As the Puddin Churns

Overutilization is the single biggest problem with Health Care in America and there are traditionally two sides of it: Doctors and Patients. The overutilization of Health Care on the part of Doctors is the side that gets all the press. We hear all about how Doctors order too many tests or prescribe too many drugs.  However, you rarely hear about Patient overutilization; unnecessary visits, demand for unnecessary drugs, using the ER as primary care, demand for ancillary services, etc.  I’ll talk about both sides in posts to come to try and illustrate just how pervasive the overutilization problem is and how tricky it will be to solve it.  I’m also going to talk about a third side to this problem:  something I call Third-Party providers.  These are the companies and providers that provide Health Care Services to patients other than physician and hospital services, such as Home Health, Durable Medical Equipment providers, pharmaceutical companies and such.  No one ever talks about the problems created by these providers, but I’ll give you my take on where they fit in the overutilization puzzle.

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Doctors

First, let’s tackle the problem with Doctor’s overutilization.  Physician overuse of the medical system stems from 3 main sources: 1)Malpractice suit fears, 2)Patient demand and 3)The current reimbursement scheme.

1)Malpractice Suit Fears

This is the one you hear about the most:  Because of the highly litigious society we live in, Doctors are afraid of being sued.  So, they tend to order more tests to rule-out serious conditions.  No Doctor wants to be sued, only to find out that if he had just ordered that rare blood disease test that costs $1000, he would have been in the clear.  As a result, many Doctors now practice “cover-your-ass” medicine; they don’t want to miss a diagnosis however rare and unlikely it might be.

2)Patient demand

Believe it or not, Patient demand is a big driver in the overuse of medicine.  For example, if a patient comes into the Doctor with cold symptoms, the Doctor is not naturally inclined to write a prescription since antibiotics are not effective against the cold virus and symptomatic care is available over-the-counter; i.e., there’s nothing the Doctor can do except recommend rest, fluids and OTC symptomatic relief.  Most patients are not satisfied with this answer; they didn’t take time off of work and pay the Doctor a copay to hear that they just need to take it easy and take DayQuil!  Chances are, the patient will request an antibiotic and some stronger form of symptomatic relief.  And, in most cases, the Doctor will comply, not wanting to lose a patient.     Now, I’m not excusing the Doctor here; the Doctor knows better.  But I can certainly understand the thinking: “If I don’t give this patient what they want, chances are that someone else will and I risk losing a piece of my income stream.”  Similar scenarios play out regarding lab tests, ancillary services, etc.

3)The current reimbursement scheme

The way Doctor’s are paid has a lot to do with the way they practice medicine.  This is a natural consequence of medicine being a business and the fact that medicine is a very unique kind of business.  First of all, the price that Doctor’s charge for their services is very seldom the amount they actually get paid.  An optimistic estimate would be that Doctors are reimbursed at a rate of about 50% of what they actually charge. Furthermore, Doctors don’t get paid right away for services and sometimes they don’t get paid at all.  Most Doctors consider themselves lucky if they collect 85% of what they are entitled to within 30 days of the service date.  Therefore, on a per visit basis, reimbursement is pretty low.  So, like with any business, the lost revenue needs to be made up somewhere.  Thus, Doctors order tests and add on treatments, sometimes unnecessarily, in an effort to bring the per visit reimbursement up to a level that makes them profitable.

Now please understand:  I’m not trying to say that all Doctors do these things, or that Doctors are evil and I’m also not trying to excuse the overuse of medicine.  All I am saying is that our current medical system sets up situations in which many Doctors feel forced into adding on services in order to make ends meet.

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So, how do we solve this problem?

1. Tort Reform – Until we rein in out-of-control lawsuit abuse, Doctors will continue to practice CYA medicine.
2. Incentivize Better Standards – Right now, there is too much variation in how Doctors practice.  For example, while one doctor might refuse on principle to give antibiotics for a virus-based illness (as they should!) another will be happy to comply with providing a prescription in order to keep the patient happy.  In other words, the second doctor is incentivized to practice bad medicine because he gets more patients (and thus more money) that way.  If payers started incentivizing Doctors who practice what is called Evidence Based Medicine and penalizing those who refuse to comply, behavior would change in a hurry.