• A contrarian view of the NY Times story on health care prices

    Elisabeth Rosenthal’s piece in The New York Times today is receiving the customary “it’s the prices, stupid” applause and “I told you so” on Twitter, including from me. However, a reader writes me with another view that’s worth sharing.

    I left it with the opposite impression of everyone on Twitter. The take-home seems to be “its the prices,” but I’m not seeing that.

    In this article, the primary problem was not that we pay more for colonoscopies, we’re buying different things! The colonoscopy was a little more expensive, but the real difference in Europe was that we also buy an anesthesiologist and a surgical center along with it.

    It’s like buying pasta with or without truffle oil – of course it costs more, that doesn’t mean the pasta with truffle oil is priced too high.

    Why’s this matter? It would lead to totally different policies. If it’s the prices, the secret would be to decrease pay scales. If it’s overuse (in this case, overuse of surgical centers and anesthesiologists, not colonoscopies) then we need more oversight or a more complex adjusted capitation system. (Would ACOs be enough to fix this?)

    Indeed, it can be both prices and “intensity,” if not volume. Volume can be coarsely measured as visits and scans and such, but intensity — roughly how much we load up each procedure with ancillary stuff — is less frequently considered and is what my correspondent is getting at. Do you agree? Go read Rosenthal’s story and express your view in the comments.


    • This is an interesting reading of the story, but I think the reporting is excellent because it addresses why we end up getting pasta with truffle oil—a strange vulnerability to lobbying that makes truffle oil required by law.

    • Two observations:

      1) How do high risk scopes in Germany, France, Switzerland, etc,, fly? If you need an anesthesiologist and facility, do your costs wrap into a bundle? If yes, while the astute comment above may address US vs other, the issue still may not be “prices,” but how the intensity of those services gets treated. On a proportional basis, overseas costs still much less in all probability.

      2) More importantly, the issue does not simply boil down to overuse. As the piece points out, guideline conflict, heavily politicized via lobbying by the ASA, leads to confusion. Rosenthal makes clear, the fear of litigation makes doctors leary. Unjustified or not, the GI docs say one thing, the gas folks say another. If you were a doc, how would you react? Clarify the policy, ie, make the need for intense services go away, and overuse may moderate,

      (however, facility ownership, substitutability of new approaches and the US track record on this front makes void filling with new dollars likely–unless Medicare rules with a heavy hand).


    • I would say it’s a combination of both overuse of the procedure and the loading of extras, although the extras may not be that much.

      The NYT story is clear that colonoscopies are being done in the US more often than evidence suggests and instead of cheaper alternatives, although of course it remains the ‘gold standard’ procedure.

      You certainly do not need an anesthesiologist as if you want sedation – it’s a simple valium IV. But in the UK most colonoscopies are performed in hospitals in suites with nurses and doctors, so apart from an ‘anesthesiologist’ you are probably comparing similar facilties and resources – these are clearly charged at a much higher rate in the US.

    • On a smaller scale, my personal experience as PCP supports the concept that part of the problem is we are forced to provide (and patients to purchase) an over-evolved and excessively complex and expensive tool when simpler and less expensive – and more patient friendly – tools would suffice.

      At least 75% of what I do in my office as a PCP has to do with listening, educating, providing context, having conversations. I need clean and safe space, simple exam tools, a good information system so my patient and I can aggregate and manipulate patient data. That’s not the system I have.

      I have a system designed to support an air ambulance, trauma center, referral cancer care, ICU, vascular surgery, radiation center, risk management department, marketing department, real estate holding company…and patients are forced to pay for it, in dollars and inconvenience.

      I do not believe this cumbersome system can be scaled down and made accessible and affordable, any more than Garmin or TomTom will be able to successfully sell a simpler product to compete with the GPS functions in smart phones.

      Some combination fo disruptive and big-bang innovation (supported by patient awareness and the exponential changes in information and communication tools) will take this part of health care away from big health care institutions and physicians. Not sure exactly how or when, but that is what makes life interesting, right?

