars in
state expenditures. The maneuver was accomplished by enacting enrollment policies that acted as barriers: for instance, face-to-face reenrollment every six months rather than yearly. In fact, during its 2003 state
budget crisis, Texas was responsible for half of all children who were
taken off the SCHIP rolls nationally. The state was extraordinary in its zeal
but not alone in cutting back some elements of its public programs: in
2003, many of the states health care costs exceeded their educational
costs for the rst time in their history.27
The poor are not easy to nd and keep enrolled because they are
often not able to comply with usual enrollment procedures. For instance,
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a one-day enrollment process every six months might cost a janitor her
job or two days of badly needed wages each year. But simplifying enrollment procedures would only be a useful way of increasing enrollment in
Medicaid and SCHIP if the states had the money to pay for those who
enrolled.
Another problem with expanding Medicaid involves a phenomenon
known as crowd out. When the jobs of the poor do offer insurance coverage that pays a percentage of the familys premium cost, the poor will
drop private coverage and enroll in public coverage when such programs
are offered because public coverage costs them less. This phenomenon is
uncommon among the very poor, whose jobs rarely offer coverage. At
higher income levels, however, as many as 60 percent of those on public
programs may have dropped private coverage for public coverage, which
shifts health care spending from the private to the public sector.28
Finally, states keep down their costs by underpaying doctors and
hospitals. Medicaid pays doctors only 69 percent of the Medicare rate,
which in turn pays doctors less than private insurance does. Therefore,
Medicaid patients are kept out of many doctors ofces by whatever
means possible, giving Medicaid beneciaries limited access to both primary and specialty care.29 A physician who works in a public clinic
recently told me that she cannot get a Medicaid patient in to see any
orthopedic surgeon in Houston. In my experience, most neurosurgeons in
Houston will not see a Medicaid patient in their ofces. For this reason,
these patients congregate in public hospitals and clinics, where doctors
are willing to see them if the patients can get in. In states such as Texas,
California, and Florida, where Medicaid beneciaries have the worst
access to care, patients must shop around for months to nd a doctor who
will take them. The care of Medicaid patients with mental illness is documented as substandard nationally.30
Doctors avoid Medicaid patients, but hospitals shift their losses from
Medicaid to private insurance. They recover about half of their Medicaid
losses by increasing charges to private insurers.31 Converting the uninsured to Medicaid patients is not likely to contribute to the moderation of
health insurance premiums because cost shifting would continue. The
uninsured account for a signicant portion of employer-based insurance
premiums, but they are not the only source of hospital cost shifting.
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140
Private payer
130
120
Percent
110
Medicare
100
90
Medicaid
80
70
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
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FIGURE 16.1
Medicaid
Source: Health Forum, Hospital Statistics (Chicago: American Hospital Association,
various editions).
Medicaid expansion would probably not lower private insurance premiums because hospitals would still cost-shift their losses.
Use of vouchers or tax credits to cover the poor would still leave many
people uninsured unless the vouchers covered the entire premium or
purchase was mandatory.
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(Democrat from Michigan) introduced the Medicare for All Act. In both
sessions Representative Pete Stark (Democrat from California) also introduced his AmeriCare Health Act. These bills offer Medicare coverage to all
of the U.S. population or at least double the size of the current program.32
But Medicares track record, like that of the entire U.S. health care
industry, has a history of unsustainable spending increases. In fact, it
cannot continue to be managed as it has been, even if the program is limited to seniors. In its current structure the program will break the federal
bank. Other countries have controlled health care costs by setting a
health care budget and forcing their medical industries to live within it,
something the United States cannot avoid if Medicare for All becomes the
answer. Such programs have their advantages and disadvantages.
Canadas national health program, also called Medicare, is an example
of what U.S. Medicare for All might look like and illustrates what the nation
would have to do to create a workable public health care system. Canadas
national health insurance is funded by block grants to the provinces and
can be supplemented by provincial taxes. Provincial governments manage
costs by xing annual operating budgets for hospitals and controlling hospital building expansions and equipment purchases. Canadian administrative costs are low compared to those in the United States, one benet of a
single-payer system. Although Canadian physicians are paid fee-forservice, their fees are negotiated with provincial governments; and expenditures for physician services are capped, as is the upper limit of physician
income in some provinces. Additionally, health insurance can only be purchased for services not provided by public programs, so there is no competition between programs or cost shifting from public to private programs.
Hospital budgets are xed; therefore, if the demand for certain procedures exceeds the expected number, patients are assigned to a waiting
list, with their care prioritized by physicians based upon medical need.
Canadian physicians rate access to emergency services and routine diagnostic services as good; but most rate access to advanced diagnostic services, orthopedic surgeons, and hospital care for elective procedures as
only fair or poor.33
The Canadian system has three strengths: (1) its cost is low relative
to care in the United States, (2) everyone is insured, and (3) it is
oriented toward primary care and emphasizes disease prevention and
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To ensure the quality of coverage, the plan mandates that all insurers
provide a level of insurance equal to that of federal employees.
Administrative cost is reduced by establishing Health Help agencies that
connect individuals with insurers and handle premiums. Employers still
aid their employees in selecting a plan and pay between 2 and 25 percent
of the cost of the average regional premium per employee. The plan is
funded by decreased Medicaid spending, decreased insurance administrative costs, removal of the tax subsidy for employer-based insurance,
and the market effect of having 247 million individuals purchase insurance in a national insurance market.
A health care bill that disconnects insurance from employment and
provides a tax credit to individuals and families for the purchase of insurance was also introduced in the 20067 legislative session by Senator Tom
Coburn (Republican from Oklahoma), also a doctor. Unlike the WydenBennett bill it allows the states to continue regulating insurance but
allows insurance to be purchased across state lines. But although it permits portability, Coburns bill leaves individuals subject to state insurance regulation, thus offering little protection from unaffordable rate
increases or denial of coverage because of preexisting conditions.47
Other groups are also concerned about health care reform, and what
employers are saying is not as important as what they are doing. The
Committee for Economic Development represents a diverse group of
employers, including pharmaceutical manufacturers, for-prot hospitals,
data management companies, and banks. In 2002 the committee proposed a restructuring of the employer-based system, but employers were
making so little progress in managing health care costs that in 2007 the
group called for mandated individual purchase of insurance with regulation of the insurance market. This idea is similar to the Wyden-Bennett
plan.48
In sum, to force the insurance industry to earn its prots by decreasing the cost and improving the quality of health care rather than by cherry
picking healthy people, the industry must be federally regulated. Only in
this way can individuals have portable insurance that is both affordable
and available for those with medical conditions. Only by covering the
uninsured and patients currently funded by SCHIP and Medicaid with private insurance equivalent to everyone elses will everyone else be relieved
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of paying for hospital losses by way of increased premiums. Only if individuals pick their policy with full knowledge of their choices and then
write the check for a major portion of the cost will they ever care enough
about the cost of health care to cooperate with efforts to reduce it. Only
the purchasing power of hundreds of millions of people buying insurance
in the same market has much of a chance against a medical industry that
is recalcitrant to change. Health care costs must be controlled, and the
uninsured must be covered. The solution is simply a matter of deciding
which forces should take charge: individuals, the federal government, or
both. I think the problem is big enough to require both.
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17
No Coverage Expansion
without Cost Control
The cost of providing health insurance for the uninsured is not trivial,
but it amounts to less federal money than is spent on any other single federal program or industry subsidy. In addition to what hospitals, doctors,
the public, and the uninsured themselves already spend on the uninsured, the United States could cover them for an estimated 73 to 100 billion
dollars (in 2004 funds).1 Consider that the nation spent 2 trillion dollars
on health care in 2004; less than 4 percent of that gure would be sufcient to cover all of the uninsured. The cost is less than the federal portions of Medicare and Medicaid and less than half the tax subsidy for
employer-based coverage.2 Unnecessary hospital and doctor services
account for one-third of Medicare spending. If this gure is extrapolated
to the 2 trillion dollars spent annually on U.S. health care, then 700 billion
dollars a year are wastedmoney enough to cover the uninsured seven
times over. Clearly, in the large scheme, covering the uninsured is not a
particularly large cost.
But as with the proposed Medicare for All Act, using federal money to
cover the uninsured could be a scal bomb if it is not combined with a
serious effort to reduce health care costs. Before the passage of Medicare,
only about one-quarter of seniors were insured, meaning that hospitals
lost money caring for seniors as they do today caring for the uninsured.
201
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and many of their Republican colleagues. This was not the rst time that
Hatch had broken ranks on issues of personal principle. In 1997 he bucked
both his Republican colleagues and many of his Utah constituents when he
and Senator Edward Kennedy introduced SCHIP. I concluded that health
reform would happen only as a result of sustained external pressure, but
I also saw that it would require bipartisan congressional leadership because
a partisan health care reform initiative is dead on arrival.
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the program to cover all children for whom it had originally been designed
(those from families earning below 200 percent of the federal poverty
level) but only these children, not their parents or higher-income children.
Many Republicans favored allocating 7 billion dollars of additional money
per year to cover all eligible children, whereas the majority of Democrats
favored allocating an additional 10 billion dollars per year to cover higherincome children and adults.
After months of tense negotiations, senators Max Baucus, Charles
Grassley, Orrin Hatch, and Jay Rockefeller, in an act of conspicuous leadership in the public interest, produced a bill that passed both the House
and the Senate with comfortable majorities. The bill included enough
money to cover all eligible children at the lower amount favored by those
Republicans who had supported the program. Key to Republican support
and to the bills passage was that states could use the funds for either public insurance or the purchase of private insurance and the bill remained
within acceptable scal bounds.
The task of producing a bipartisan bill was complicated by the
administration of George W. Bush, which had already granted waivers to
a number of states permitting them to use SCHIP funds to cover adults
and children from higher-income families. Including adults in SCHIP was
a source of major disagreement between Republicans and Democrats
because it would have increased the cost of the bill. The bipartisan bill
allocated just enough money to cover all poor and near-poor children but
not adults and higher-income children. Bush, however, vetoed the bipartisan bill not once but twice, leaving the program without the funds to
cover 2 to 2.8 million eligible children. The House could not muster up
the necessary Republican votes to override the presidential veto. I concluded that bipartisan health care reform is certainly possible but only
with a U.S. president who supports the process.
There are divisions among Republicans on the issue of health care
spending, just as there are among Democrats, but those divisions arise
over how much money to spend rather than how to spend it. Republicans
uniformly support the use of public money to purchase private insurance
and just as uniformly oppose any expansion of government-managed
programs. They say they are less willing to spend new money on health
care than Democrats are, but six years of Republican control of Congress
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and the presidency belie that claim. The Medicare Modernization Act of
2003 was devised, promoted, and enacted by a Republican president and
Congress. The Medicare prescription drug benet increased Medicares
long-term cost overrun by 30 percent, a shift from private to public
spending unprecedented since the programs enactment.
David Walker, U.S. comptroller general, directs the Government
Accountability Ofce (GAO), a large federal agency charged with investigating the functioning of other government agencies. The GAO is nonpartisan, and its director has a thirteen-year appointment, permitting him to
speak freely. According to Walker, The prescription drug bill is probably
the most scally irresponsible piece of legislation since the 1960s because
we promise way more than we can afford to keep. Analysts point out that
73 to 75 percent of Medicare beneciaries already had prescription drug
coverage at all income levels before the bills enactment.9
The Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 sought to insert the private insurance market into Medicare,
as did Medicare Advantage, another component of the 2003 bill.
Medicare Advantage provides incentives and rules by which beneciaries
can select a health insurer to manage their Medicare benets. As in other
private health insurance policies, Medicare Advantage insurers select
a network of doctors and hospitals, negotiate contracts with them, and
accept the nancial risk if premiums do not cover the cost of beneciaries care. In traditional Medicare the government pays providers directly.
In Medicare Advantage the government combines the premiums that the
patient normally pays for traditional Medicare with a government-funded
premium paid to the insurer for the patient-selected insurance. As of
December 2006, 16.7 million Medicare patients had signed up for the
prescription drug benet, and another 7.6 million had signed up for
Medicare Advantage, out of a total of 44 million Medicare beneciaries.10
By assigning their Medicare benets to an insurer, beneciaries
reduce their own costs more than they would with traditional Medicare
and sometimes improve coordination of their care. But the government
could not attract insurers to Medicare Advantage without paying them 12
percent more than traditional fee-for-service Medicare, thus aggravating
rather than diminishing Medicares cost problem.11 Republicans lavished
public money on seniors through Medicare Part D and Medicare
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Advantage, sacricing their long-espoused devotion to scal conservatism for the higher calling of private-sector management of health care.
At this point, the party can no longer credibly argue scal conservatism as
its opposition to health care reform. In fact, Republican actions have
made reform to manage cost more urgent. Private health insurances
track record is no better than fee-for-service Medicare, so the probability
that Medicare Advantage will decrease the Medicare programs long-term
cost is low unless there is a change in how private insurance works.
The Democrats lost control of the House and the Senate in 1994. They
regained the Senate in 2001, lost it again in 2002, and then gained control
of both houses in 2006. Thus, their recent track record on health care is
spotty. Democrats generally take one of two positions: Medicare for All or
private coverage (usually mandated rather than voluntary and either
through employment or disconnected from it.). The partys nal two 2008
presidential candidates, senators Barack Obama and Hillary Clinton, have
espoused approaches that preserve private insurance and expand public
insurance. Democratic ideology embraces both government- and privately-managed proposals. Thus, the party has no unied position on how
to expand coverage; it just declares that it should be done and places less
emphasis on short-term scal cost than Republicans do. Every politician,
no matter what party, agrees that health care costs must come down in
the long term. Democrats tend to emphasize the control of costs by federal
action; Republicans emphasize market forces. But both are necessary.
Neither one alone is sufcient.
Public Apathy
Members of Congress can only go as far as the public mood permits. After
all, Congress is distributing public money. Regarding health care, I would
not characterize the American mood as disinterested; rather, the insured
public is intent on retaining benets and is annoyed by cost. In recent
surveys, people rank their concern about health care just below the economy and defense. In 2003, 66 percent were not happy with health care, an
increase from 53 percent in 2000. As public priorities, cost is rst, the
uninsured second.12 The low quality of health care scarcely ranks as a
concern, but that may change as access to primary care degenerates.
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A Coordinated Solution
Changing the nancing of health care to include the uninsured and
reforming the medical industry are two different issues, but they beg for
a coordinated solution because what is done to address one issue affects
the other. Covering the uninsured will be expensive, perhaps impossible,
without reforming medical practice. Reforming medical practice will be
impeded by the presence of so many uninsured. For example, if the public is to be protected and costs are to be controlled, then all hospitals
should meet a high standard of safety and efciency. How can academic
medical centers or major emergency hospitals that struggle to maintain a
2-percent prot margin be held to the same safety and quality standards
as hospitals that are ush with cash when the reason for the difference in
margin is that one avoids the uninsured and Medicaid patients and the
other does not? And how can anyone talk about cutting fat out of hospitals that depend upon that fat to balance losses incurred by caring for
the uninsured? Without covering the uninsured, the nancial chasm
between hospitals will act as a dead weight on the reform of the medical
industry.
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Comprehensive management and disease prevention are only platitudes if many of the primary care doctors who are expected to implement
the concepts are overburdened, undernanced, and overwhelmed with
uninsured and Medicaid patients. How can a publicly funded clinic that
cannot even order specialized diagnostic tests for its patients and barely
make its budget from month to month be held to same quality standard
as a private medical practice? The business adage no margin, no mission applies to the reform of medical practice. Without coverage of the
uninsured, key participants in reformhospitals and doctorswill have
no margin and will laugh at what they are being asked to do.
Reforming the medical industry to reduce cost and improve quality
is a matter of changing the orientation and the payment method of an
entire industryof changing its culture.
