Healthcare costs cannot be controlled by only banning fee for service

by James Baker, MD

Once the recession is over (maybe that should be “if the recession is ever over”), it’ll be time to do something about the deficit.

The way to do that is to get healthcare costs under control.

But I don’t see how containing fee-for-service medical practice does the trick because, outside of family practice, I cannot see how to get away from fee-for-service, for the most part.

I think there are three drivers of escalating healthcare costs: 1) end-of-life care; 2) defensive medicine; and, 3) our patients are not our customers.

Here’s how to address each, in turn:

End-of-life. We don’t need “death panels,” but we do need social consensus about how to manage end-of-life medicine.  It cant be left to doctors, as their job is to preserve life.  It cant be left to families, as the price in guilt of making such decisions is far more expensive than the price of hopeless medical care.  So, as a society, we have to give permission to both docs and families to spend less at end-of-life.

Defensive medicine. Lots of tests get ordered simply because there is nothing more painful to a doc than the theater of a malpractice suit.  So there has to be some sort of no-fault process that keeps docs off that stage instead of spending money on marginally-necessary MRI’s and the like.

Patients as customers. The best way to drive down medical costs is to use high-deductible insurance policies tied to HSA’s.  Fund the HSA’s for the poor, the disabled and the elderly.  In that way, the patient (not the insurance company) becomes the doctor’s customer again.  That is, decision-making about what to pay for moves out of the insurance company suites back into the patient consultation room.

And the research is clear that, when given back this choice, every patient — including those with mental illness — can make decisions that are clinically effective and cost less money.

James Baker is a child and adolescent psychiatrist with Metrocare Services who blogs at Mental Notes.

Submit a guest post and be heard.

Comments are moderated before they are published. Please read the comment policy.

  • IVF-MD

    For the past year, this board has endured my repeated comments touting the advantages of involving patients in their healthcare decision, especially with respect to financial decisions. I’m happy that someone else sees it too. From first-hand experience working in a field where doctors are forced to actively compete for the patients’ patronage, I see all around how it set the proper incentives in place for providers to maximize patient satisfaction. Because if we don’t satisfy our patients, then we go out of business and if we do satisfy them, then we’re rewarded. It’s good to have a system where doctors are rewarded for effort which caters to greater satisfaction in the eyes of the patients. It’s bad to have the current system where doctors are rewarded for efforts aimed at getting the government or insurance company to cut them a bigger reimbursement check, such as doing more of procedure A than procedure B or chunking and coding things in a different tricky way.

  • stargirl65

    Though I agree with the ideas above I find patients don’t always want health care that is appropriate. If they don’t get what they want they move on.

    Example: Doctor, I have a cold and want antibiotics. Obviously if the patient has a cold they don’t need antibiotics. Some patients are ok with this but many are not. If they don’t get anything for their visit because nothing was needed they get angry and refuse to pay their bills and/or go somewhere else. This is where patient satisfaction may not be the idea goal.

    A similar argument could be made for pain medicine seeking patients. Or benzo abusers. Or patients that want xrays on joints that don’t meet the indication for an xray. Or children with otitis media that don’t need antibiotics but only pain medicines. Or patients that are traveling and want an entire pharmacy of medicines just in case.

    The other problem is that now that most of the costs are going back to deductibles, more bills are sent out to get the patient portions of the charges (the copays are collected at time of service). Many patients put health care at the bottom of the list of bills and just don’t pay their health care bills. It’s not like you can repossess the visit or turn it off. Our AR has significantly increased since the start of HSAs.

  • LibraryGryffon

    Patients who want antibiotics for colds or unnecessary x-rays, usually do so because they think they know better AND it’s being paid for by someone else. If they had to pay for that x-ray out of pocket, and their insurance wouldn’t count it towards their deductible if it wasn’t considered medically necessary, I strongly suspect there would be lot fewer demands for it. Pain med seekers are another kettle of fish, and while something needs to be done about them, I don’t see why we have to avoid any reforms because of one group. And again, if they had to pay for all their pills out of pocket, might we see fewer folks getting hooked on them in the first place? I really don’t know that answer to that.

  • J.T. Wenting

    banning fees makes the cost invisible to the patient.
    The best thing you can do to lower cost is to send the patient a copy of every bill, and have them pay at least part of it themselves (maybe prepay and later get it back from their insurance).

    • pj

      That’s “sort of” already done- they’re called EOB’s.

  • Primary Care Internist

    I have floated this idea several times before on this blog:

    For end-of-life care, have families pay just 1% of costs of care deemed futile by 2 physicians. If grandma has terminal dementia and end-stage CHF, hospitalizing her from the nursing home for intubation, ICU stay etc., might cost $100,000+ to the taxpayer. For many families here in NY, they bear none of the cost directly (medicare & medicaid ie. you & me). Having them pay 1% is not denying such care to them, but at least they have SOME minimal skin in the game. That makes a huge difference in the decision-making process.

