On April 5, 2014, the NY Times published another article by Elisabeth Rosenthal on the extremely high costs of healthcare in this country. This article focused on the escalating costs of type 1 diabetes care – now in the range of $26,000 per year for medication and equipment. She also told the story of a science teacher who had been getting Remicade infusions for psoriatic arthritis every 6 weeks at NYU – he stopped going when he discovered that his insurance company was paying almost $100,000 for each infusion. As long as the fees paid for virtually all healthcare services remain a secret, this kind of misguided use of insurance premiums will continue. Consumers need access to the fees paid for healthcare services before they receive care. This is particularly important now that 40% of consumers have a high deductible.
On February 13, 2014, the NY Times published an article by Elisabeth Rosenthal entitled “Apprehensive. Many Doctors Shift To Jobs With Salaries”. She describes how healthcare providers are joining larger medical practices and often take salaried positions. Physicians join hospital-based practices primarily for two reasons. First, because the complexity of running a cutting edge healthcare practice, with all of the technologic and regulatory challenges, requires tremendous effort and expense. The second reason is that hospital-based practices are paid substantially higher fees than smaller independent practices.
When fees for healthcare become transparent, it will be clear that the rapid consolidation of healthcare providers that has been occurring over the past decade, has come at a hefty price. Until we understand the impact that consolidation has had on costs of care, we cannot do a meaningful analysis to determine if the benefits justify the costs.
Many of the contracts that salaried physicians are signing include incentives to those that give cost-effective care. If doctors spend less on patient care than a fixed benchmark (set by the organization), they are eligible for a bonus. In theory, this will reduce the wasteful spending estimated at 30% of current healthcare costs. Accountable Care Organizations (ACOs) are also designed to work this way to reduce healthcare spending. However, it has not yet been shown that such incentives can bend the cost curve. In fact, after a five year pilot study, and one full year in practice, the most enthusiastic medical centers that signed up for the ACO program in year one have managed to reduce spending by less than 1%.
The current trends in our healthcare system appear to be exacerbating the cost conundrum. At the very least, we need an assessment of the costs of consolidation and an honest review of the flaws inherent in the ACO model. A better solution lies in a competitive marketplace where transparency of cost and quality allow consumers to drive down the costs of care.