      Peter Elias, MD

    • I share the contrarian view. Endoscopy, including colonoscopy, can be done with very little anesthesia or under general anesthesia. In many countries (Singapore, Taiwan, —-), if you want to be “completely out” during the procedure, you’ll need to pay extra. Same with medications. For example, Pepcid may be completely covered by the (national) insurance, if you want Nexium instead you’ll need to pay the difference even if it is ordered by the doctor. In US insurance usually pays anything the doctors ordered.
      I think it is safe to say that it is both prices and intensity.

    • Sure, it is possible to perform colonoscopy using a light sedative, but patients and gastroenterologists prefer deeper sedation, the most popular sedative agent being propofol. Patients prefer deeper sedation for a variety of reasons, including fear of the procedure itself and the possibility of experiencing discomfort. Gastroenterologists prefer deeper sedation because it immobilizes the patient, allowing for a more thorough examination while reducing the risks of perforation of the colon or intestine during colonoscopy. Propofol has become the most popular sedative agent because of its versatility: it can be given for short or prolonged sedation as well as for general anesthesia, putting the patient anywhere on a continuum from awake and responsive (“conscious sedation”) to unconscious. As for the cost, reimbursement varies among third party payers. For example, some insurers reimburse a flat rate per procedure, while other insurers reimburse according to the “anesthesia time.” The time (the “anesthesia record”) is determined by the anesthesiologist or CRNA, and varies depending on several factors, including the degree of difficulty navigating the colon, the nature of and amount of pathology encountered (e.g., polyps), and the diligence and skill of the gastroenterologist performing the colonoscopy. Total reimbursement for anesthesia by a health insurer which reimburses according to the anesthesia time is based on a system of “base value units” and “time units.” The base value units are those assigned by the ASA for providing anesthesia for the particular procedure (five base units are assigned for colonoscopy). The time units usually are fifteen-minute increments. Total reimbursement is determined by adding the base value units and the time units (the fifteen-minute increments of anesthesia time) and multiplying the sum by the rate per unit allowed by the insurer. Total reimbursement varies little among cases, however, because the rates of reimbursement per unit are not significant (typically ranging from about $22.00 per unit to about $38.00 per unit). The costs indicated in the NYT article are way out of line from the typical reimbursement in my state (Florida). Indeed, I appreciate that the reporter is well-intentioned, but by reporting such highly exaggerated costs as being typical does a disservice to the physicians and their patients.

    • Three other points. One, it’s true some endoscopy centers use only CRNAs. I discourage the practice. Why? With a few exceptions, CRNAs must be supervised by a physician, which means the gastroenterologist if the endoscopy center has no anesthesiologist. If you are the patient, do you want the gastroenterologist’s attention focused 100% on your colon, or divided between your colon and anesthesia? Two, it’s essential to distinguish a colonoscopy, which is an examination of the entire colon, and examinations of less than the entire colon, such as a sigmoidoscopy, which examines only the distal portion of the colon. It’s the latter that are performed in the physician’s office rather than an endoscopy center. Three, the typical reimbursement for the facility is far less than the exaggerated amounts reflected in the NYT article. But there is an enormous difference between the reimbursement rate for a free standing endoscopy center and a hospital: the co-pay for a colonoscopy in the hospital usually exceeds the entire facility fee for the endoscopy center. If you are the patient, where do you want your gastroenterologist to perform the procedure?

    • If its the prices then why does Medicare seek to close surgi-centers that I believe charge about half the hospital charge? There are strict criteria that have to be met before doing the test and the same people do them both in hospitals and surge-centers. Physicians that are bought by the hospital find their rates go up at least in certain areas, but it is the same physician providing the care.

      If it is the prices why would one even want to promote hospital treatments when they could be performed in a center. Hospitals have to be more expensive and perhaps provide less care and maybe even more risk such as the hospital risk of infection?

      If it is marginal care, then that proves that Medicare failed in its goals since it has been trying to code out marginal care for decades and failed. The diagnostic codes have changed from XXX to XXX.xx increasing the complexity so one almost needs a PhD to bill Medicare.

      If these things aren’t working despite all the fiddling with the code numbers, the audits, etc. wouldn’t one want to try something new?