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A Workable Plan for Reform
If I believed that the unaided market forces of 247 million people (the
U.S. population minus those enrolled in Medicare) would drive down the
cost of health care and extract waste, I would not have been impelled to
write this book. But the medical industry does not operate like a conventional market. Lowering cost and improving quality are not as simple as
unleashing market forces. As I have shown in previous chapters, waste
and poor quality thrive because the health care system is highly insulated
against external pressure.
Hospitals by their nature enjoy a privileged position in the community; they are regional monopolies or oligopolies. If market forces were at
work in medicine, an empty hospital bed would sit idle until the price was
right, but an empty bed always gets lled. If the sale of hospital services
were like the sale of cars, then hospital revenues would not increase just
because prices were increased. Regions of the country with a plethora of
hospital beds and specialists spend 60 percent more for the same care at
lower quality than do regions with the fewest beds and specialists. In a
standard business model, the demand for services drives the supply of
those services. In medicine, the standard relationship is reversed:
increased supply produces increased demand and use.
In two situationsurban monopolies and rural shortagescompetitive
hospital pricing is probably impossible to achieve by consumer power. In
large cities, oligopolies can be created when only two hospital systems
control health care rather than a larger group of hospitals and hospital
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systems, and the result can be particularly inated prices and little consumer choice. On the other hand, 15 percent of Americans live in rural
areas where they are lucky if they have access to a hospital. Rural hospitals barely hang on nancially because they cannot pick and choose the
most protable patients like their big-city cousins can. For instance, bigcity hospitals can increase their margins by promoting the performance
of highly paid procedures and discouraging admission of low-paying
patients who need medical, not procedural, management. Rural hospitals
admit everyone in their community but lose high-margin procedures to
big-city hospitals. They suffer high overhead because they are small and
have no economies of scale. Rural hospitals are regional monopolies, but
they cant always price-gouge because they are money-losing community
resources. Thus, there are some inherent limits on the ability of competitive pressure to drive hospital performance.
Doctors have a monopoly on information because they know what
patients dont. Doctors are able to promote the application of technology
by the information they present to patients and how they present it.
Although excess treatment is not entirely to blame, 46 percent of the
increase in health care costs from 2000 to 2003 was the result of increased
application of technology per capita.1
In a perfect market, if individuals paid for medical services, doctors
would be forced to compete with each other on price and perhaps quality
as well. But as a patient, who knows whether or not she really needs a procedure? A treatment or test can be prescribed or performed for just about
any ailment. The matter is more complicated because a patient whose life
is in a doctors hands must be comfortable with the doctor. Finding the
right doctor is not like shopping for a car. It is more like seeking a relationship, and relationships are difcult to price.
The resistance of doctors and hospitals to the consolidated power of
insurers and employers is another testament to medicines rigid opposition to change. Insurance is more consolidated than any other segment of
the medical industry, yet it has been unable to reduce health care costs.
Fifty-ve percent of those with employer-based health insurance are
directly funded by their employers, with no insurance middleman.2 Even
self-funded large employers have been unable to bring health care costs
within bounds. Despite these failures, there are powerful reasons to turn
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direct responsibility for the purchase of health care over to the individual
backed by the government, but not to the government alone.
Patients must cooperate with the steps that have to be taken to
reduce health care costs. Government cannot compel individuals to comply with efforts to reduce these costs; only self-interest can. Unless people
are directly paying a signicant portion of their health insurance, they
have no reason to put up with inconvenience, if that is the price they
must pay for reducing health care costs.
And health care costs cannot be brought down without inconveniencing consumers. Twenty-seven percent of the escalation of health care costs
is driven by obesity. Smoking accounts for 7 percent.3 Smoking and the
behaviors that produce obesity will have to be modied or paid for in the
form of increased insurance premiums if costs are to be reduced.
People will be inconvenienced because there can be no meaningful
health care reform unless patients are subject to coordinated medical
management. They must submit to allowing one doctor to coordinate and
manage their care and ensure its quality. People can no longer agree to
undergo procedures of marginally increased value over medical management unless they are willing to pay part of the cost or buy an expensive
insurance policy that provides everything without signicant co-pays.
People will have to be informed and understand the nature of marginally
versus highly effective procedures. Putting the brakes on the excess application of technology must take place at the level of the provider and the
patient.
In fee-for-service medicine, doctors nancial incentives are to perform procedures and provide services. When a third party pays for the
majority of health care costs, the patients incentives are to willingly
accept whatever the doctor recommends and in fact often ask for more.
Until the nancial incentives of doctors and patients are aligned, we cannot manage health care costs.
But consumers will need some help from the federal government to
keep health care costs manageable. If the baseline practice of medicine in
this country were improved in a way that reduced medical waste by half,
not considering the costs of obesity and smoking, health care costs would
be reduced by 15 percent. Such a goal will require the reform of medical
practice. The medical system is unlikely to respond to competitive pressure
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as much because it does not know how to reduce its costs as because it is
organized to effectively resist doing so. Consumers can neither force nor
teach doctors how to practice efcient medicine. That is where federal
action is needed.
While walking the halls of hospitals in the course of my practice, I
tried to imagine what federal initiatives could change the workings of
doctors ofces, hospitals, and outpatient facilities. I knew that the members of the medical industry, including myself, have a nely honed capacity for getting around the intent of payment rules made in Washington
and in the central ofces of insurers. Who but a treating doctor can certify that a treatment or a test is medically necessary?
Having lived through the wholesale disruption that a decrease in
medical pricing had had on the medical industry in the 1990s, I was clear
that reducing the prices paid to doctors and hospitals is no way to reduce
health care costs. So my conclusion was that saving money by reducing
waste is the only means available to us. The twofold regional variations in
the amount of services that are supplied to patients, which have been so
thoroughly documented by the Dartmouth Institute for Health Policy and
Clinical Practice, illustrate the magnitude of the problem. I have lived in
the proigate world of medicine for thirty years, so the ndings of that
group were no surprise to me.
Reducing Variation
Variations in medical practice are rife. At the end of life, patients in
Ogden, Utah, spend an average of 4.6 days in the hospital, whereas in
Newark, New Jersey, they stay for twenty-one days. Miami doctors apply
two and a half times more interventions to Medicare patients than do
Minneapolis doctors. Surgeons in Birmingham, Alabama, perform three
times more heart surgeries per capita than do surgeons in Albuquerque,
New Mexico. Hysterectomies were so frequent in one Maine community
that researchers concluded that 70 percent of the women in town would
have no uterus by the age of seventy-ve.4
Doctors practice differently from one another because they lack
information, there are no standards against which to compare their practices, some own facilities that they must keep full, they wish to conform
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HMOs meet the criteria I describe. They reduce waste by using protocols and coordinating care. They operate by being paid a at amount for
a patients annual care, so they have a nancial reason to encourage efciency. In theory, if everyone in the United States were in an HMO, waste
and cost would be reduced. But while there are some good HMOs, I have
shown what happened when such techniques were abruptly imposed
upon the medical community in the 1990s and badly implemented.
There are three limitations to medical reform in America. First, no
third party must be inserted between a doctor and a patient. From my
managed care days, I know why doctors resent anyone who tries to tell
them how to practice medicine. Doctors dont like to be second-guessed
and cannot do a very good job managing a patient when they are.
Countries that put their health care systems on a budget interfere
with medical practice by limiting access to specialists, equipment, and
facilities rather than by directly intervening between a doctor and a
patient.
Second, patients must be freely able to pick their doctor within reasonable limits. As a practitioner, I know why doctors hated the feature of
managed care that forced patients to see a particular doctor rather than
allowed them some choice. Trust is difcult to create in a forced relationship. In practice, 57 percent of those with employer-based health insurance are in plans that restrict the doctors they may see without being
responsible for a higher co-pay, and 21 percent are in HMOs that offer
care only by a closed panel of physicians.6
Third, doctors will not cooperate with the wholesale reorganization
of medical practice. HMOs work well for some doctors, but many would
not practice in them. Managed care abruptly reorganized medical practice, but physician resistance led to its downfall. When doctors are paid
with incentives that reward efcient practice, they will nd that they can
make more money and do a better job by using information technology,
organizing into groups, and afliating with specic hospitals. But doctors,
not external parties, must be the ones to make those decisions because
physicians have to live with the circumstances of their practice. Medical
practice cannot be reformed unless doctors and patients cooperate.
These three restrictions are the limits on their cooperation.
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Payment policy should reect standards. The purpose of creating standards is to reduce variations in management among regions of the country, hospitals, and doctors. I do not propose to restrict or interfere with a
doctors ability to care for an individual patient or to in any way restrict
the application of technology that is proven to be effective. I do propose
that payers refuse to pay for excess diagnostic testing and ineffective procedures, require patients to pay a signicant portion of procedures that
are marginally effective, and publicly report and perhaps restrict Medicare
participation of doctors whose practice deviates far from norms.
For common straightforward conditions such as the workup of a
headache, a backache, or abdominal pain, payers should consider limiting payment for diagnostic procedures to a standard workup unless the
physician can justify a more extensive one. Physicians who follow such
standards should be given legal protection from failure to diagnose. At
present, extensive testing for the rare condition is routine. With the lack
of any workup standards and in the U.S. legal climate, a doctor would be
lax to do anything else.
Payers should refuse to pay for procedures that are proven to be ineffective in a given group of patients. Who would want such a procedure anyway? For example, if back fusion in patients with degenerative conditions
without slippage or trauma should prove to be no better or worse than
physical therapy alone, insurers should not pay for it. Every medical procedure is effective in some group of patients, like catheter procedures for
victims of a heart attack and back fusion for patients with spinal fractures
and slippage of the vertebra. But every medical procedure is not effective
in all the patients, or even the majority of patients, who receive them.
Just as the pharmaceutical industry promotes poorly evaluated drugs,
the medical industry promotes poorly evaluated procedures for widespread
use. One is recognized as exploitive; the other is not. At present there is
limited knowledge as to which procedures are highly effective, marginally
effective, or ineffective in different groups of patients. Yet we treat all these
procedures as if they were proven and reliable for all applications.
Neither doctors nor patients would agree to outright restrictions on
marginally effective procedures, but such procedures are candidates for
tiered payment. That is, an insurer might require a co-payment equal to
25 percent of the cost of the procedure for marginally effective procedures
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States. Collectively, the AMQS would provide the information and the
payment models needed to alter insurance payment policy nationally and
the reporting and education needed to inform the public.
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Establishing Standards
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questioned whether shortcuts in care explain the high U.S. mortality rate,
but a decade of subsequent research has presented conicting opinions.3
A 2006 report comparing 22,000 patients in Europe, Japan, and the
United States found that the longer the duration of dialysis, the lower
the mortality rate. The study showed that the United States had not only
the highest mortality rate but also the shortest duration of dialysis. The
authors called for a denitive formal study to answer the question of
whether or not the mortality rate of patients with renal failure is reduced
by longer periods of dialysis.4
What is not disputed is that nances account for short dialysis times
in the United States. Dialysis facilities are paid by the number of patients
they put into the dialysis chair, not by the duration of dialysis. While the
situation is not necessarily a matter of cost, it is certainly a matter of quality: we must determine the optimal duration of dialysis and then pay for
it. We need a systematic approach to determining best practices with an
eye to cost and quality. The AMQS would fund such research.
Evaluating Pharmaceuticals
Three-quarters of the new drugs that the FDA approves for marketing are
rated standard by the agency, and they probably offer little improvement
over existing drugs. Yet they account for the majority of pharmaceutical
sales. In my proposed system, after FDA approval of new standard-rated
pharmaceuticals, the AMQS would fund clinical trials to compare them
with older, cheaper drugs and with other drugs in the same class.
Unlike medical services, drugs are commodities. There is already evidence that market forces can reduce their cost. But we need information
that compares the effectiveness of new drugs so that pricing can be based
upon actual value, not the value assigned by billion-dollar, direct-toconsumer marketing campaigns, and so that the safety and effectiveness
of new drugs are better understood.
Almost everyone covered by employer-based insurance has prescription drug benets, as do more than three-quarters of Medicare beneciaries.5 Drug benets are typically managed by managed care organizations,
who can purchase drugs at reduced prices by limiting the number of
drugs provided to their beneciaries (in other words, by limiting their
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every Wednesday in clinic, and every patient came with an MRI under his
arm. Two-thirds of the studies were of such marginal quality that I simply
ordered a new MRI or a study called a myelogram (in which a spinal tap
injects dye into the spinal uid) before making a surgical decision. The
patients rst MRIs were usually of poor quality because the referring doctor had ordered them to be done on the nearest equipment, often cheap
units housed in mobile trucks that visited their clinics parking lot once a
week. My patients were often from small towns where such units seemed
to be ubiquitous. These MRI scanners had insufcient power to detect the
anatomic distinctions I needed to make a surgical decision. But the cost
to Medicare and to commercial insurers for a good-quality MRI is exactly
the same as the cost of a poor one.
Sometimes the studies were of good quality, but I could not decipher
the labeling on the images because there are no standards for labeling.
The only agreed-upon convention in radiology is that right and left are
standard on all lms. If I could not decipher the labeling on the images, I
could not afford to guess. So I never thought twice about ordering duplicate studies. The cost of the images I reordered in each clinic was about
24,000 dollars per clinic or about 1,152,000 dollars per year in duplicated
studies. During the fteen years I ran those clinics, I was responsible for
more than 17 million dollars in studies that from a systems perspective
were unnecessary. I can assure you that I was not alone in this behavior.
Ideally, I might have called the referring physician and recommended
that she not image the patients she was sending me so that I could order
my own. But I did not always know who the referring doctor was, and she
probably would not have desisted if I had called anyway. A doctor in a
small town uses such imaging studies to determine whether to trouble the
patient with a referral to Houston; the patients expect them.
In 2003, a law was passed that reduced Medicares payment for CT
scans and MRIs by 30 percent because imaging volume was growing faster
than any other service in Medicare. Although Senate staff widely understood that a high percentage of such imaging was waste, who could sort
the wheat from the chaff? Even the doctors could not tell, so how could
congressional staff members? When the prospect of further imaging cuts
was raised in the 110th Congress, I spoke, as a Senate staffer, with innumerable representatives from imaging companies and with radiologists.
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They told me that, as a result of the 2003 payment cuts, they were operating on thin margins and that further reductions would destabilize their
businesses. The injustice is that radiologists order only a small percentage
of studies, but they are usually the ones who must accept decreased payments. Doctors who manage the patients order most studies. I knew that
my practice of ordering so many studies, no matter the cause, had contributed to decreasing radiologists payment rates. Both the radiologists
and the lobbyists for imaging companies begged for imaging standards so
that volume could be reduced by excluding wasteful tests; consequently,
payment rates would remain at a level that would support their businesses. But who in Washington has the staff, the money, or the mission to
determine the necessary reasons for an MRI or a CT scan?
The AMQS would fund research to generate the missing information
needed to create such guidelines and protocols, and there is quite a bit of
missing information. Another example from my own practice is patients
who suffer a concussion. Such patients are briey knocked out, and then
awaken, and it is exceedingly rare for them to have any medical complications; they are usually sent home from the emergency room with their
families. Nonetheless, most doctors perform a CT scan, which is invariably negative. By keeping records on several thousand patients with concussions who have CT scans, AMQS-funded research could determine how
many serious conditions are picked up and whether the scan is necessary
at all.
Another common example is the diagnostic workup of patients who
throw out their back. Most of these patients undergo MRI scanning for
what is most often a muscle sprain that resolves within a week. Rarely
does an MRI affect management. Which patients with the abrupt onset of
back pain need an MRI? Do they only need one if the pain does not resolve
in a week? An examination of the clinical yield from routine MRI scanning
of acute low back pain would provide the answer. The ndings of such
studies would be used to establish guidelines for a wide range of conditions. But do not expect guidelines alone to alter practice.