    End-of-life care is an enormous cost, both financial to taxpayers, and emotional to families and patients. And much of it is needless.

    For all you small-office solo docs, think about how many patients put up a stink about a $5 or $10 copay???

  • ninguem

    The countries that are always held up as models we should emulate, they all have fee-for-service practice.

  • Anon-MD

    You are so right, and many of the commenters so far do get it.

    There is only ONE THING driving up the costs of health care – health care is bought with OTHER PEOPLE’S MONEY (OPM). We make different choices when we us OPM – we don’t ask what things cost, nor, more importantly what we get for that extra cost. Want the “Best New Drug” for “X” sure, here you go. By the way, do you know there are no studies proving it is safer than generic drug “Y”? And it is only marginally more effective and costs 10x as much??? Who caress …

    Let’s look at your list …

    1. End-of-life – there is no need for “Social consensus” about what is right or wrong at the end of life if you pay for it yourself. Sure, one must avoid fraud, but other than that, the only reason to impose external, arbitrary, and sometimes repulsive standards is if someone else pays for it.
    If everyone paid their own way (or even a fraction), end-of-life care would cease to be a societal issue, and it could go back to what it should be, a personal and private one

    2. Defensive medicine? No such thing. Defensive medicine is nothing more than purchasing tests that do not have “ZERO benefit” but marginal benefit where it is believed that the legal benefits outweigh the medical ones. The distinction is crucial. No one orders defensive ER head CTs b/c the risk of a head bleed in that headache patient is zero. Drs order it b/c there is a minuscule, ~NON-ZERO~ chance it may be there. No one gets sued for ordering tests that miss nothing. Only the fear that some zebra is hiding, b/c there ~are~ zebras out there.

    Now, back to the OPM problem – if patients actually were personally responsible for the costs of testing, there would no longer be defensive medicine.
    “I want an MRI for my headache”
    “Sir, your odds of having a significant problem with a headache of that character are less than 1%”
    “I don’t care, I want it”
    “OK, that’ll be $500.”
    – Now I already know that some will say what if he really needs an MRI? Most docs I know do the “right thing” most of the time. We are not talking about those times. We are talking about marginally effective studies done to placate the patient.

    3. Patients as customers – as much as we hate to see it this way, this is the only thing that will save us. Patients paying out of pocket for what matters to them is the only thing that will bring rational pricing to health care while simultaneously restoring what is good about medicine.
    I absolutely agree that HSAs w/ HDHPs are the way to go



    Excellent assessment. The situation I run into with HDHPs with or without HSAs is that patients are making “testing shopping” decisions yet want treatment before I am comfortable with the diagnosis.

    I agree we all test looking to prove that there is no needle in the haystack but sometimes it is a very good ideal to r/o things on the diff dx list that come more frequently than zebras and my cause a worse outcome.

    “I’ll do the bloodwork but not the MRI to r/o MS, but I want you to do the injections you mentioned to treat this inflammation and macula edema”


  • Anon-MD

    Good point, I hadn’t really considered decisions where the patient is actually sick, but wants treatment ~instead of~ tests.

    Still, in the “pt as consumer” model it ~could~ work, provided there was a major shift in the medico-legal environment.

    To wit:

    Doc: I suggest we get a CT-PE protocol before starting coumadin.

    Pt: Look, I am having the same symptoms as my cousin w/ Factor V leiden. Can you just treat me?

    Doc: Well, the odds of you having a PE are substantial, but the risks of treatment w/o knowing for sure are considerable

    Pt: Doc, I understand that and accept that risk

    Doc: Look, I cannot force you to undergo testing if you don’t want. If you’ll accept the risks of this decision, I will write the Rx …

    –> Doctor then documents the decision in much the same way as any other R/B decision, and writes the Rx for the patient, after having the patient sign a consent indicated he chose to go w/o appropriate testing …

  • Kiricenkov

    Before touting HSA’s go price them. They are cheap for the young, but unaffordable by age 50. If we lower Medicare to 50, then the HSA argument holds water, otherwise forget it.

  • Vernon Rowe

    This is a fine article and the comments are great too.
    We see a lot of zebras so we order tests. It’s that simple for us. We have an MS center and people come in on therapy that costs $40,000 a year and don’t have MS. Same thing happens for our headache and sleep centers. We present our results at national meetings so we know this to be true.
    But 66% of CMS dollars are spent on 25% of their patients, and a lot of this is end of life hospital driven care, much of which is anti-competitive and ordered by hospital-owned practices.
    Our philosophy–keep patients out of hospitals and hospital systems, and you immediately radically reduce health care costs.
    This article and many of the responses have great ideas for just such a cost reduction without sacrificing quality patient care. Involve patients and let them have their own skin in the game. Bravo for that.

Most Popular