    • Rosenthal channels Steven Brill as she bashes the U.S. system, even including many of the same misrepresentations (check out Christopher Conover’s comments on Brill’s article and apply them to Rosenthal’s piece).

      The article is just another implicit call for central planning and control for one sixth of the world’s largest economy. Hey, is Oskar Lange still around? Maybe the government can put him in charge of the U.S. Central Planning Board for healthcare.

      Seriously, though, one of the unassailable facts of social life is that competition outperforms central planning and control every time. The failure to accept this reflects the great incoherence of liberal healthcare policy wonks.

      • I agree with your assessment of competition versus central planning.
        Do you think competition has worked well, with each insurer negotiating a price for every procedure?
        Do you think a little “central planning” may actually reduce prices and premiums?
        The planning I envision is for each state exchange to have a board comprised of representatives of the insurers, physicians, hospitals, and consumers negotiate a price for every procedure for every insurer, with every insurer paying the same price for every various procedure.
        Seems to me a very expensive system of competition has arisen, particularly with prices all over the map.
        Don Levit

      • “Seriously, though, one of the unassailable facts of social life is that competition outperforms central planning and control every time.”

        You must live on a different planet than I do. Here in strictly price-controlled Japan, per-person medical costs are 1/3 those in the US, everyone is provided care*, no one goes bankrupt due to medical costs, and the results are better. (Some of that is a healthier population, of course, although Japan is working hard on catching up with the US on metabolic syndrome and the like. But part of the reason the population is healthier is that everyone’s covered, including dental care, which is insanely cheap for the patient. I’ve had all my US dental work redone with far higher-quality materials than I could have afforded in the states and never paid more than US$30 for a visit, even the ones where I was paying for a new crown.)

        *: Even the uninsured! A person from a developing country was here working (legally) but hadn’t paid her insurance premiums. She came down with acute appendicitis, received appropriate care, and recovered without problem. How much was she charged? The exact same amount someone on insurance would have been. She was, however, required to pay the insurance premiums she had been delinquent on.

      • What competition? What hospitals/MDs/clinics compete on price? I believe none of them. It is also difficult, if not impossible to get information on safety measures-infection rates, medical errors etc. Although it could have been better the piece is useful, in part because the general public cannot be reminded enough that our health care system is not like any other market. Yes, prices are high but there are all kind of ways that you can be charged more money and not be aware of it, i.e. depending on exactly how medicines and procedures are delivered.

      • Competition works with adequate regulation, otherwise providers exploit advantages such as local monopolies, asymmetry of information, and use deceptive marketing. All of which are features of the US healthcare system.

        Regulation is not synonymous with central planning. We regulate banks, businesses, charities, etc.

        We need to stop asking providers who make their income from supplying procedures to decide what procedures we really need. What motivation does the American College of Gastroenterologists have to suggest that instead of colonoscopies at those shiny new stand-alone facilities, we provide stool samples to lab techs annually?

    • Dr. Aylward – What do you think about DChen’s comments? It seems to me that you’re referring to the same stuff. Propofol and surgical centers are great, but the rest of the world proves colonoscopy can be done effectively without them. It’s only in America where we decided that if it can be done it must be done, no discussion, right?

    • Robert Aylward mischaracterizes the use of propofol in several ways here:
      It is not ‘the most popular form of sedation’ nationally (although its frequency of use has increased), it is not associated with decreased risk of complications, it is not typically used in a manner that places the patient in a continuum of states during the procedure that includes wakefulness, and it is not nearly as inexpensive 44-78 dollars for a 1/2 hour colonoscopy slot. There is also no data to support the contention that propofol allows for a more through examination of the colon than would be obtained with a combination of fentanyl and versed.The addition of propofol in fact, in the State of Florida, requires a supervising anesthesiologist, although the administering provider in the room can be a nurse anesthetist. This adds a layer of cost to the performance of the exam that is unnecessary for most patients (and income – generating for the ASC). Its use with the addition of this added manpower such as occurs in states like Florida is not advocated by governing bodies in the field of gastroenterology, nor is it commonly seen in routine practice within teaching hospitals including Mayo Clinic in that state. The addition of anesthesia services usually tacks on hundreds of dollars to the bill for the procedure, and the patient who is often left responsible for some or all of the added costs is not generally given an alternative to them in advance. And the statement that the copay at the hospital usually exceeds the facility fee at a freestanding endoscopy lab would need to be clarified with data as it is frankly not believable.