Two policies would have changed my clinic practice. A regular report
about how far I had deviated from the standard would have kept the matter on my mind, but that would not have been enough. Surgeons mostly
endure long clinics because this is how they nd people who need
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surgery. Operating is what surgeons enjoy. I used the screening MRIs done
by the referring doctors much as those doctors did. I would not allow a
patient to make an appointment with me without an imaging study in
hand because I did not want my clinic to be clogged with nonsurgical
patients. In this circumstance neither I nor the referring doctors would
have paid attention to reports of our imaging practices unless we were
paying a nancial price for them. For instance, taking the cost of excess
studies out of our Medicare payments at the end of the year would have
quickly generated some policy changes in our clinics.
Standards for diagnostic workups could serve another purpose as
well. Doctors dont perform major procedures, especially marginally indicated ones, to avoid lawsuits; rather, they over-order images, blood tests,
and diagnostic procedures such as biopsies. One-third of malpractice
cases are for failure to diagnose.8 A doctor who adhered to a standard protocol for a diagnostic workup could be held harmless for failure to diagnose. Such a law, combined with a nancial penalty for waste, would be a
powerful motivator for efciency and still leave control of patient care in
the hands of doctors.
If a doctor or a hospital has no nancial consequences for failing to
follow standards, then it does not matter who establishes those standards.
On the other hand, if standards can affect payment, the manner of their
creation must not only be objective but must also appear to be objective.
Currently, standard setting appears to have a conict of interest. For
instance, the body that promulgates the most widely accepted guidelines
for renal dialysis, the National Kidney Foundation, receives 57 percent of
its funding from industries that directly prot from renal dialysis.9 The
20045 annual report of the American Heart Association, the body that
issues standards for management of heart disease and stroke, lists
twenty-one donors that contributed between 1 million and 4.9 million
dollars. Twenty were industries that have something to gain from a decision of the American Heart Association.10
The AMQS would work with specialty societies and perform primary
research to establish standards for diagnostic workups and treatment.
One of the reasons to establish standards is to reduce variation; another
is to protect patients. Fee-for-service medicine rewards doctors for doing
more. A shared savings payment model reward doctors for doing less in a
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Prioritizing Primary Care
The Sumner Clinic is not much to look at from the outside. It is located
in a strip shopping center on a busy street in the small town of Gallatin,
Tennessee, about thirty miles northeast of Nashville. The clinic is managed by a general internist, Dr. Sid King. When I entered for my meeting
with King, I was greeted by a trim, smartly dressed elderly woman sitting
in a rocking chair near the front door of an expansive room. She was one
among several patients who volunteer as greeters at the clinic.
Inside, the Sumner Clinic did not resemble any doctors ofce I had
ever seen. It was not posh, but it was spacious with a large, simply decorated waiting room. The oors were linoleum, the walls accented with
faux wood. Two computer terminals and several telephones for the
patients use were scattered among rocking chairs and upholstered
chairs. A patient in a wheelchair could easily navigate the room, and one
older woman in a wheelchair was logging onto her email account.
In the middle of the room was a replace open on two sides. On the
right was an open kitchen with a long dining table, where two elderly
African American women were in deep conversation. The room adjacent
to the kitchen was set up like a classroom so the clinics nurse and a dietician could teach patients healthy cooking and eating skills. On the left
side of the waiting room was the ubiquitous check-in counter, not
enclosed in glass but open. The staff often came into the waiting room to
greet patients by name.
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At the time of my visit, the only patients using the services of the
Sumner Clinics internists were 1,200 Medicare beneciaries who had
signed up with a Medicare Advantage Plan offered by HealthSpring, a
Nashville-based managed care organization. Seniors enroll in such plans
so they do not have to bear the expense of purchasing a Medicare supplemental policy (which pays for the 20 percent of outpatient services not
covered by Medicare) and because their co-payments and deductibles
are lower than those with fee-for-service Medicare. Medicare pays
HealthSpring, and HealthSpring pays the doctors and hospitals, keeping
any remainder as prot.
Republicans had hoped that this program, intended to demonstrate
the private sectors better coordination of care, would eventually result in
cost savings to Medicare. But in order to get insurers interested, the new
program had to pay them 12 percent more than traditional fee-for-service
rates. Judging from the Sumner Clinic, the Republicans had not hoped in
vain. What happens in this clinic is remarkable.
Dr. James Geraughty, who is chief quality ofcer for HealthSpring,
told me about the clinic when I visited his companys Nashville ofces.
HealthSpring had enlisted the Sumner Medical Group to care for its
Medicare Advantage patients in the Gallatin area. Geraughty explained
that their target was to take care of Medicare patients for about 82 percent of what Medicare paid, though for most practices the number was
closer to 87 percent. The remaining 18 percent is available to pay company overhead and prot, typically distributed as 10 percent for operations and 8 percent as prot. Medicare pays insurers based upon a
patients severity of illness, so there is little reason for any insurer to hustle healthy Medicare patients in order to improve earnings.
Geraughty had hired a nearby rm that specializes in management of
chronic diseases to keep HealthSprings patients out of the hospital by
improving their medical management. This rms nurses would phone
the Sumner Clinics patients and ask why they had missed an appointment, inquire into their compliance with a dietary recommendation, or
tell them how to change their medications. When I interviewed Sid King
in his Gallatin clinic, he said that he had objected to this practice because
it interfered with his management and that the patients did not pay much
attention to a call from an insurance companys nurses anyway.
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one doctor rather than decide for himself which specialist to see or, like
Ed Fitzsimmons in our story of the best of Medicare, be managed by a selfselected panel of specialists.
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they pitch their ideas to Congress, both the members and their staff can
only see doctors asking for more money, a yearly occurrence. Nothing the
medical industry has asked Medicare to fund has ever saved it money, so
the doctors dont get very far.
But the coordinated management model has many opportunities for
savings. For example, managing care at the end of life is not a feature of
disease management programs, but it certainly is a cost driver. At least
one-quarter of Medicare spending takes place in the last year of life,
much of it in the hospital. A study of where patients die has shown that,
in regions with high bed counts, 54 percent of patients died in the hospital. In regions with lower bed counts, only 23 percent did, with the
remainder dying in their own homes or in nursing homes. Personal preference had no inuence on the place of death.5 So the key to end-of-life
management is to allow patients to make decisions beforehand.
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patient wanted cardiopulmonary resuscitation, intravenous uids, ventilators, antibiotics, or nutritional support. Nothing was left to any doctors
imagination. The orders, called Physician Orders for Life-Sustaining
Treatment (POLST), were to accompany any patient likely to be near the
end of life as that person was transferred or discharged from a nursing
home or a home.
After ve years of renement the concept was tested statewide in
eight long-term-care facilities. The results were remarkable. No patient
received unwanted cardiopulmonary resuscitation or articial ventilation. Of 183 patients in the statewide test, twenty-four were hospitalized
only because the nursing homes could not control suffering. For the others, the nursing homes could fulll patients medical orders.
Before statewide implementation, Oregon law was changed to protect
emergency medical service providers who followed the POLST orders in
the eldfor instance, protecting them from litigation should they not
provide cardiopulmonary resuscitation in compliance with a patients
POLST orders. The orders were made bright orange so that no one could
miss them, and the public was extensively educated.
As a result, Oregon has reported the lowest rate of Medicare in-hospital expenditures in the last six months of life6,198 dollars per enrollee
in Bend, Oregon, versus 17,797 dollars in New York City.7 Ed Fitzsimmons
would have died quietly and probably quickly in a private hospital room
without a ventilator, tubes in his body, or thousands of dollars of
unwanted tests had he lived in Oregon instead of California. Had he been
a patient of the Sumner Clinic he might have lived for many more years.
The AMQS would organize and conduct Medicare demonstration
projects of the medical home model and incorporate the Oregon model of
end-of-life care and other successful end-of-life programs. AMQS regional
boards would manage these programs in primary care practices in urban
and rural areas and in solo and group practices throughout the United
States. The information learned in one region would be shared with others. The AMQS would install information systems in participating doctors
ofces to help them manage patients and to aid the AMQS in
monitoring quality of care and developing measures of quality. It would
provide some of the up-front cost of care coordination, such as a nursing
salary for large group practices. No one should expect an immediate
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result; rather, everyone would work by trial and error until the program
could stand alone in reducing cost and improving quality. AMQS staff
would work with doctors as if they were colleagues in a national learning
experiment until everyone could understand which critical behaviors and
performance measures were producing reduced cost along with increased
quality. When the details were clear and widely disseminated, the AMQS
would recommend to Medicare that it change payment policy nationally.
The AMQS would report on the quality of its clinics using a method
similar to the one used by Minnesota Community Measurement. This
group is a not-for-prot whose member organizations are Minnesota
insurers and the Minnesota Medical Society. It assesses the quality of care
of asthma, diabetes, high blood pressure, colds, sore throats, well-child
visits, and cancer screening in Minnesota clinics. Compiling data collected from health plan claims and medical records, the groups website
(www.mnhealthcare.org) provides user-friendly information. What the
public sees is the grade (from below average to above average) of each
participating clinic. And the information is easy to nd.
According to the Sumner Clinic model, a primary care doctor practicing for fty hours a week should be expected to earn at least 250,000 dollars a year. Current average income for generalists is 180,000 dollars. The
increased income is from payments for quality and shared savings. If a primary care doctor seeing 140 patients a week could not prevent one 70,000dollar hospitalization in a year to justify her bonus, I would be surprised.
The shortage of generalists would quickly dissipate as soon as twentyve-year-old medical students understood that primary care is important
to American medicine and that they could make at least as much money
as an ofce dermatologist or an emergency medicine physician and still
practice primary care, which many doctors love. The disincentives just
have to be removed.
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Reducing Spending on
Hospitals and Specialists
The United States is paying for high-performance hospitals but not getting them. What would a true high-performance hospital look like? I interviewed Dr. Lucian Leape, adjunct professor of health policy at Harvard
School of Public Health, who is a pioneer in hospital safety and quality.
When I asked how he framed the difference between safety and quality,
Leape said that they are always found together. He thinks of quality as
involving process measures: for instance, did a patient get antibiotics
before surgery? He thinks of safety as the outcome measure of quality: for
instance, did the patient have a wound infection? According to Leape, two
U.S. hospitals best exemplify safe, high-quality hospitals: Latter Day Saints
(LDS) Hospital in Salt Lake City, Utah, and the Mayo Clinic in Rochester,
Minnesota. I ew to Salt Lake City to interview one of the leaders in the
quality movement, Dr. Brent James, who was a cancer surgeon before he
became consumed with creating quality health care systems.
James came from Harvard to LDS Hospital in 1986. But even before his
arrival, the hospital had been concerned about quality: as early as 1964, a
visionary had outtted the LDS intensive care units with computers that
lled seven ofce-sized rooms. LDS is part of Intermountain Healthcare, a
statewide group of hospitals and clinics. At LDS, James met Steve Busboom,
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in the cost of care, with variations spanning a spectrum from very high
to very low.
James said he had always believed that some surgeons were just naturally better than others, a view I had also held. But the LDS investigators
found that in no area of management was one surgeon always the best.
Length of TURP procedures varied from thirty-eight to ninety minutes, the
key variable. The slow surgeons patients had more complications and
cost more. As it turned out, the faster the surgeon, the more prostate tissue he removedvarying from thirteen grams for slow surgeons to fortytwo grams for fast surgeons. This nding was counterintuitive: one would
expect a slower surgeon to operate more thoroughly. The more prostate
that surgeons removed, the fewer incidents they had of postoperative
obstruction of the urinary tract, requiring additional interventions,
longer hospital stays, and thus more cost.
Investigators presented these data to the urologists, who could identify their own behaviors but not other surgeons. The group did not tell
the urologists what to do with the data. James said he was sure that the
slowest surgeon would never talk to him again, but some time later that
surgeon called him and thanked him. The doctors comment was I talked
with my colleagues and found that they could tell where they were by
observing the nature of the prostate tissue they were resecting. I had been
picking my way more slowly and actually could not remove as much tissue
safely. I adopted their technique.
One year later, when new data from the same surgeons were examined, the slow surgeons had become faster, were removing more tissue,
and had patients with fewer complications. The range of variation among
the ninety factors was less, complications had decreased, and cost was
signicantly reduced. The surgeons had learned from one another.
As Jamess work continued, LDS hospital culture began to change,
service by service. The Intermountain Healthcare administration got
behind him when his method showed the board how to reduce the cost of
hip replacements from 12,000 to 8,000 dollars. At about the same time,
another group of investigators at the hospital showed that wound infections were increased by 240 percent if surgical patients received their
antibiotics after surgery rather than before. The hospital made administration of presurgery antibiotics standard practice, saving large sums and
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Induction is not benign because it leads to hard labor that can increase
the chance of injury to the fetus.
Nationally, use of induction more than doubled between 1989 and
2001, from 9 percent of deliveries to 20.5 percent. In upstate New York in
2001, 25 percent of inductions had no apparent medical basis, and the
induction rate of laboring women varied from 10 to 39 percent among
hospitals.2 Like many things in medicine, numerous factors enter into the
decision to induce. One of them, however, is not medical: it may be more
convenient to the doctor or the mother to have a prescheduled delivery
rather than wait for labor to begin spontaneously. If the procedure were
being done for strictly medical reasons, the variation in induction rates
should not be so great, a thesis analogous to Wennbergs regional variation data but played out in one hospital.
Jamess group found astonishing variation in the rates of induction
among practice groups, among hospitals in the Intermountain system,
and among physicians within groups. These data showed that, among
hospitals, 28 percent of inductions were inappropriate according to the
American College of Obstetricians and Gynecologists guidelines and that
induction was associated with a high rate of preterm deliveries and
admissions to the neonatal intensive care unit.3 Investigators presented
their data to the systems obstetricians, asking them to change guidelines
as they saw t but to reach an agreement. The consensus among the
obstetricians was to decrease the percentage of inductions from 27 to 5
percent of births, a goal they accomplished within three years.
James told me that he simply kept giving data to the obstetricians. He
noted that one group held out against altering its procedures, but after a
few years peer pressure forced even this recalcitrant group to conform. He
said this is how change happens. At rst 5 percent of doctors buy in, then
more, and eventually the last 5 percent are brought in by peer pressure.
James emphasized that neither he nor anyone else ever tells a doctor
what to do. When a standard protocol is developed, he disseminates it
among participating doctors, asking them to change the protocol as they
see t, not to approve or disapprove of it. He has learned again and again
that best management arises when the ones who deliver care design the
protocol. In Jamess view, his function is to provide the framework and the
information needed to standardize management and to report regularly
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of those who manage the patients, each doctor meant something different. James is an administrator and a researcher; he meant that the frontline doctors, not the administrators, have to design processes. Clemmer
meant that nurses, pharmacists, and respiratory therapists at the bedside
not necessarily the doctorsneed to design them. For example, he told
me that his physicians developed a protocol for managing patients on
ventilators for lung failure. But when the doctors presented the protocol
to the respiratory therapists, they all laughed. He said, We changed the
protocol because they were right and also because they are at the bedside
and they had to buy into it.
Clemmer gave another example of where good protocols come from.
High blood-glucose levels cause all manner of complications and are very
common in ICU patients. Insulin is the treatment, but its use is tricky
because patients vary in their response to it; and lowering the glucose too
much can cause insulin shock, which can be fatal. A somewhat high glucose, however, exerts its bad effects over a period of time without any
immediate danger to the patient, so the understandable tendency in hospitals is to err on the side of too high rather than too low. Clemmer credited managing blood glucose in a lower range with reducing the mortality
rate in the hospitals ICUs. Such a protocol does not require more effort
from the doctors but more attention from the bedside nurses, who must
frequently check the glucose values, alter the insulin dose, recheck the
blood glucose, and then instantly respond if the insulin overshoots and
drops glucose to dangerous levels.
