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If only it were that simple

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September 18, 2017
by Brian J. McKinnon, MD, MPH, MBA, FACS


In Dr. Jamie Koufman's recent OP-ED in The New York Times,1 she indicated that specialist physicians are the primary drivers of healthcare costs in the United States. For a clinician of her intellect and stature to be willing to step into the breach is brave and laudable, and some of what she wrote is factually accurate. However, my formal training in business and public policy, as well as my experience as a practicing academic physician and surgeon, force me to conclude that her analysis is superficial and reflects some basic misunderstandings of healthcare costs.

Healthcare spending accounts for nearly 18% of the GDP, according to the Centers for Medicare and Medicaid Services (CMS), with increases primarily reflecting higher levels of personal spending.2 The increased personal spending reflects the increase in insurance coverage, which itself reflects the downstream impact of the Patient Protection and Affordable Care Act (PPACA). Of this personal spending, apparently the most significant beneficiaries have been the makers of prescription medications.2

CMS reports that of the $3.2 trillion spent on healthcare in the United States, 20% goes to physicians, 33% goes to hospitals, and 10% goes to makers of prescription medications.2 Of the 20% to physicians, less than half is paid to physicians in salary;3 most of the payments go to cover overhead and the other costs of an office practice. Furthermore, healthcare providers during the past 25 years have seen no significant increase in income,4 indicating that ever-increasing healthcare spending is not going into their pockets.

Significant winners include health and insurance executives, who have seen nearly a 10% increase in income. It is worth noting that CMS has estimated administrative costs at $360 billion a year, 85% of which is related to our system of healthcare insurance. Surprisingly, the discussion on how to reduce healthcare costs says little on how to reduce this substantial expenditure.2

These adverse economic realities have led to a decline of physicians in private practice, with less than half of physicians now working in private practice.5 Those not in private practice are employed by large integrated health systems not unlike the large integrated health system where Dr. Koufman is a clinical professor of otolaryngology. Physicians being employed by health systems are becoming a significant contributor to healthcare cost increases, as payers allow higher payments for care provided in hospitals.6

Dr. Koufman's examples of sedated endoscopy and transnasal endoscopy are worth exploring. Using 2017 national Medicare average payments, when a physician performs a transnasal exam of the esophagus in his or her office, Medicare pays $192.72. However, if a physician performs this procedure in the hospital on an outpatient basis, the physician payments are much lower-$91.88; but the hospital payment is $699.49. The hospital is reaping the benefit, not the physician. This may not be strictly due to institutional avarice. With fewer than half of U.S. hospitals being profitable,7 there is good reason for a hospital to encourage one procedure over another for the hospital's best economic interest, even if it is not in the physicians' best economic interest. With more and more physicians now employed by health systems, Dr. Koufman's envisioned benefits of a primary care oversight are unlikely to come to fruition in the face of such financial incentives.

Even if the above issues were addressed and resolved, they would not address the single most significant driver of healthcare costs: technology.8 Advancing technology alone is responsible for half of the increase in healthcare costs and spending. For example, the up-front costs of an electronic health record system can be as much as $25,000 per physician, and the monthly costs of maintaining an electronic health system are substantial, as well.9

If healthcare spending is to be addressed in any meaningful way, advancing technology, payments to hospitals, and administrative costs should be at the center of the discussion and debate, rather than physicians, whose impact on healthcare costs is relatively limited. Physicians should address healthcare costs, but first physicians should acquire a comprehensive understanding of the drivers of healthcare spending, to be able to contribute meaningfully to reducing those costs.



Reference

  1. Koufman J. The Specialists' Stranglehold on Medicine.The New York Times;June 3, 2017.
  2. Centers for Medicare and Medicaid Services. National Health Expenditure Data; 2015. www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html. Accessed August 10, 2017.
  3. Jackson Healthcare. Physician compensation eight percent of healthcare costs.www.jacksonhealthcare.com/media-room/news/md-salaries-as-percent-of-costs; 2011. Accessed August 10, 2017.
  4. Seabury SA, Jena AB, Chandra A. Trends in the earnings of health care professionals in the United States, 1987-2010. JAMA 2012; 308 (20): 2083-5.
  5. Kane CK. Updated data on physician practice arrangements: Physician ownership drops below 50 percent. American Medical Association (Policy Research Perspective); 2017. www.ama-assn.org/sites/default/files/media-browser/public/health-policy/PRP-2016-physician-benchmark-survey.pdf. Accessed August 10, 2017.
  6. Goodman L, Norbeck T. Who's to blame for our rising healthcare costs? Forbes ;April 3, 2013. www.forbes.com/sites/realspin/2013/04/03/whos-to-blame-for-our-rising-healthcare-costs/#77705c56280c.
  7. Bai G, Anderson GF. A more detailed understanding of factors associated with hospital profitability. Health Aff (Millwood) 2016; 35 (5): 889-97.
  8. Ginsburg PB. High and rising health care costs: Demystifying U.S. health care spending. The Robert Wood Johnson Foundation (Research Synthesis Report No. 16); October 2008. https://people.emich.edu/jthornton/text-files/Econ436_article_Ginsburg.pdf. Accessed August 10, 2017.
  9. Leonard D, Tozzi J. Why don't more hospitals use electronic health records? Bloomberg ;June 21, 2012.
Associate Professor and Vice Chair, Department of Otolaryngology-Head and Neck Surgery, Associate Professor, Department of Neurosurgery, Drexel University College of Medicine, Philadelphia
Ear Nose Throat J. 2017 September;96(9):354-360