      That said, some of Rosenthal’s numbers are way off on the plus side, including the amount Medicare pays the provider for a colonoscopy.
      However, the article’s contention that excessive procedures are performed outside of guidelines has been well documented in the literature.

      Alsan’s unassailable facts are hardly born out by the cost of our healthcare system, which involves profit generating in every nook and cranny, as is well exemplified above in the use of propofol in ASCs in Florida.
      Here’s a fun fact: the wholesale cost of nexium has more than doubled since the introduction of more competition over the past few years. Go ahead and square that with the Econ 101 textbook that passes for how the world works in one’s simple minded musings .

    • Backing up what Emily said, I think we have yet one more incidence of hospitals preserving themselves with high loaded prices for outpatient care.

      As Jeff Goldsmith and others have pointed out, hospital spending should have been shrinking for the last 20 years. Insurers in general have been bulldozed into ‘covering the hospital’s costs,’ and the uninsured or underinsured individual patient is quite helpless before the hospital also.

      If surgicenters can cut costs for outpatient care, we should set the reimbursements natnionally at their price level, and legally prohifit hospitals from balance billing the difference.

      Don Levitt suggests something like this, but I think he underestimates how impossible it may be to get agreement among all providers.

      This will be a legal slugfest, but that is what it will take to lower our health costs for outpatient care.

    • It’s not just the prices –

      In fact, providers offset imposed lower prices by increasing volume. Read more about providers & behavioral economics here – http://heinonline.org/HOL/Page?handle=hein.journals/stlulj53&div=54&g_sent=1&collection=journals

    • He makes a good point.
      His point reminds me of the absurd gauntlet that Americans MDs run.
      RN’s who hospitals are choosing more of LPN’s also have to be highly qualified to get into nursing.

    • As an academic gastroenterologist and medical director of an ambulatory endoscopy unit with no personal equity I would like to point out the following:

      1. Clinical oversight and quality in accredited units like ours equals or exceeds most hospital based units and certainly surpasses private offices.We have a rigorous quality program which actually analyzes compliance with appropriate procedural intervals and we partake in a national registry which allows us to benchmark all of our physicians against national standards and internally.

      2. Approximately 35% of the patients treated at our center have some form of governmental coverage (Medicare/Medicaid) The care they are provided is identical in nature including anesthesia support provided by a board certified anesthesiologist. The anesthesia fee under governmental plans does not even cover the overhead associated with the labor and drug costs. We do this because it is the ethical, moral, and clinically correct thing to do.

    • A few other points:

      3. The use of a consulting firm has been invaluable in assuring compliance with the continuously changing regulatory environment at a national and local level. In addition the process of opening a unit in a state such as NY takes up to 2 years and involves developing compliance plans, operating agreements, architectural plans, and a circuitous medicolegal process that physicians could not navigate without help. THe overhead costs of maintaining, staffing, and keeping these units compliant can exceed 50% , far in excess of what a physician practicing in a socialized system must face.

      4. Doctors do not set Medicare fees and most commecially negotiated fees are based on a percentage of the Medicare rate.

    • The comment that private fees are negotiated as a percent of medicare is somewhat misleading if that number is 150%, for example. If the percent is less than 100, as is the norm in usage, that would suggest that the anesthesia services described routinely lose money, which is surely not the case. The problem with usage of anesthesia services in the outpatient setting is that they need to be busy to turn a profit and that means utilization of their services, usually in block times, that include sedating ASA class 1 and 2 patients as well as those for whom these services in that setting may be appropriate (class 3). If this occurs, charging such patients for unnecessary services is costly and hardly to be considered ethical, since they routinely bear a part of the costs.