Clemmer turned to his computer screen as we talked and pulled up
the blood-glucose proles of every patient in the LDS Hospital ICUs during the past twenty-four hours. At a glance he could tell it staff members
were following the protocol. He summarized his view of hospital quality:
Its a matter of being consistent, reliable, and doing what you say you are
going to do.
When I asked if the hospital had saved money on its quality effort,
Clemmer said that, by reducing complications and mortality, LDS had
reduced the cost of ICU patients by 2 million dollars a month. But we do
not get to keep the money, he explained. Medicare pays hospitals by the
discharge diagnosis, and most insurers simply pay by the number of interventions to which a patient is subject. Hospitals get paid more if, upon
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discharge, a patient has had a lot of complications. For instance, a hospital is paid a certain amount for a patient with heart disease who is admitted for a coronary artery bypass. If the patient is discharged with no
complications, the hospital is paid less than it would have been if she had
had a myriad of complications. More work earns more pay from Medicare
and much more from private insurers, even if sloppy medical care is the
cause of the additional work. This approach leaves hospitals and doctors
without the slightest nancial incentive to reduce complications and a
powerful incentive to tacitly allow them. The payment system pits a basic
tenet of medical practice, rst, do no harm, against the self-interest of
doctors and hospitals.
LDS partially solved this problem by becoming an insurer so that, at
least for its own beneciaries, good medicine is not unprotable medicine. A hospital payment system that rewards complications, as the U.S.
system does, is perverse. The United States is getting what it is paying for
in every area: quantity, not quality.
I asked Clemmer if the work he does at Intermountain would be possible without fully functional electronic medical records. He said that
computers were necessary but not sufcient. What is needed are both
computers and the will to use theman information system without a
culture of safety and efciency is wasted money. He advised me to look
into a story that is now famous in quality circles, the Cedars-Sinai story.4
A stones throw from Beverly Hills, Cedars-Sinai, a hospital in southern California, has a cutting-edge reputation. In 2002, it seemed characteristic of the hospital to invest 34 million dollars on an information
system; at the time it already had several computerized patient care areas.
But when the process was extended throughout the hospital, the medical
staff revolted. The system had been programmed not to accept a medication order from a doctor if that medication interacted with one the patient
was already taking. But doctors frequently and deliberately combine drugs
that interact, so the computer stopped them cold. This was not the only
problem. Even when executing uncomplicated orders, the doctors had to
slow down to answer numbers of questions before the computer would
accept their orders. Only a fraction of the 2,000 doctors with privileges at
the hospital had been involved in the development of the information system; and within three months of installation, the hospital shelved it.
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Clearly, until doctors and hospitals have a business case to use information technology, it will be an add-on, not an integral part of practice.
Payment should be changed so that doctors and hospitals are paid for
efciency. Then they would have a business case to use information
technology.
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payment with the hospitals. Let the anesthesiologists, surgeons, intensivists, radiologists, and other hospital-based specialists work out their
own payment arrangements with hospitals, based upon their value to the
process of care as well as their performance. The hospital and its afliated
doctors would bear the cost of repeat surgeries and complications
because they would all be in the same nancial boat. Everyone would
have an interest in preventing complications and reducing cost.
Such an arrangement is currently legally questionable. The justication for legal barriers is that competition between hospitals and doctors
protects patients interests. I agree that an independent relationship does
permit a doctor to practice at another hospital if he believes its approach
to care is better; I have taken this step myself in the past. But nothing in
my proposal would prevent a doctor from working with multiple hospitals. The only difference is a reformed nancial arrangement, and I have
found an example of such a payment system.
Dr. Denton Cooley is a legend at the Texas Medical Center in
Houston. I saw him operate when I was a medical student, and even a
novice could tell that he operated like a musician plays an instrument
smoothly, economically, and quickly. His dexterity and his surgical results
were world-famous. I was enthralled. In 1968 Cooley performed the rst
successful heart transplant in the United States, and he made major contributions to reducing the mortality rate from adult and pediatric heart
surgery. But years later, when Cooley was nearing the end of his career, I
heard him say that he thought his greatest contribution to medicine was
the development of a bundled pricing model for heart surgery.
The Texas Heart Institute where Cooley was chief worked like a
machine for patients needing heart surgery. Every step was preplanned.
There were so many postoperative heart surgery patients in the ICUs, for
instance, that every detail of their management was on protocol. The
nurses were so used to caring for them that they could sense a problem
before it happened. Specialists were versed in the particularities of how the
organ system of their interest responded to heart surgery. Once, when
the institute was seeing more infections than expected, a rapid analysis that
would have taken a year to accomplish in any other setting found that the
use of a safety razor on the chest before surgery was the cause. Because of
the hospital culture that Cooley initiated, almost every aspect of cardiac
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Measuring Standards
The AMQS would fund the use of information technology in its highperformance hospitals because discovering standards and measuring
them with paper records is slow and expensive. As Brent James explained,
when doctors receive information about their processes of care, they
respond, unless they have powerful reasons not to (as in my case of excess
imaging). Our hospital once provided us with reports on the length of stay
of our spinal surgery patients. Four of us had high-volume practices that
could be compared. One of the surgeons had the shortest length of stay,
while mine was one of the longest, though my complication rate was low.
I asked my friend how he kept his patient stays so short.
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rather than after (when they do not), and vaccinating elderly patients to
prevent pneumonia. Between 2004 and 2007, hospitals that failed to
report received a 0.4-percent reduction in their annual Medicare payments, so most of them complied and documented their best practices.
Between 2002 and 2006, hospital performance improved. For example, the appropriate care of heart attack improved from 86.9 to 90 percent. For heart failure the improvement was from 60.7 to 76 percent; for
pneumonia, from 72.3 to 81 percent.8 Still, performance was highly variable. Hospitals in the midwest and the northeast outperformed those in
the west and the south. The percentage of hospitals that were providing
life-saving catheter procedures within 120 minutes of a heart attack varied among states by almost 50 percent.9
The greatest limitation of the Joint Commissions program is that
good standard medical practice has had little inuence on the mortality
rate of patients, though it may yet.10 Other, more complex factors were at
work. For instance, what urologist would have suggested the removal of at
least forty-two grams of prostate gland as a quality measure for prostate
surgery? What obstetrician would have believed that so many colleagues
were inducing delivery rather than letting it occur naturally? What doctor
would have imagined that a series of simple hygiene measures and control of blood glucose would have wiped out hospital-acquired pneumonia
and reduced ICU mortality rates fourfold at LDS Hospital?
I do not take away from the importance of measuring and reporting
quality; in fact, I promote it. Such measures do not, however, get to the
key processes that result in improved outcome. Further, paying a small
bonus for quality measures is not a sustainable way to pay hospitals for
quality. I attended a conference at which a doctor who manages a quality
program funded by Medicares 1.5-percent bonus payment reported savings and decreased mortality in his hospital. I asked him if his hospital
got to keep the savings. His response was that the bonus just paid for the
reporting. This method is no way to create high-performance hospitals.
Regional AMQS boards would work with high-performance hospitals
to determine processes and methods that enhance patient safety until
enough is known to standardize hospital function and transfer the technology to other hospitals. As these hospitals became independent of
AMQS support, nancing would be freed up to expand to other hospitals
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in each region. In this way, AMQS would lead medicine through a fundamental change, one group of hospitals at a time, until payment and quality adjust nationally for all hospitals and specialists. If we follow the logic
of Demings ndings, seventy hospitals out of the current 5,000 and 1,000
doctors out of the current 900,000 would be enough to initiate the
process of reform in the United States. Over time, the majority of U.S. hospitals would become high-performance hospitals with standardized
processes and measurable outcomes.
The other hospital safety issue is unreliable emergency services. A
recurring theme of this book is that the development of new technology
has outstripped our ability to use it, and the situation is no different for
emergency services. In the past twenty years a scientic revolution has
provided one life-saving emergency treatment after another, but those
treatments work only if rendered a short time after onset of the emergency. Many people do not receive them.
Clot-busting drugs, for example, if given within three hours of a
stroke, increase the chance of survival with a slight or no decit by 30 percent. The treatment was proven to work in 1993, and its use has been
endorsed by groups such as the American Stroke Association. But fewer
than 10 percent of eligible patients ever receive treatment.11 The reason is
that neurologists who normally treat stroke are mostly diagnosticians who
are used to working during ofce hours and have not organized to come to
the emergency room within the short time frame needed for treatment.
Also, even though treatment improves outcome, one of its complications
is bleeding in the brain, so emergency doctors will not administer it. The
problem is aggravated because doctors are not paid to administer the
drugs. A global payment for the treatment of stroke, in combination with
public reporting of the percentage of patients in each region who receive
it, would increase the use of this therapy and protect the publics interests.
Administration of clot-busting drugs or catheter procedures reduce
the chance of death by one-third if applied within twelve hours of a heart
attack, and the sooner the better. Two-thirds of patients do receive these
procedures within twelve hours of hospital admission.12 These technologies
have been long established and are one of the standards of quality reported
by the Joint Commission. The performance of individual hospitals on
this quality measure can be accessed on the Joint Commissions website,
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probably one of the reasons that two-thirds of patients receive the drug. But
one-third of people do not.
Induction of hypothermia shortly after cardiac arrest increases the rate
of survival with good neurological recovery by at least one-third. This relatively new treatment was reported in 2002, but it is highly effective with a
low complication rate and endorsed by specialty societies. In 2005, however, only 13 percent of emergency medicine physicians, critical care physicians, and cardiologists had ever used the therapy or knew much about it.13
The Joint Commission is a central organization whose ndings are
publicly available but not publicly known. If it used its ability to sanction
hospitals, denying them access to Medicare patients by setting high standards nationally, it would close too many hospitals. Further, its rules have
to recognize the limits of hospital nancing.
What is missing in emergency services in many areas is any responsible regional entity that could hold competing doctors and hospitals
accountable to the local community for the quality of service. Emergency
services in a community are typically delivered by multiple ambulance
services and hospitals, all functioning in their own worlds without awareness of the context in which they operate. Without local leadership that
transcends individual hospitals, these circumstances are not likely to
change. There is no forum in most regions where doctors and hospitals
come together to discuss emergency services. AMQS regional boards
would enquire about why all patients do not receive appropriate emergency treatment, provide a forum for discussion and planning, work with
doctors and hospitals to improve performance, and report to the public.
It would facilitate and report, not regulate.
AMQS would make grants to municipalities and local governments to
support three-year pilot projects to establish something similar to airtrafc control systems for ambulances throughout the United States.
These coordinating bodies would report upon the availability of these and
other emergency services and try to improve them. In Houston, where
such a system was attempted, the total cost of a coordinating center for
the thirteen counties that account for 20 percent of Texass population
was only about 2 million dollars per year.
This idea is modeled on a project piloted by Dr. David Persse, director
of emergency medical services in Houston. During hurricanes Katrina
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and Rita, 5,000 to 10,000 people with medical needs from Louisiana and
East Texas were displaced into Houston hospitals, nursing homes, and
clinics.14 By coordinating ambulance trafc for the entire region from a
command center, the right patients from the ooded areas got to the
right hospitals in Houston. The miracle was that patients were so evenly
spread among area hospitals than not one scheduled surgery in a
Houston hospital was cancelled because of patient overow. This concept
could be executed anywhere with off-the-shelf communications systems,
and its example is one of the reasons that I say it is absurdly easy to correct many of the problems in medicine. We just have to blow through the
resistance to change.
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hospital labor shortage; and some simple steps in each region might permanently relieve it.
Between 2000 and 2003, 27 percent of the growth in health care costs
was due to prices in excess of ination.16 This gure bolsters the case that
medicine functions as a regional monopoly. AMQS would examine hospital pricing regionally to identify areas in which high pricing appears to be
the result of regional monopolies. There is nothing wrong with a monopoly as long as its pricing is fair; but if it gouges its customers, people
should be informed. Since not-for-prot hospitals receive a tax subsidy
for the public good that they do, they should publicly report their prices.
Empowering Consumers
Physician and hospital participation in AMQS would be voluntary, but
public reporting of provider- and hospital-specic data would be a
requirement for participation. Over time, as the systems brand came to
mean quality and safety, the number of participating hospitals and clinics
could expand to include most in the country. AMQS would make the
results of its evaluations of drugs and procedures known in ways that the
public could understand. It would inform the public about the state of
health care services in each region. The idea is to change medical culture
in every way possible, and public education is a sure way of doing it.
Another way of educating the public is to teach them about procedures
that they are to undergo. When straightforward videos and readable information are presented to patients who are faced with a medical decision,
more than one-quarter fewer of them choose surgical procedures.17
Choosing treatment for prostate cancer illustrates why patients should be
taught by a neutral source. In 2005, more than 200,000 men were diagnosed
with prostate cancer, and 30,000 died from it. There are four treatments for
prostate cancer when it is localized within the prostate gland: watchful waiting, surgical removal, hormone therapy, and radiation therapy. Researchers
have not found much difference between the long-term results of radiation
therapy and surgery, but their complications are different.18
Each patient must make his own treatment decision. The usual way is
to talk to a urologist about surgery and to a radiation oncologist about
radiation therapy. A 1999 survey found that 93 percent of urologists
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Positioning of an American
Medical Quality System
The American Medical Quality System would provide the information and the payment models needed to alter insurance payment policy nationally and the reporting and education needed
to inform the public.
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losers. The 700 billion dollars in waste associated with unnecessary treatments has to come out of someones pocket. NIH research helps develop
new technology, and the agency enjoys vastly more funding than its sister
agenciesabout four times more than the CDC and fteen times more
than the FDA. The NIH has the support of industry, medical schools, scientic societies, and disease societies such as the American Cancer
Society and the American Heart Association. All prot from its work. It has
no opponents and few detractors. What other federal agency can make
that claim? Yet in 2003 only about 5 percent of the money allocated by the
federal government to medical research was used to determine how best
to deliver medical services.3
Research to nd out what works in medicine had no status until
1989, when legislation established the Agency for Health Care Policy and
Research with the mission to research the outcomes of medical treatment, develop guidelines for best medical practices, and advise Medicare
on payment policy. But two simultaneous events in 1994 nearly cost the
agency its life.4 The rst was that it began to do its job. A review of the
data on spine fusion had found there was no evidence that back fusion,
a widely performed procedure, was effective and that it had a high complication rate. Agency staff proposed studies to nd out more, but a professional society of spine surgeons, the North American Spine Society,
attacked their conclusions. Moreover, a back surgeon from northern
Virginia, Dr. Neil Kahanovitz, formed the Center for Patient Advocacy,
which organized a letter-writing campaign to Congress. Through personal contacts in the House of Representatives, he succeeded in convincing a number of representatives that the agencys position on back
surgery was based on unsound research and was a waste of taxpayers
money.
Kahanovitzs efforts were perfectly timed with a second 1994 event:
Republican control of the House. As a federal body managed by the executive branch, the agency had naturally provided information and analyses
to support the Clinton administrations Health Security Act. But now its
association with the executive branch made it vulnerable to enemies.
Fueled by Kahanovitzs lobbying, members of Congress accused it of
wastefulness and unwarranted interference in the practice of medicine.5
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The Agency for Health Care Policy and Research barely survived the
attack. It was dealt a 21-percent budget cut and renamed the Agency for
Healthcare Research and Quality after its teeth were led to nubs. Its successor agency was forced to abandon controversial topics that might
affect payment policy. Its current budget is
1
100
The country depends upon the Federal Reserve System for objective
nancial decisions. AMQSs dynamics should be the same. It must make
neutral decisions based upon incontrovertible data. It will be recommending courses of action to Congress and commercial insurers; so its day-to-day
decisions cannot be unduly inuenced by Congress, a presidential administration, or an industry. History has shown that when a federal agencys ndings threaten an industrys prots, that agency may go out of business or be
tamed. Therefore, what I propose cannot be a federal agency.
