Even the crustiest reporter can get throat-chokey and eye-misty, and I confess that it happened to me yesterday as a singular moment in American history unfolded on the steps of the U.S. Capitol. But now the alchemy of turning political promises into pragmatic programs begins. I was most interested in the president's touting of "technology's wonders to raise healthcare's quality and lower its cost." It was just a line in a speech, but reflective of a worshipful and widely shared view.
Yes, technology can raise quality. Surgery performed through small incisions, made possible in part by advanced fiber optics and miniaturized tools, can reduce complications and send patients home faster. Technology can lower cost. If medical records are digitized and centralized, if prescription orders in hospitals are entered at the bedside and tracked by computer, time would be saved and errors reduced, both of which would cut expenses.
But technology also gives surgeons new ways to operate, which they do in some parts of the country with seemingly excessive enthusiasm. For many years, data analyzed by the Dartmouth Institute for Health Policy and Clinical Practice have revealed striking imbalances—many times the national average rate of heart or back or other operations in some cities or regions for no reason that can be explained by the mix of patients or the severity of the condition. And some procedures made possible by technology, such as knee arthroscopy to clean out debris and shave off bone spurs, have been shown to be largely ineffective. Excessive and dubious operations erode quality by exposing patients to the possibility of surgical errors and postsurgical complications, and they drive costs up, not down.
Besides, what are "costs"?
"When I use a word," Humpty Dumpty said in a rather a scornful tone, "it means just what I choose it to mean—neither more nor less."
"The question is," said Alice , "whether you can make words mean different things."
"The question is," said Humpty Dumpty, "which is to be master—that's all."
Alice was too much puzzled to say anything....
In hospitals, cost data is generated in a looking-glass world. Statements received by patients show how much the hospital charged the insurer, Medicare, or other payer for care, how much the hospital received, and how much the patient must pay. The total of those charges equals the sum of individual charges for each procedure, test, drug, and gauze pad. These figures, in turn, are plucked from he chargemaster, a 3M tool used by almost all hospitals.
The total charges—call them the list or sticker price—has almost no basis in reality. For the most part, the only patients billed for the full list price are those who are admitted through the ER and are uninsured. Of course, the hospital doesn't expect such patients to pay more than a fraction of the bill. All or most of the charges are written off.
Hospitals don't expect insurers to cough up the list price, either. The average national hospital charges for a knee replacement covered under Medicare came to more than $38,000 in 2007. Medicare paid an average of less than $12,000. It is almost impossible to know what commercial insurers pay hospitals; such arrangements are the product of intense negotiation and vary considerably, depending on the hospital, the insurer, and economic factors such as location and competition.
Why can't patients negotiate, too? Last week I looked at Healthcare Blue Book, a new online site claiming to give uninsured patients who are ineligible for federal or state programs a tool for an affordable payment to hospitals and other healthcare providers. Cofounder Jeff Rice, a physician, says the site provides a "fair price"—the upper end of what the hospital would receive from a typical managed-care plan—for "thousands" of procedures.
The idea is that a patient would offer to pay the listed fee, and the hospital should be willing to listen. For knee replacement, for instance, the proposed amount is $18,305 to the hospital, plus $2,552 to the surgeon and $522 for anesthesia services, which typically are billed separately. A "binding price agreement" form can be printed out, to be signed by the provider.
Do uninsured patients even have any leverage to bargain over their bill? "I don't think we would negotiate on that basis," said Andrew Litt, executive vice-president of NYU Medical Center in New York. "If somebody came in and said, 'I can't pay full freight,' we would work with them and very likely they would be charged an amount not much different than we would receive from third-party payers." The sum, he said, would be determined by their financial and credit status and payment arrangement. "Do they have a credit card? How much can they pay up front? How good a credit risk are they? We're not going to try to charge them the last dollar." As for the form, "we would never sign an agreement like that," said Litt, because it would give a hospital no room for unforeseen factors that could quickly ratchet up the bill.
I don't think NYU is unique, and I'm not sure how well the new "transparency" movement, to open up procedure and other costs to consumers, really measures up. When I checked a couple of pricing sites offered by health insurers to members, the figures I saw were charges, so they don't necessarily have much to do with what a provider gets, or what a patient pays.
To solve healthcare problems, we need to measure them first. But with a bunch of you-pick-'em yardsticks for measuring "costs," how can we possibly know how large they are, or the true savings from reducing them? Technology doesn't have an answer for that.