For the AMQS to function, it must, like the Federal Reserve System,
have an appointed board independent from Congress and the administration and be rigorously nonpartisan. But unlike the Federal Reserve
System, which is chartered by Congress but self-supporting, the AMQS will
require taxpayer dollars. The FDA receives a signicant proportion of its
funds from industry to approve new drugs, and allegations of excessive
industry inuence plague it. An American Medical Quality System needs
a signicant portion of its nancing to be independent of industry and
of congressional and industry interference with its ndings. Otherwise,
industry will contaminate or stop its actions by lobbying Congress, as
Kahanovitz did and as industry does for Medicare policy every day.
There is a precedent for congressional approval of a process without
congressional involvement in the details. Closing military bases is an
essential means of managing the military, but bases bring so much
money into congressional districts that members must try to stop a base
closure there even if they know that closure is in the national interest.
I can imagine the same dynamic when a major industry residing in a
members home district is threatened by an AMQS nding. Congress uses
the Defense Base Closure and Realignment Commission to make
individual closure decisions, retaining the option of disbanding the commission but not of altering its decisions. Members of Congress are thus
protected in their home districts from politically unpopular decisions
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private operation owned by its member banks and is led by a nine-member board of directors, some selected by member banks and others by the
board of governors. Regional banks store excess currency and provide
common services to member banks, such as the processing of checks.
They sell Treasury securities and perform economic research in their
region.
I conceive of an American Medical Quality System in Washington,
D.C., modeled on the governance of the Federal Reserve System, with
Medical Quality Boards in every region of the country. Its business would
be to change the practice of medicine in the United States. It is not just a
physicians conjecture that the measures I propose here could reduce
health care cost. The Commonwealth Fund contracted with an independent health care consultant, the Lewin Group, to estimate the savings from
a number of measures, such as public health programs to decrease smoking and obesity and also including industry-wide controls on medical
prices. Many of the measures that I propose here were a component of the
analysis and, extrapolated out to ten years, were estimated to save more
than 100 billion dollars per year.7
This estimate is realistic if there is no change in the U.S. culture of
medicine. But if doctors begin to take pride in delivering cost-effective
and quality medicine, if the uninsured are covered so that hospitals dont
rely on wasteful practices to balance their books, and if consumers accept
ownership of some of the problems, the savings gure could conceivably
be closer to 700 billion dollars.
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Political Realities
The deck is stacked against the establishment of an American Medical
Quality System because no industry reforms itself. The pharmaceutical
industry spent 800 million dollars lobbying federal and state governments
over a seven-year period; 116 million dollars of that sum made sure that
the Medicare Modernization and Improvement Act of 2003 would suit
their needs. Of the 1,291 pharmaceutical lobbyists, 52 percent have been
federal ofcials.8 The CEO of the main drug lobby, PhRMA, was a member
of the House of Representatives for twenty-ve years and an author of the
Medicare Modernization Act of 2003, which includes a prescription drug
benet. The pharmaceutical industry is likely to oppose head-to-head testing of drugs by anyone other than a pharmaceutical company, and its tentacles reach deep into congressional ofces. The medical device industry
similarly opposes testing of its products effectiveness.
The hospital industry will object to the idea that AMQS will expose
excess hospital prices, but its members may not oppose accepting grants
for information technology and process improvements. Hospitals function well with prot margins of no less than 2 percent and need prots of
no more than about 6 percent. If some prospect of covering the uninsured
along with cost savings from improved efciency can stabilize the function of not-for-prot hospitals at the upper limit of that range, they might
go along with such a reform effort.
The disease-based advocacy groups are a wild card. Many of these
organizations accept signicant support from the industries that stand to
prot from the guidelines they sponsor, especially the pharmaceutical
industry.9 Advocacy groups could oppose the notion of allowing a neutral
entity to work with medical societies to establish practice guidelines, and
they might join specialty medical societies and their industry supporters
in opposing AMQS. This combination could be deadly because patients
who may or may not have a full understanding of the issue will be
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savvy and understand the nancial forces that their specialties face.
I think they understand that their efforts to keep payment levels up cannot continue to succeed under current circumstances. Some specialty
societies may be willing to support something similar to my proposal.
But individual specialists will strike hard at these ideas. Like Neil
Kahanovitz, who nearly brought down the Agency for Healthcare Research
and Quality, some specialists will say that spending public money to evaluate their technology or limit its use is unwarrantedeven wrong.
Imagine how Dr. Raymond Alford, the character in my story of unnecessary surgery, would react to what I propose. He would have too much
invested in his one operation to risk change, and he would have enough
money to work against such change. But personal beliefs based upon
unexamined individual experience, even if they are sincere, can be wrong
as often as they are right.
I remember a scene in the basement of an NIH building on Wisconsin
Avenue in Bethesda, Maryland, twenty-ve years ago. Those were the days
before we had any proven treatments that reduced the neurological damage from stroke, brain injury, spinal cord injury, or cardiac arrest. I had
just completed my residency and was on a panel with more senior neurosurgeons discussing the design of a clinical trial of a drug called a steroid,
which would be tested for the treatment of spinal cord injury.
Back in the early 1960s, a neurosurgeon named Lyle French at the
University of Minnesota had been searching for a way to get chemotherapy into brain tumors. I helped care for his patients when I was an intern
in 1975. The brain has a microscopic barrier that excludes pharmaceuticals from entering it, so French gave a steroid to a comatose patient in
hopes that it would open the brains barrier to the chemotherapeutic
agents. When he came back to give the chemotherapy, he found the
patient awake. After more such experiences, neurosurgeons everywhere
began to use steroids to decrease the swelling of the brain caused by brain
tumors. There was no need for any randomized trial here. The results
were analogous to administering penicillin for pneumonia: patients got
better before the doctors eyes.
As a result of this success, neurosurgeons began to use steroids for
every neurosurgical disease they treated, though the results of treatment
were not immediately evident in injured patients, who did not wake up
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like tumor patients did. But doctors continued to assume that because
steroids were effective in tumors, they were also effective in brain and
spinal cord injuries.
Subsequent laboratory research found that steroids did improve the
outcome of spinal cord injury but only if given in a higher-than-common
dose very soon after injury. Now doctors needed a clinical trial to determine the right dose. The question before our panel was whether to give
one group of patients with spinal cord injury the usual steroid dose and
the other the high dose or whether to administer a placebo to one group
and compare it to high-dose steroids. The latter was the better design
because objective analysis of the data demonstrated that no one knew
whether or not steroids had any effect on spinal cord injury.
The room was tense as the ten or so doctors sat around the conference
table discussing the two options. Two or three of the doctors held back;
but when the decision to test a placebo versus high-dose steroids appeared
to be the probable consensus, they began to react. One red-faced doctor
stood up, waving his arms in agitation, and passionately declared that it
would be immoral not to use steroids in both groups of patients: we
knew that they were effective; what we didnt know was which dose was
more effective. His two supporters became equally animated; and before
the meeting was over, they had prevailed. The study was completed with
high- and low-dose steroids, and it was completely negative. The matter
became so confused that years later another large trial was conducted,
testing a placebo versus a dose of steroids tenfold higher than that used in
the original study. The result was a weak treatment effect but only if the
drug was given within eight hours of injury. Clearly, unexamined personal
experience is no way to make conclusions about what works in medicine,
no matter how passionately one holds those beliefs.
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it. We are running out of time to reform this massive system with forethought and planning rather than under duress.
I cannot be sure what will turn the tide of medical care in America,
but I have faith in the country. That faith is strengthened by the many
sons and daughters of U.S. families who have joined the military in recent
years. There are so many people of good will; I have worked with them in
medicine, in Congress, and in business. The views of the coming generations are too fresh and untarnished to be without optimism. And my generation, the baby boomers, though jaded after forty years of materialism,
must still remember the 1960s when America changed direction.
Our nation has the tools, the know-how, and the resources to develop
a high-performance health care system that delivers quality care at lower
cost to all its citizens. It is time for America to roll up its sleeves and begin
this task with focus and commitment.
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NOTES
CHAPTER 1
1. Mark M. Moy, The EMTALA Answer Book (Gaithersburg, Md.: Aspen, 1999).
2. Robert J. Mills, Health Insurance Coverage: 2001, in U.S. Census Bureau,
Current Population Reports (Washington, D.C., September 2002), 10.
3. Abaris Group for SAVE OUR ERS, An Assessment of Houston Area EDs
(Houston, May 2002).
4. Charles E. Begley, Yu-Chia Chang, Robert C. Wood, et al., Emergency Department Diversion and Trauma Mortality: Evidence from Houston, Texas,
Journal of Trauma 57 (December 2004): 126065.
CHAPTER 3
AN ERODING INFRASTRUCTURE
1. Atul Gawande, Casualties of WarMilitary Care for the Wounded from Iraq
and Afghanistan, New England Journal of Medicine, December 9, 2004,
pp. 2471475.
2. John G. West, Donald D. Trunkey, and Robert C. Lim, Systems of Trauma Care:
A Study of Two Counties, Archives of Surgery 114 (April 1979): 103335.
3. Charles C. Branas, Ellen J. MacKenzie, Justin C. Williams, et al., Access to
Trauma Centers in the United States, Journal of the American Medical Association, June 1, 2005, pp. 262633; National Foundation for Trauma Care,
U.S. Trauma Center Crisis: Lost in the Scramble for Terror Resources (Las
Cruces, N.M., May 2004).
4. U.S. General Accounting Ofce, Hospital Emergency Departments: Crowded
Conditions Vary among Hospitals and Communities (Washington, D.C.,
March 2003); Catharine W. Burt, Linda F. McCaig, Roberto H. Valverde, Analysis of Ambulance Transports and Diversions among U.S. Emergency Departments, Annals of Emergency Medicine 47 (April 2006): 31726; American
275
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Health
Statistics
13
(November
2001),
http://www.cdc.gov/
nchs/data/series/sr_13/sr13_150.pdf.
9. Ann S. OMalley, Anneliese M. Gerland, Hoangmai H. Pham, et al., Rising
Pressure: Hospital Emergency Departments As Barometers of the Health Care
System (Washington, D.C.: Center for Studying Health System Change,
November 2005); McCaig and Burt, National Hospital Ambulatory Medical
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10. American Hospital Association, Emergency Departments Provide an Important Access Point for Traditionally Underserved Populations, Trend Watch 3
(March 2001): 12; Peter J. Cunningham, What Accounts for Differences in
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Emergency Department Visits (Washington, D.C.: Center for Studying Health
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12. McCaig and Burt, National Hospital Ambulatory Medical Care Survey: 2003.
13. Eric W. Nawar, Richard W. Niska, and Jianmin Xu, National Hospital Ambulatory Medical Care Survey: 2005 Emergency Department Summary
(Hyattsville, Md.: Centers for Disease Control and Prevention, June 29, 2007).
14. Abaris Group, Houston-Galveston Area Council Emergency Health Care
Study; Susan Lambe, Donna L. Washington, Arlene Fink, et al., Trends in the
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CHAPTER 4
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7. Medicare hospital spending in 2005 was 180 billion dollars. The program
historically grows at GDP plus 2.5 percent. At 5.5-percent annual growth,
hospital spending in 2018 would be 367 billion dollars; 73 billion dollars
is 20 percent of that gure.
8. U.S. Census Bureau, Projections of the Total Resident Population by 5-Year
Age Groups, and Sex with Special Age Categories: Middle Series, 2016 to 2020,
January 13, 2000, http://www.census.gov/population/projections/nation/
summary/np-t3-e.txt.
9. Texas Primary Care Coalition, Press Release: New Poll Finds Texas Medicaid
Patients Unable to Find Primary Care Physicians (Austin, Tex., April 5, 2005);
Project HOPE, Center for Health Affairs for the Medicare Payment Advisory
Commission, 2002 Survey of Physicians about the Medicare Program (March
2003),
http://www.medpac.gov/publications/contractor_reports/Mar03_
02PhysSurv_summary2.pdf.
10. Stephen Zuckerman, Joshua McFeeters, Peter Cunningham, et al., Changes in
Medicaid Physician Fees, 19982003; Implications for Physician Participation,
Health Affairs Web Exclusive, June 23, 2003, http://content.healthaffairs.
org/cgi/reprint/hlthaff.w4.374v1; Kaiser Family Foundation and Health
Research and Educational Trust, 2007 Annual Employer Health Benets Survey: Summary of Findings (May 2007), http://www.kff.org/insurance/7672/;
Len M. Nichols and Sarah Axeen, Employer Health Costs in a Global Economy:
A Competitive Disadvantage for U.S. Firms (Washington, D.C.: New America
Foundation, May 2008).
11. 2007 Annual Employer Health Benets Survey; Richard Kronick and David
Rousseau, Is Medicaid Sustainable? Spending Projections for the Programs
Second 40 Years, Health Affairs Web Exclusive, February 23, 2007, http://content.healthaffairs.org/cgi/reprint/ hlthaff. 26.2.w271v1.
12. Todd Gilmer and Richard Kronick, Its the Premiums, Stupid: Projections of
the Uninsured Through 2013, Health Affairs Web Exclusive, April 5, 2005,
http://content.healthaffairs.org/cgi/reprint/hlthaff.w5.143v1; Todd Gilmer and
Richard Kronick, Calm before the Storm: Expected Increase in the Number of
Uninsured Americans, Health Affairs 20 (NovemberDecember 2001):
20710.
13. Families USA, Paying a Premium: The Added Cost of Care for the Uninsured
(Washington, D.C., June 2005).
14. Kaiser Family Foundation and Health Research and Educational Trust, 2004
Annual Employer Health Benets Survey: Summary of Findings (September
2004),
http://kff.org/insurance/7148/upload/employer_health_benefits_
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CHAPTER 8
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of
Vulnerable
Medicare
Beneficiaries,
285
Archives
of
Family
Medicine
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14. Rand Corporation, The First National Report Card on Quality of Health Care
in America (2004), http://www.rand.org/pubs/research_briefs/RB90531/
RB90531.pdf.
15. Steven M. Asch, Eve A. Kerr, Joan Keesey, et al., Who Is at Greatest Risk for
Receiving Poor-Quality Health Care? New England Journal of Medicine, March
16, 2006, pp. 114756.
16. Barbara Stareld, Is U.S. Health Really the Best in the World? Journal of the
American Medical Association, July 26, 2000, pp. 48385; Leiyu Shi, James
Macinko, Barbara Stareld, et al., Primary Care, Infant Mortality, and Low
Birth Weight in the States of the USA, Journal of Epidemiology and Community
Health 58 (2003): 37480; Leiyu Shi, Barbara Stareld, Bryan Kennedy,
et al., Income Inequality, Primary Care, and Health Indicators, Journal of
Family Practice (April 1999): 27584; Leiyu Shi and Barbara Stareld, The
Effect of Primary Care Physician Supply and Income Inequality on Mortality
among Blacks and Whites in U.S. Metropolitan Areas, American Journal of Public Health 91 (August 2001): 124650.
17. Ellen Nolte and Martin McKee, Measuring the Health of Nations: Analysis of
Mortality Amenable to Health Care, British Medical Journal, November 15,
2003, p. 1129; James Macinko, Barbara Stareld, and Leiyu Shi, The Contribution of Primary Care Systems to Health Outcomes within OECD Countries,
19701998, Health Services Research 38 ( June 2003); Ellen Nolte and
C. Martin McKee, Measuring the Health of Nations: Updating an Earlier
Analysis, Health Affairs 27 ( JanuaryFebruary 2008): 5871.
18. Barbara Stareld, Leiyu Shi, Atul Grover, et al., The Effects of Specialist Supply on Populations Health: Assessing the Evidence, Health Affairs Web Exclusive, March 15, 2005, http://content.healthaffairs.org/cgi/reprint/hlthaff.
w5.97v1; Barbara Stareld, Leiyu Shi, James Macinko, Contribution of Primary Care to Health Systems and Health, Milbank Quarterly 83, no. 3 (2005):
457502.
19. Stephen Jencks, Edwin Huff, and Timothy Cuerdon, Change in the Quality of
Care Delivered to Medicare Beneciaries: 19981999 to 20002001, Journal of
the American Medical Association, January 15, 2003, pp. 30512.
20. Katherine Baiker and Amitabh Chandra, Medicare Spending, the Physician
Workforce, and Beneciaries Quality of Care, Health Affairs Web Exclusive,
April 7, 2004, http://content.healthaffairs.org/cgi/reprint/hlthaff.w4.184v1.
21. Mark W. Stanton, The High Concentration of U.S. Health Care Expenditures
(Rockville, Md.: Agency for Health Care Research and Quality, June 2006).
22. Dorothy P. Rice and Norman Fineman, Economic Implications of Increased
Longevity in the United States, Annual Review of Public Health 25 (2004):
45753; Andrew J. Rettenmaier and Zijun Wang, Explaining the Growth of
Medicare: Part II (Washington, D.C.: National Center for Policy Analysis,
August 6, 2002); Christine Hoffman, Dorothy Rice, and Hai-Yen Sung, Persons
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with Chronic Conditions: Their Prevalence and Costs, Journal of the American
Medical Association, November 13, 1997, pp. 147379.
23. Jennifer L. Wolff, Barbara Stareld, and Gerald Anderson, Prevalence, Expenditures, and Complications of Multiple Chronic Conditions in the Elderly,
Archives of Internal Medicine, November 11, 2002, pp. 226976; Congressional
Budget Ofce, High-Cost Medicare Beneciaries (Washington, D.C., May
2005).
CHAPTER 9
DANGEROUS HOSPITALS
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September 12, 2005, pp. 181924; A. Russe ll Localio, Ann G. Lawthers, Troyen
A. Brennan, et al., Relation between Malpractice Claims and Adverse Events
Due to Negligence: Results of the Harvard Medical Practice Study III, New England Journal of Medicine, July 25, 1991, pp. 24551; Troyen A. Brennan and
Michelle M. Mello, Patient Safety and Medical Malpractice: A Case Study,
Annals of Internal Medicine, August 19, 2003, pp. 26773; David M. Studdert,
Michelle M. Mello, Atul A. Gawande, et al., Claims, Errors, and Compensation
Payments in Medical Malpractice Litigation, New England Journal of Medicine,
May 11, 2006, pp. 202433.
11. Stacy Lawrence, Survey: Hospital CIOs Want Electronic Medical Records,
EWeek Enterprise News and Reviews (February 16, 2006), http://www.eweek.
com/article2/0%2C1895%2C1927818%2C00.asp.
12. David W. Bates, David J. Cullen, Nan Laird, et al., Incidence of Adverse Drug
Events, Journal of the American Medical Association, July 5,1995, pp. 2934;
Lucien L. Leape, Troyen A. Brennan, Nan Laird, et al., The Nature of Adverse
Event in Hospitalized Patients, New England Journal of Medicine, February 7,
1991, pp. 37784; Institute of Medicine, Preventing Medication Errors (July
2006), http://www.iom.edu/Object.File/Master/35/943/medication%20errors%
20new.pdf.
13. David W. Bates, Lucien L. Leape, David J. Cullen, et al., Effect of Computerized
Physician Order Entry and a Team Intervention on Prevention of Serious Medication Errors, Journal of the American Medical Association, October 21, 1998,
pp. 131116.
14. Connie L. Johnson, Russell A. Carlson, Chris L. Tucker, et al., Using BCMA
Software to Improve Patient Safety in Veterans Administration Medical Centers, Journal of Healthcare Information Management 16 (winter 2002): 4651;
Max M. Cohen, N. L. Kimmel, M. K. Benage, et al., Medication Safety Program
Reduces Adverse Drug Event in a Community Hospital, Quality and Safety in
Health Care, June 14, 2005, pp. 16974.
15. David M. Cutler, Naomi E. Feldman, and Jill R. Horwitz, Adoption of Computerized Physician Order Entry Systems, Health Affairs 24 (NovemberDecember
2005): 166364; Kateryna Fonkych and Roger Taylor, The State and Pattern of
Health
Information
Technology
Adoption
(September
2005),
http://www.rand.org/pubs/monographs/2005/RAND_MG409.pdf; Ashish K.
Jha, Timothy G. Ferris, Karen Donelan, et al., How Common Are Electronic
Health Records in the United States? A Summary of the Evidence, Health
Affairs Web Exclusive, October 11, 2006, http://content.healthaffairs.org/
cgi/reprint/25/6/w496.
CHAPTER 10
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2. Matthew R. Williams, Rachel B. Wellner, Elizabeth A. Hartnett, et al., LongTerm Survival and Quality of Life in Cardiac Surgical Patients with Prolonged
Intensive Care Unit Length of Stay, Annals of Thoracic Surgery 73 (May 2002):
147278.
3. Thomas J. Prendergast and John M. Luce, Increasing Incidence of Withholding and Withdrawal of Life Support from the Critically Ill, American Journal of
Respiratory and Critical Care Medicine 155 (January 1997): 1520.
4. Linda L. Emanuel, Michael J. Barry, John D. Stoeckle, et al., Advance Directives
for Medical CareA Case for Greater Use, New England Journal of Medicine,
March 28, 1991, pp. 88995.
5. Thomas J. Mattimore, Neil S. Wenger, Norman A. Desbiens, et al., Surrogate
and Physician Understanding of Patients Preferences for Living Permanently
in a Nursing Home, Journal of the American Geriatric Society 45 (July 1997):
81824; Neil S. Wenger, Russell S. Phillips, Joan M. Teno, et al., Physician
Understanding of Patient Resuscitation Preferences: Insights and Clinical
Implications, Journal of the American Geriatric Society 48, no. 5, supp. (2000):
S4451.
6. Susan W. Tolle, Virginia P. Tilden, Anne G. Rosenfeld, et al., Family Reports
on Barriers to Optimal Care of the Dying, Nursing Research 49
(NovemberDecember 2000): 31017; Laura C. Hanson and Eric Rodgman,
The Use of Living Wills at the End of Life: A National Study, Archives of Internal Medicine, May 13, 1996, pp. 101822; Rolfe Sean Morrison, Ellen Olson,
K. R. Mertz, et al., The Inaccessibility of Advanced Directives on Transfer from
Ambulatory to Acute Care Settings, Journal of the American Medical Association, August 9, 1995, pp. 47882.
7. Joan M. Teno, Elliott S. Fisher, Mary Beth Hamel, et al., Medical Care Inconsistent with Patients Treatment Goals: Association with 1-Year Medicare
Resource Use and Survival, Journal of the American Geriatric Society 50 (March
2002): 496500; Jean-Louis Vincent, Jacques Berre, and Jacques Creteur,
Withholding and Withdrawing Life Prolonging Treatment in the Intensive
Care Unit: A Current European Perspective, Chronic Respiratory Disease 1, no.
2 (2004): 11520.
8. Alfred Maksoud, D. W. Jahnigen, and C. I. Sibinski, Do Not Resuscitate
Orders and the Cost of Death, Archives of Internal Medicine, May 24, 1993,
pp. 124053; Lawrence J. Schneiderman, Richard Kronick, Robert M. Kaplan,
et al., Effects of Offering Advance Directives on Medical Treatments and
Costs, Annals of Internal Medicine, October 1, 1992, pp. 599606.
9. SUPPORT Principal Investigators, A Controlled Trial to Improve Care for Seriously Ill Hospitalized Patients: The Study to Understand Prognoses and Preferences for Outcomes and Risks of Treatments (SUPPORT), Journal of the
American Medical Association, November 22, 1995, pp. 159198.
10. Ibid.; Robert S. Pritchard, Elliott S. Fisher, Joan M. Teno, et al., Inuence of
Patient Preferences and Local Health System Characteristics on the Place of
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UNNECESSARY SURGERY
1. Advisory Board Company, Best of OI: Neuroscience Centers, New Opportunities for Growth (Washington, D.C., May 6, 2004).
2. Steven R. Garn and Hansen A. Yuan, Food and Drug Administration Regulation of Spinal Implant Fixation Devices, Clinical Orthopaedics and Related
Research 335 (February 1997): 3238.
3. Orthopedic Devices: Classication and Reclassication of Pedicle Screw Spinal
Systems, Federal Register, July 27, 1998, 21CFR, part 888; Richard A. Deyo,
Back SurgeryWho Needs It? New England Journal of Medicine, May 31, 2007,
pp. 223943.
4. James N. Weinstein, Kristen K. Bronner, Tamara Shawver Morgan, et al., Trends
and Geographic Variations in Major Surgery for Degenerative Diseases of the
Hip, Knee, and Spine, Health Affairs Web Exclusive, October 7, 2004, http://
content.healthaffairs.org/cgi/reprint/hlthaff.var.81v1; Dartmouth Atlas of
Health Care, http://cecsweb.dartmouth.edu/atlas08/datatools/datatb_s1.php.
5. Christopher M. Bono and Casey K. Lee, Critical Analysis of Trends in Fusion
for Degenerative Disc Disease over the Past 20 Years: Inuence of Technique
on Fusion Rate and Clinical Outcome, Spine, February 15, 2004, pp. 45563;
J. N. Alastair Gibson and Gordon Waddell, Surgery for Degenerative Lumbar
Spondylosis, Cochrane Database of Systematic Reviews 19 (October 2005):
CD001352; Jens Ivar Brox, Roger Sorensen, Astrid Friis, et al., Randomized
Clinical Trial of Lumbar Instrumented Fusion and Cognitive Intervention and
Exercises in Patients with Chronic Low Back Pain and Disc Degeneration,
Spine, September 1, 2003, pp. 191321; Peter Fritzell, Olle Hagg, Dick Jonsson,
et al., Cost-Effectiveness of Lumbar Fusion and Nonsurgical Treatment for
Chronic Low Back Pain in the Swedish Lumbar Spine Study: A Multicenter,
Randomized, Controlled Trial from the Swedish Lumbar Spine Study Group,
Spine, February 15, 2004, pp. 42134.
6. James N. Weinstein, Jon D. Lurie, Tor D. Tosteson, et al., Surgical Versus Nonsurgical Treatment for Lumbar Degenerative Spondylolisthesis, New England
Journal of Medicine, May 31, 2007, pp. 225770.
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7. Deyo, Back SurgeryWho Needs It?; James N. Weinstein, Tor D. Tosteson, Jon
D. Lurie, et al. Surgical versus Nonsurgical Therapy for Lumbar Spinal Stenosis, New England Journal of Medicine, February 21, 2008; American Medical
Association, International Classication of Diseases, 9th rev., vols. 1, 2, and 3
(Chicago: AMA Press, 2005, procedure codes for discectomy and decompression: 03.01, 03.02, 03.09, 80.50, 80.51, 80.52, 80.59; for cervical and lumbar
fusion: 81.04, 81.05, 81.06, 81.07, 81.08, 81.61, 81.62, 81.63, 81.64, 84.51,81.30,
81.30, 81.34, 81.35, 81.36, 81.37, 81.38.
8. Devon I. Rubin, Epidemiology and Risk Factors for Spine Pain, Neurologic
Clinics 25 (May 2007): 35371; Scott D. Boden, P. R. McCowin, David O. Davis,
et al., Abnormal Magnetic-Resonance Scans of the Cervical Spine in Asymptomatic Subjects, Journal of Bone and Joint Surgery American 72 (August 1991):
117884; Maureen C. Jensen, Michael Brant-Zawadski, Nancy Obuchowski,
et al., Magnetic Resonance Imaging of the Lumbar Spine in People without
Back Pain, New England Journal of Medicine, July 14, 1994, pp. 6973; Steffen
Jacobsen, Stig Sonne-Holm, Hans Rovsing, et al., Degenerative Lumbar
Spondylolisthesis, an Epidemiological Perspective: The Copenhagen Oseteoarthritis Study, Spine, January 1, 2007, pp. 12025.
9. Robin Young, When Is the Spine Bubble Going to Burst? address presented at
the InSpine Conference, Dallas, November 2004, http://www.healthpointcapital.
com/research/2004/11/22/when_is_the_spine_bubble_going_to_burst/.
10. Agency for Healthcare Research and Quality, Hospital Cost and Utilization
Project, 2003, nationwide inpatient sample compiled by the author, 2007.
11. Coronary Revascularization: Coronary Artery Bypass Grafting and Percutaneous Coronary Interventions (2005), http://www.dartmouthatlas.org/
atlases/Cardiac_report_2005.pdf.
12. Mark A. Hlatky, William J. Rogers, Iain Johnstone, et al., Medical Care Costs
and Quality of Life after Randomization to Coronary Angioplasty or Coronary
Bypass Surgery: Bypass Angioplasty Revascularization Investigation (BARI)
Investigators, New England Journal of Medicine, January 9, 1997, pp. 9299.
13. David T. Nash, The Case for Medical Treatment in Chronic Stable Coronary
Artery Disease, Archives of Internal Medicine, December 12, 2005, pp. 258789.
14. Jonathan Skinner, Douglas Staiger, and Elliott Fisher, Is Technological Change
in Medicine Always Worth It? The Case of Acute Myocardial Infarction, Health
Affairs Web Exclusive 25 (2006), http://content.healthaffairs.org/cgi/reprint/
25/2/w34.
15. American Medical Association, International Classication of Diseases, procedure codes: 00.66, 36.01, 36.02, 36.03, 36.04, 36.05, 36.06, 36.07, and 36.09;
diagnostic codes MI-410, MI-411; diagnostic codes for stable angina: 413, 412,
and 414.
16. William E. Boden, Robert A. ORourke, and Koon K. Teo, Optimal Medical
Therapy with or without PCI for Stable Coronary Disease, New England Journal
of Medicine, April 12, 2007, pp. 150316.
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17. Rob Stein, Heart Attack Study Casts Doubt on Routine Use of Angioplasty,
Washington Post, March 27, 2007, http://www.washingtonpost.com/wpdyn/
content/article/2007/03/26/AR2007032600700_pf.html.
18. Kim A. Eagle, Robert A. Guyton, Ravid Davidoff, et al., ACC/AHA 2004 Guideline Update for Coronary Artery Bypass Graft Surgery, Circulation 110 (2004):
E340E437; Sidney C. Smith, Jr., Ted E. Feldman, John W. Hirshfeld, et al.,
ACC/AHA/SCAI 2005 Guideline Update for Percutaneous Coronary Intervention, Circulation 113 (2006): E166E286.
CHAPTER 12
1. Peter P. Budetti, 10 Years beyond the Health Security Act Failure: Subsequent
Developments and Persistent Problems, Journal of the American Medical Association, October 27, 2004, pp. 20002006.
2. Centers for Medicare and Medicaid Services, Memorandum: Physician Volume and Intensity Response (August 13, 1998), http://www.cms.hhs.gov/ActuarialStudies/downloads/PhysicianResponse.pdf.
3. Stephen Zuckerman, Steven A. Norton, and Diana Verilli, Price Controls and
Medicare Spending: Assessing the Volume Offset Assumption, Medical Care
Research and Review 55 (December 1998): 45778.
4. Author analysis of Medical Group Management Association physician income
data, 19902005.
5. Ha T. Tu and Paul B. Ginsburg, Losing Ground: Physician Income, 19952003
(Washington, D.C.: Center for Studying Health System Change, June 2006).
6. Bruce E. Landon, James Reschovsky, and David Blumenthal, Changes in
Career Satisfaction among Primary Care and Specialist Physicians, 19972001,
Journal of the American Medical Association, January 22, 2003, pp. 44249.
7. Ann S. OMalley, Debra A. Draper, and Laurie E. Felland, Hospital Emergency
On-Call Coverage: Is There a Doctor in the House? (Washington, D.C.: Center
for Studying Health System Change, November 2007).
8. John K. Inglehart, The Emergence of Physician-Owned Specialty Hospitals,
New England Journal of Medicine, January 6, 2005, pp. 7884.
9. Brahmajee K. Nallamothu, Mary A. M. Rogers, Michael E. Chernew, et al.,
Opening of Specialty Cardiac Hospitals and Use of Coronary Revascularization in Medicare Beneciaries, Journal of the American Medical Association,
March 7, 2007, pp. 96268.
10. Medicare Payment Advisory Commission, Report to Congress: Ambulatory
Surgical Center Services (Washington, D.C.: March 2004), sec. 3F; Keith
Hearle, Lane Loinig, Allen Dobson, et al., Study of Healthcare Outpatient Cost
Drivers (October 16, 2002), http://www.bcbs.com/coststudies/reports/6_Outpatient_Report.pdf.
11. William J. Lynk and Carina S. Lonley, The Effect of Physician-Owned
Surgicenters on Hospital Outpatient Surgery, Health Affairs 21 (JulyAugust
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2002): 21521; Medicare Payment Advisory Committee, A Data Book: Healthcare Spending and the Medicare Program (Washington, D.C., June 2007).
12. Ezekiel Emanuel, Medicare Drug Reimbursements: A Broken System for
Patients and Taxpayers, testimony before the U.S. House of Representatives,
Committee on Energy and Commerce, September 21, 2001, http://energycommerce.house.gov/107/action/107-65.pdf.
13. Alex Berenson and Andrew Pollack, Doctors Reaping Millions for Use of Anemia Drugs, New York Times, May 9, 2007, http://www.nytimes.com/2007/05/
09/business/09anemia.html.
14. Marc A. Rodwin, Hak J. Chang, and Jeffrey Clausen, Malpractice Premiums
and Physicians Income: Perceptions of a Crisis Conict with Empirical Evidence, Health Affairs 25 (MayJune 2006): 75058.
15. Congressional Budget Ofce, The Effects of Tort Reform: Evidence from the
States (Washington, D.C., June 2004); John Donnelly, Malpractice Curbs
Hailed, Faulted: Texas Law Draws Doctors, Frustrates Some Claimants, Boston
Globe, November 26, 2007, http://www.boston.com/news/nation/articles/
2007/11/26/malpractice_curbs_hailed_faulted/?page=2.
16. Pricewaterhouse Coopers, The Factors Fueling Rising Health Care Costs
(Washington, D.C.: American Association of Health Plans, April 2002); Medicare
Payment Advisory Commission, Healthcare Spending and the Medicare Program, in MedPac Data Book (Washington, D.C., June 2006), sec. 8.
17. David M. Studdert, Michelle M. Mello, William M. Sage, et al., Defensive Medicine among High-Risk Specialist Physicians in a Volatile Malpractice Environment, Journal of the American Medical Association, June 1, 2005, pp. 260917.
18. Most Doctors Report Fear of Malpractice Liability Has Harmed Their Ability
to Provide Quality Care, Harris Interactive Health Care News, May 16, 2002,
http://harrisdealerpoll.com/news/newsletters/healthnews/HI_HealthCareNews2002Vol2_Iss10.pdf.
19. Fred J. Hellinger and William E. Encinosa, The Impact of State Laws Limiting
Malpractice Damage Awards on Health Care Expenditures, American Journal
of Public Health 96 (August 2006); Daniel P. Kessler and Mark McClellan, Do
Doctors Practice Defensive Medicine? (Cambridge, Mass.: National Bureau of
Economic Research, February 1996); Gerard F. Anderson, Peter S. Hussey,
Bianca K. Frogner, et al., Health Spending in the United States and the Rest of
the Industrialized World, Health Affairs 24 (JulyAugust 2005): 90314.
CHAPTER 13
1. Natasha Mihal and Renee Moilanen, When Emergency Rooms Close: Ambulance Diversion in the West San Fernando Valley (Los Angeles: University of
California, Lewis Center for Regional Policy Studies, 2005).
2. Gerald F. Anderson, From Soak the Rich to Soak the Poor: Recent Trends in
Hospital Pricing, Health Affairs 26 (May/June 2007): 78089; authors analysis of key ratios and net margins on http://morningstar.com, 2007.
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3. Eileen Salinsky, What Have You Done for Me Lately? Assessing Hospital Community Benet (April 19, 2007), http://www.nhpf.org/pdfs_ib/IB821_HospitalCommBenet_04-19-07.pdf.
4. David M. Walker, Nonprot, For-Prot, and Government Hospitals: Uncompensated Care and Other Community Benets, testimony before the U.S.
House of Representatives, Committee on Ways and Means, May 26, 2005.
5. Ginsburg, Competition in Health Care.
6. Jean M. Abraham, Martin S. Gaynor, and William B. Vogt, Entry and Competition in Local Hospital Markets (Cambridge, Mass.: National Bureau of Economic Research, September 2005).
7. Claudia H. Williams, William B. Vogt, and Robert Town, How Has Hospital
Consolidation Affected the Price and Quality of Hospital Care? (February
2006), http://www.rwjf.org/publications/synthesis/reports_and_briefs/pdf/
no9_policybrief.pdf.
8. Walker, Nonprot, For-Prot, and Government Hospitals.
9. Anthony J. Culyer and Joseph P. Newhouse, eds., Handbook of Health Economics
(Amsterdam: Elsevier/North-Holland, 2001), 1:1422
10. Robert F. Leibenluft, Antitrust Enforcement and Hospital Mergers: A Closer
Look (Washington, D.C.: Federal Trade Commission, July 5, 1998).
11. Michael E. Porter and Elizabeth Olmsted Teisberg, Redening Health Care: Creating Value-Based Competition on Results (Boston: Harvard Business School
Press, 2006); Hal J. Singer, The Budgetary Impact of Eliminating the GPOs
Safe Harbor Exemption from the Anti-Kickback Statue of the Social Security
Act (Washington, D.C.: Criterion Economics, June 2006).
12. James D. Bentley, senior vice president for strategic policy planning, American
Hospital Association, personal communication, 2006; American Hospital
Association, Trends in Hospital Financing (April 2007), http://www.
aha.org/aha/research-and-trends/trendwatch/2007chartbook.html.
13. Dennis P. Andrulis and Lisa M. Duchon, Hospital Care in the 100 Largest
Cities and Their Suburbs, 19962002: Implications for the Future of the Hospital Safety Net in Metropolitan America (Brooklyn, N.Y.: SUNY Downstate
Medical Center, August 2005); Joel S. Weissman, Darrell J. Gaskin, and
J. Reuter, Hospitals Care of Uninsured Patients during the 1990s: The Relation of Teaching Status and Managed Care to Changes in Market Share and
Market Concentration, Inquiry 40 (spring 2003): 8493; Walker, Nonprot,
For-Prot, and Government Hospitals.
14. Stephen Zuckerman, Gloria Bazzoli, Amy Davidoff, et al., How Did
Safety-Net Hospitals Cope in the 1990s? Health Affairs 20 (JulyAugust 2001):
15968.
15. Linda E. Fishman, What Types of Hospitals Form the Safety Net? Health
Affairs 16 (JulyAugust 1997): 21522.
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16. Reed Abelson and Jonathan D. Glater, Suits Challenge Hospital Bills of Uninsured, New York Times, June 17, 2004, http://query.nytimes.com/gst/fullpage.html?res=9405E0DE1639F934A25755C0A9629C8B63&sec=&spon=&pag
ewanted=2; Anderson, From Soak the Rich to Soak the Poor.
17. Health Care Advisory Board, A Delicate Balance: Managing the Inpatient
Enterprise for Protable Growth (Washington, D.C., 2001).
18. Healthcare Cost and Utilization Project, data compiled by the author, 2006.
19. Health Care Advisory Board, A Delicate Balance.
20. Lewin Group, A Study of Hospital Charge Setting Practices (Falls Church, Va.,
December 2005); Institute for Health and Socioeconomic Policy, The Third
Annual IHSP Hospital 200: The Nations Most and Least Expensive Hospitals,
Fiscal Year 2003/2004 (Orinda, Calif., December 13, 2005).
21. Institute for Health and Socioeconomic Policy, The Third Annual IHSP Hospital 200.
22. Uwe E. Reinhardt, The Pricing of U.S. Hospital Services: Chaos behind a Veil
of Secrecy, Health Affairs 25 (JanuaryFebruary 2006): 5769.
23. John E. Wennberg, Elliott S. Fisher, Laurence Baker, et al., Evaluating the Efciency of California Providers in Caring for Patients with Chronic Illnesses,
Health Affairs Web Exclusive, November 16, 2005, http://content.healthaffairs.org/cgi/reprint/hlthaff.w5.526v1.pdf.
24. Mireille M. Goetghebeur, Sharon Forrest, and Joel W. Hay, Understanding the
Underlying Drivers of Inpatient Cost Growth: A Literature Review, American
Journal of Managed Care, June 9, 2003, pp. SP312; Jack Needleman, Peter
Buerhaus, Soeren Mattke, et al., Nurse-Stafng Levels and the Quality of Care
in Hospitals, New England Journal of Medicine, May 30, 2002, pp. 171522;
Sharon Forrest, Mireille Goetghebeur, and Joel Hay, Forces Inuencing Inpatient Hospital Costs in the United States (Chicago: Blue Cross/Blue Shield
Association, October 16, 2002).
25. American Association of Colleges of Nursing, Press Release: With Enrollments
Rising for the 5th Consecutive Year, U.S. Nursing Schools Turn Away More than
30,000 Qualied Applications in 2005 (Washington, D.C., December 12,
2005); American Federation of Teachers, Press Release: Serious Nurse Faculty
Shortage Exacerbating Nurse Shortage, AFT calls for Higher Salaries, More
Funding for Nursing Programs (Washington, D.C., December 21, 2005).
26. William J. Scanlon, Nursing Workforce: Recruitment and Retention of Nurses
and Nurse Aides is a Growing Concern, testimony before the U.S. Senate,
Committee on Health, Education, Labor, and Pensions, May 17, 2001; Pricewaterhouse Coopers, Cost of Caring: Key Drivers of Growth in Spending on Hospital Care (Washington, D.C.: American Hospital Association and Federation
of American Hospitals, February 19, 2003).
27. Ann E. Tourangeau, Lisa A. Cranley, and Lianne Jeffs, Impact of Nursing on
Hospital Patient Mortality: A Focused Review and Related Policy Implications,
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Quality and Safety in Health Care 15 (February 2006): 48; Linda H. Aiken,
Sean P. Clarke, Douglas M. Sloane, et al., Hospital Nurse Stafng and Patient
Mortality, Nurse Burnout, and Job Dissatisfaction, Journal of the American
Medical Association, October 23, 2002, pp. 198793; Forrest et al., Forces
Inuencing Inpatient Hospital Costs in the United States.
CHAPTER 14
American
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What Have We Learnt from Vioxx? British Medical Journal, January 20, 2007,
pp. 12023.
17. Patricia M. Danzon and Michael F. Furukawa, International Prices and Availability of Pharmaceuticals in 2005, Health Affairs 27 (JanuaryFebruary
2008): 22123.
18. National Institute for Health Care Management Research and Educational
Foundation, Changing Patterns of Pharmaceutical Innovation (May 2002),
http://www.nihcm.org/~nihcmor/pdf/innovations.pdf.
19. Ibid.
20. Ibid.
21. Patricia M. Danzon and Michael F. Furukawa, Prices and Availability of Pharmaceuticals: Evidence from Nine Countries, Health Affairs Web Exclusive, October 29, 2003, http://content.healthaffairs.org/c/reprint/h/thaff.w. 3.52ivi.pdf.
22. C. Daniel Mullins, Andrea R. DeVries, Van Doren Hsu, et al., Variability and
Growth in Spending for Outpatient Specialty Pharmaceuticals, Health Affairs
24 (JulyAugust 2005): 111727.
23. Patricia M. Danzon, Prices and Availability of Biopharmaceuticals: An International Comparison, Health Affairs 25 (SeptemberOctober 2006): 135362.
24. Steven G. Morgan, Morris L. Barer, and Jonathan D. Agnew, Whither Seniors
Pharmacare: Lessons from (and for) Canada, Health Affairs 22 (MayJune
2003): 4959.
25. Danzon and Furukawa, Prices and Availability of Pharmaceuticals: Evidence
from Nine Countries.
26. Congressional Budget Ofce, Would Prescription Drug Importation Reduce
U.S. Drug Spending? (Washington, D.C., April 29, 2004).
27. Danzon and Furukawa, Prices and Availability of Pharmaceuticals: Evidence
from Nine Countries; Jim Gilbert and Paul Rosenberg, Addressing the Innovation Divide: Imbalanced Innovation, presented at the 2004 annual meeting
of governors of the World Economic Forum for Healthcare, Davos, Switzerland,
January 22, 2004; Danzon and Furukawa, International Prices and Availability of Pharmaceuticals in 2005.
28. Medicare Prescription Drug Benet Cost Almost $13B Less in 2006 Than
Expected, According to CMS, Medical News Today, December 1, 2006, http://
www.medicalnewstoday.com/articles/57760.php; Aaron Catlin, Cathy Cowan,
Micah Hartman, et al. National Health Spending in 2006: A Year of Change
for Prescription Drugs, Health Affairs 27 (January/February, 2008): 1429.
29. Gilbert and Rosenberg, Addressing the Innovation Divide.
30. Families USA, The Choice: Health Care for People or Drug Industry Prots
(Washington, D.C., 2005); Alan Sager and Deborah Socolar, Drug Industry
Marketing Staff Soars While Research Stafng Stagnates (Boston: Boston University, School of Public Health, 2001).
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31. Richard T. Rapp and Adam Lloyd, Civilized Pharmaceutical Price Regulations:
Can the U.S. Have It Too? Regulation 17 (spring 1994): 7282.
32. Patricia McGettigan and David Henry, Cardiovascular Risk and Inhibition of
Cyclooxygenase, Journal of the American Medical Association, October 4, 2006,
pp. 163344; David J. Graham, COX-2 Inhibitors, Other NSAIDs, and Cardiovascular Risk (September 12, 2006), http://journal of the american medical
association.ama-assn.org/cgi/reprint/296.13.jed60058v1.
33. Krumholz et al., What Have We Learnt from Vioxx?
34. Rosenthal et al., Promotion of Prescription Drugs to Consumers.
CHAPTER 15
1. Eric Dash and Milt Freudenheim, Chief Executive at Health Insurer Is Forced
Out in Options Inquiry, New York Times, October 16, 2006, http://www.
nytimes.com/2006/10/16/business/16united.html.
2. James C. Robinson, Consolidation and the Transformation of Competition in
Health Insurance, Health Affairs 23 (NovemberDecember 2004): 1124.
3. James G. Kahn, Richard Kronick, Mary Kreger, et al., The Cost of Health Insurance Administration in California: Estimates for Insurers, Physicians, and Hospitals, Health Affairs 24 (NovemberDecember 2005): 162939.
4. Jeff Lemieux, Perspective: Administrative Costs of Private Health Insurance
Plans (Washington, D.C.: Center for Policy and Research, 2005); Kahn et al.,
The Cost of Health Insurance Administration in California.
5. David U. Himmelstein, Stefe Woolhandler, and Sidney M. Wolfe, Administrative Waste in the U.S. Health Care System in 2003, International Journal of
Health Services 34, no. 1 (2004): 7986.
6. John Sheils, Randall Haught, and Evelyn Murphy, Cost and Coverage Estimates for the Healthy Americans Act (Falls Church, Va.: Lewin Group,
December 12, 2006).
7. Stefe Woolhandler, Terry Campbell, and David U. Himmelstein, Cost of
Health Care Administration in the United States and Canada, New England
Journal of Medicine, August 21, 2003, pp. 76875.
8. Kahn et al., The Cost of Health Insurance Administration in California.
9. Center for Policy and Research, January 2007 Census Shows 4.5 Million
People Covered by HSA/High-Deductible Health Plans (April 2007),
http://www.ahipresearch.org/PDFs/FINAL%20AHIP_HSAReport.pdf; U.S. Census Bureau, Health Insurance Coverage: 2006, August 28, 2007, http://www.
census.gov/hhes/www/hlthins/hlthin06/hlth06asc.html.
10. Melinda Beeuwkes Buntin, Cheryl Damberg, Amelia Haviland, et al., Consumer-Directed Health Care: Early Evidence about Effects on Cost and Quality,
Health Affairs Web Exclusive, October 24, 2006, http://content.healthaffairs.
org/cgi/reprint/25/6/w516.
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the
RAND
Health
Insurance
Experiment
(Cambridge,
Mass.:
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30. Teresa A. Coughlin and Sharon K. Long, Adult Health Care Access and Use under
Medicaid: Does It Vary by State? Journal of Health Care for the Poor and Underserved 14 (May 2003): 20828; Catherine A. Mel, Thomas W. Croghan, and Mark
P. Hanna, Access to Treatment for Depression in a Medicaid Population, Journal of Health Care for the Poor and Underserved 10 (May 1999): 20115.
31. David Dranove, Pricing by Non-Prot Institutions: The Case of Hospital Cost
Shifting, Journal of Health Economics 7 (March 1988): 4757; Frank A. Sloan
and Edmund R. Becker, Cross Subsidies and Payment for Hospital Care. Journal of Health Politics, Policy, and Law 8 (winter 1984): 66085; Sheils et al.,
Cost and Coverage Estimates for the Healthy Americans Act.
32. Sara R. Collins, Karen Davis, and Jennifer L. Kriss, An Analysis of Leading Congressional Health Care Bills, 20052007: Part I, Insurance Coverage (New
York: Commonwealth Fund, March 2007).
33. Laurence A. Graig, Health of Nations: An International Perspective on U.S. Health
Care Reform, 3d ed. (Washington, D.C.: Congressional Quarterly, 1999); Canadian Medical Association, Pulse on Access to Health Services for Patients
(2004), http://www.cma.ca/index.cfm/ci_id/46794/la_id/1.htm; Family Physicians Rate Patients Access to Care, Canadian Family Physician 52 (December
2006), http://www.nationalphysiciansurvey.ca/nps/reports/PDF-e/janus_snapshot_dec.06.pdf.
34. Gerald Anderson and Peter Sotir Hussey, Comparing Health System Performance in OECD Countries, Health Affairs 20 (MayJune 2001): 21932.
35. Ellen Nolte and Martin McKee, Measuring the Health of Nations: Analysis of
Mortality Amenable to Health Care, British Medical Journal, November 15,
2003, p. 1129; Gerald H. Anderson, Bianca K. Frogner, and Uwe E. Heinhardt,
Health Spending in OECD Countries in 2004: An Update, Health Affairs 26
(SeptemberOctober): 148189.
36. Claudia Sanmartin, Francois Gendron, Jean-Marie Berthelot, et al., Access to
Health Care Services in Canada, 2003 (2004), http://www.statcan.ca/english/freepub/82-575-XIE/2003001/pdf/report.pdf; Alberta Hip and Knee
Replacement Project ( June 2007), http://www.albertaboneandjoint.com/
hipandknee.asp.
37. Phuong Trang Huynh, Cathy Schoen, Robin Osborn, et al., The U.S. Health
Care Divide: Disparities in Primary Care Experiences by Income (New York:
Commonwealth Fund, April 2006).
38. Marshall V. Williams, E. T. Summers, K. Drinkwater, et al., Radiotherapy Dose
Fractionation, Access and Waiting Times in the Countries of the U.K. in 2005,
Clinical Oncology 19 (June 2007): 27386.
39. Graig, Health of Nations; Anderson et al., Health Spending in the United States
and the Rest of the Industrialized World; Cathy Schoen, Robin Osborn, Phuong
Trang Huynh, et al., On the Front Lines of Care: Primary Care Doctors Ofce
Systems, Experiences, and Views in Seven Countries, Health Affairs Web
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CHAPTER 17
1. Jack Hadley and John Holahan, Covering the Uninsured: How Much Would It
Cost? Health Affairs Web Exclusive, June 4, 2003, http://content.healthaffairs.org/cgi/reprint/hlthaff.w3.250v1.pdf.
2. Thomas M. Selden and Bradley M. Gray, Tax Subsidies for EmploymentRelated
Health
Insurance:
Estimates
for
2006,
Health
Affairs
25
(NovemberDecember 2006): 156879; Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds,
annual report (Washington, D.C., 2006); Centers for Medicare and Medicaid
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14. Susan Dorr Goold, Stephen A. Green, Andrea K. Biddle, et al., Will Uninsured
Citizens Give Up Benet Coverage to Include the Uninsured? Journal of General Internal Medicine 19 (August 2004): 86874.
15. Douglas Holtz-Eakin, testimony of Congressional Budget Ofce director before
the U.S. House, Committee on Ways and Means, May 2005.
CHAPTER 18
1. Richard S. Foster and Stephen Hefer, Building the Foundation: Health Care
Costs, presentation to the Centers for Medicare and Medicaid Services, Citizens Health Care Working Group, May 13, 2005.
2. Kaiser Family Foundation and Health Research and Educational Trust, Percentage of Covered Workers in Partially or Completely Self-Funded Plans by
Firm Size, 19992007 (2007), http://www.kff.org/insurance/7672/upload/
76723.pdf.
3. Kenneth E. Thorpe, What Accounts for the Rise in Health Care Spending?
presentation at the Conference of the Council on Health Care Economics and
Policy, Princeton, N.J., May 24, 2006; Centers for Disease Control and Prevention, Medical Care Expenditures Attributable to Cigarette SmokingUnited
States, 1993, Morbidity and Mortality Weekly Report, July 8, 1994, pp. 46972.
4. Carolyn Newbergh, The Dartmouth Atlas of Health Care, in To Improve Health
and
Health
Care,
ed.
Stephen
L.
Isaacs
and
James
R.
Knickman
(Princeton, N.J.: Robert Wood Johnson Foundation, October 2006), vol. 10,
chap.
2,
http://www.rwjf.org/files/publications/books/2007/AnthologyX_
CH02.pdf.
5. Mark R. Chassin, J. Kosecoff, Rolla E. Park, et al., Does Inappropriate Use
Explain Geographic Variations in the Use of Health Care Services? A Study of
Three Procedures, Journal of the American Medical Association, November 13,
1987, pp. 253337; C. M. Winslow, J. B. Kossecoff, Mark R. Chassin, et al., The
Appropriateness of Performing Coronary Artery Bypass Surgery, Journal of the
American Medical Association, July 2229, 1988, pp. 5059; Steven J. Bernstein,
Elizabeth A. McGlynn, Albert L. Siu, et al., The Appropriateness of Hysterectomy: A Comparison of Care in Seven Health Plans, Journal of the American
Medical Association, May 12, 1993, pp. 23982402; Michael S. Broder, David E.
Jabiysem, Brian S. Mittman, et al., The Appropriateness of Recommendations
for Hysterectomy, Obstetrics and Gynecology 95 (February 2000): 199205; Lee
H. Hilborne, Lucian L. Leape, Steven J. Bernstein, et al., The Appropriateness
of Use of Percutaneous Transluminal Coronary Angioplasty in New York
State, Journal of the American Medical Association, February 10, 1993, pp.
76165.
6. Gary Claxton, Bianca DiJulio, Benjamin Finder, et al., Employer Health Benets, 2007 Annual Survey (Menlo Park, Calif.: Kaiser Family Foundation and
the Health Research and Educational Trust, 2007).
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7. David J. Hyman and Valory N. Pavlik, Characteristics of Patients with Uncontrolled Hypertension in the United States, New England Journal of Medicine,
August 16, 2001, pp. 47986.
8. J. D. Kleinke, Oxymorons: The Myth of the U.S. Health Care System (San
Francisco: Jossey-Bass, 2002).
9. Websters Dictionary of American English, ed. Gerard M. Dalgish (New York: Random House, 1997), 611.
10. David M. Cutler, Making Sense of Medical Technology, Health Affairs Web
Exclusive, February 7, 2006, http://content.healthaffairs.org/cgi/reprint/25/
2/w48.
CHAPTER 19
ESTABLISHING STANDARDS
1. Robert N Foley and Allan J. Collins, End-Stage Renal Disease in the United
States: An Update from the United States Renal Data System, Journal of the
American Society of Nephrology 18 (October 2007): 264448.
2. David A. Goodkin, Jennifer L. Bragg-Gresham, K. G. Koenig, et al., Association
of Comorbid Conditions and Mortality in Hemodialysis Patients in Europe,
Japan, and the United States; The Dialysis Outcomes and Practice Patterns
Study, Journal of the American Society of Nephrology 14 (December 2003):
327077.
3. T. F. Parker, L. M. Laird, and E. G. Lowrie, Comparison of the Study Groups in
the National Cooperative Dialysis Study and a Description of Morbidity, Mortality, and Patient Withdrawal, Kidney International, supp. 13 (April 1983):
S4249; H. R. Harter, Review of Signicant Findings from the National Cooperative Dialysis Study and Recommendations, Kidney International supp. 13
(April 1983): S10712; Zbylut J. Twardowski, Treatment Time and Ultraltration Rate Are More Important in Dialysis Prescription Than Small Molecule
Clearance, Blood Purication, December 14, 2007, pp. 9098.
4. Rajiv Saran, Jennifer L. Bragg-Gresham, Nathan W. Levin, et al., Longer Treatment Time and Slower Ultraltration in Hemodialysis: Associations with
Reduced Mortality in the DOPPS, Kidney International 69 (April 2006): 122228.
5. Kaiser Family Foundation, Fact Sheet: Medicare Prescription Drug Benet
(Washington, D.C., October 2007); Kaiser Family Foundation and the Health
Research and Educational Trust, Prescription Drug Benefits (2007),
http://www.kff.org/insurance/7672/upload/76723.pdf.
6. Daniel G. Garrett and Benjamin M. Bluml, Patient Self-Management Program
for Diabetes: First-Year Clinical, Humanistic, and Economic Outcomes, Journal of the American Pharmacists Association 45 (MarchApril 2005): 13037.
7. Medicare Payment Advisory Commission, A Data Book: Healthcare Spending
and the Medicare Program (June 2007), http://www.medpac.gov/documents/Jun07DataBook_Entire_report.pdf; David Kashihara and Kelly Carper,
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National Health Care Expenses in the U.S. Civilian Noninstitutionalized Population, 2003 (Rockville, Md.: Medical Expenditure Panel, November 2005).
8. Studdert et al., Claims, Errors, and Compensation Practices in Medical Malpractice Litigation.
9. Robert Steinbrook, Hemoglobin Concentrations in Chronic Kidney Disease,
Lancet, December 2330, 2006, pp. 219193.
10. American Heart Association, annual report (Dallas, 20045).
CHAPTER 20
1. David C. Classen, R. Scott Evans, Stanley L. Pestotnik, et al., The Timing of Prophylactic Administration of Antibiotics and the Risk of Surgical-Wound Infection, New England Journal of Medicine, January 30, 1992, pp. 28186.
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1. Gail R. Wilensky, Developing a Center for Comparative Effectiveness Information, Health Affairs Web Exclusive, November 7, 2006, http://content.
healthaffairs.org/cgi/reprint/25/6/w572; Placement, Coordination, and Funding of Health Services Research within the Federal Government, Academy
Health Report (September 2005): 116; Institute of Medicine, Roundtable on
Evidence-based Medicine, Washington, D.C., March 19, 2007; Blue Cross/Blue
Shield Association, Improving Health Care Value: Quality and Cost (Chicago,
September 25, 2007).
2. Peter Orszag, letter to the Honorable Pete Stark, September 5, 2007.
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INDEX
cervical cancer, 41
cervical fusion, 111112, 114115, 126, 225
charge master, 244
chemotherapy, 270
chief information ofcers (CIOs), 90
children, 7273. See also State Childrens
Health Insurance Program
Chile, 165
cholesterol, 41, 62, 69, 73
Chrysler Corporation, 182
CIGNA, 171
CIOs. See chief information ofcers
Citizens Health Care Working Group, 204
civil monetary penalty statute, 221
Clemmer, Terry, 248
Cleveland Clinic Health System, 147
Cleveland, OH, 147
clinical trials, 160, 168169, 224225
Clinton, Bill, 123, 203, 262
Clinton, Hillary, 208
clot-busting drugs, 256
Coburn, Tom, 199
cognitive doctors, 152
colon cancer, 73, 109, 216
colonoscopy, 41, 72
colon polyps, 162
colorectal cancer, 41, 102
Committee for Economic Development,
198, 199
Commonwealth Fund, 265
Communications Workers of America, 198
Community Care of North Carolina,
236239
community hospitals. See hospitals,
community
complication rates, 154
computerized axial tomographic (CAT)
scan, 6, 137, 227229
computerized data management: billing
systems, 92; computerized physician
order entry, 9192; operational
electronic medical records, 90; paper
patient charts vs., 9093, 154, 235,
250251; physician support tool, 248;
primitive nature in hospitals, 84,
8993; systems integration, 92. See
also medical technology
concussion, 229
conict of interest, 131134
Congressional Budget Ofce (CBO), 50,
52, 166
consulting fee, 106, 196
consumers, empowering, 259260
contract workers, 182
Cooley, Denton, 252253
co-pay. See health insurance, co-pay
coronary angiographies, 216
coronary artery bypass surgery, 116119,
216
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315
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317
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318
INDEX
illegal immigrants, 36
implantable deep-brain stimulator, 7
individual insurance. See health
insurance, private
infant mortality, 74, 194
infections, 89, 141, 154
Institute of Medicine, 20, 77, 84, 91
insulin, 249
insurance. See health insurance
insurance industry. See health insurance
Intel, 198
intensive care unit (ICU), 3, 9799, 140,
141
Intermountain Healthcare (UT),
243250
Internal Revenue Service, 181, 221
interventions to beneciaries, 121122
intubation, 3
Iraq War, 16
Italy, 165
James, Brent, 243248, 249, 253
Japan, 6264, 165, 226, 246
Johnson, Lyndon, 123
Johnson Foundation, Robert Wood, 101
Joint Commission on Accreditation of
Healthcare Facilities, 87, 254257
Journal of the American Medical
Association, 132
Kahanovitz, Neil, 262, 270
Kaiser, Henry J., 28
Kaiser Family Foundation, 186
Kaiser Permanente, 2728, 30, 71
Katy Memorial Hospital (Katy, TX), 1112
Kellerman, Arthur, 20
Kelly Services, 198
Kennedy, Edward, 191, 205
kickbacks, 196197, 221
kidney disease, 134
kidney failure, 73, 225226
kidney transplant, 225
King, Sid, 232236
knee replacement, 6364, 109, 196, 225
labor, induction of, 246247
Latter Day Saints (LDS) Hospital,
243248
LDS Hospital. See Latter Day Saints
Hospital
Leape, Lucian, 243
legs, vascular problems of, 109
Lewin Group, 204, 265
life expectancy. See age
life support, 96, 100
life-sustaining treatment, management
of, 101102
long-term care facility, 251
Los Angeles, CA, 20, 147, 153
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