NEW YORK ( TheStreet) -- In previous articles in my series on health care, I have made numerous references to Dr. John Wennberg, arguably the leading researcher and thinker on needed reforms to the U.S. health care system. Wennberg's ideas are set forth in his latest book, Tracking Medicine: A Researcher's Quest to Understand Health Care. This article is based on Wennberg's published work as well as a recent interview I conducted with him.

As I have noted previously, Wennberg and colleagues at The Dartmouth Institute for Health Policy and Clinical Practice collected data on the health care that patients with chronic illness received in their last two years of life.

This is a significant health care sample because their treatment accounts for about 32% of total Medicare spending, or approximately $150 billion annually. Much of the money spent goes to physician and hospital fees associated with repeated hospitalizations.

Wennberg and colleagues found:
  • There is remarkably little correlation between the prevalence of severe chronic illness and per capita Medicare spending across regions.
  • There was a nearly threefold variation across hospitals in dollar spending, average hospital days and physician visits.

Why would such variations occur? Wennberg concluded "the variation ... cannot be explained by illness, medical evidence or patient preference." One might think it had to do with the severity of the disease. But Wennberg studied such a large sample that differences in severity would have averaged out. More expensive diseases? No. The 2008 Dartmouth Atlas compared costs across hospitals for patients with similar chronic illnesses. More expensive regions? No. The data show large variations of care within the same regions.

The over-riding conclusion is that the supply of doctors, hospitals, diagnostic machines, etc. explains variations in use:
  • The supply of hospital beds explains 54% admissions for all medical conditions.
  • The supply of cardiologists explains 49% of cardiac appointments.

Wennberg concluded:
  • Supply-sensitive care accounts for well more than half of Medicare spending, with most going to patients with severe chronic illness.
  • Whether from the patient's perspective (satisfaction, technical quality, health outcomes) or from physicians' perspective (quality of communication among physicians, continuity of care), higher spending and greater use of supply-sensitive care is not associated with better care.
  • Greater per capita use of supply-sensitive care and more spending do not result in lower mortality or improved quality of life; nor do they lead to improvement in the quality of care.
  • If the U.S. modeled its health care on efficient providers such as the Mayo Clinic, the Geisinger Clinic and the Cleveland Clinic, we could shave 30% to 40% off the cost of caring for Medicare's chronically ill patients -- and need fewer physicians in the United States than we already have;
  • Overtreatment harms patients, and it contributes to the chaotic quality of American health care. Also, overtreatment wastes taxpayer dollars;
  • Various estimates for the amount we waste on overtreatment in this country range between 20 to 30 cents on every health care dollar spent.

So what is the remedy for overuse of supply-sensitive care? Wennberg told me that it would be a redesign of the clinical pathways for managing chronic illness to rationalize care over the course of illness, including:
  • the relationships between primary care and medical specialists;
  • the use of team medicine to build infrastructure to reduce "rescue" medicine that takes place in acute care hospitals; and
  • the provision of humane end-of-life care that reduces the risk of a "high tech" death.

U.S. Health Care Manpower Issues

Dr. Wennberg said the new health care legislation includes important steps to move the U.S. away from supply-driven, fee-for-service care toward the care that he and his colleagues advocate. But he added, "While these 'microsystem' issues are extremely important, the macro issues concerning health care manpower are equally important, and are getting very little attention."

Dr. Wennberg believes that as part of the needed reorganization of health care, the roles of the primary care physician and specialists should be changed. Right now, patients with serious chronic illnesses are often referred by their primary care physician to specialists who then take over responsibility for care. Since specialists are expensive, the referral means that costs are greater and continuity of care can be jeopardized. Are patients referred unnecessarily? Often, yes. And as studies by Brent James of Intermountain Healthcare have shown, primary care physicians, working in a team with medical specialists and nurse practitioners, provide high-quality, low-cost care.

As I see it, this is how the system works: maximizing revenue into the system. In essence, primary care physicians have become marketing agents for specialists, hospitals and diagnostic tests.

But Wennberg wants to change this. He wants the role of the primary care physician to be enhanced: Rather than be a ticket provider to specialists, he wants the primary care provider to be the manager of the team dedicated to taking care of America's chronically ill over time. Wennberg believes unnecessary referrals to specialists are an important reason for why health costs are so high -- and why quality is often low. It's because no one is really in charge.

But there are real problems in getting this to happen. One of them is our education system for physicians. To understand this, a brief introduction to U.S. medical manpower determinants is needed. Following medical school, U.S. doctor candidates must do residencies at teaching hospitals. This is a big business and is heavily subsidized by the federal government. In a 2009 blog entry at Fitzhugh Mullan and Elizabeth Wiley reported that in 2007, Medicare paid hospitals almost $9 billion for residency training. That works out to approximately $96,000 per resident.

Mullan and Wiley wrote:
"Not surprisingly this system is enormously popular with teaching hospitals since it represents a large and predictable funding stream based on the number of residents they employ -- and employ is the operative word. Residents are learners, to be sure, but with their 80 hour weeks, they are also valuable and inexpensive skilled labor."

Now, you might think that because Medicare pays this money, it can control how it is spent. So if there was a general consensus among experts such as the World Health Organization, Wennberg and Mullan and Wiley et al., that more primary care physicians were needed (and there is), Medicare could change the primary care/specialists training mix in residencies.

Apparently not. Teaching hospitals have a lot of clout and get what they want: subsidized workers. Now if the manpower needs of the teaching hospitals reflected overall U.S. needs, there would not be a problem. But there is a problem.

Mullan and Wiley write:
"The complement of residents that hospitals need to staff their services is not the same complement that the nation needs to deliver health care to 300 million people -- 99% of whom are not in a hospital. The pattern of training in US hospitals is heavily specialty oriented reflecting the intensivity of hospital care as well as the more lucrative payments associated with many specialty services."

And if we should be training more primary care physicians and fewer specialists, things are getting worse.

Again, Mullan and Wiley:
"... the pattern of residencies offered by hospitals has become more and more specialized at the expense of primary care. Between 2002 and 2007, hospitals opened 7754 more new residency positions, 88.3% of which were in specialty care.... During the last decade, 20 family medicine residency programs have been closed and 645 less residents are being trained in family medicine today than ten years ago. In 1998, 54% of internal medicine residents planned careers in primary care, whereas only 23% did in 2007."

It will take a dramatic change in incentives to get doctor candidates to favor primary care over medical specialties. According to 2006 health data from the Organisation for Economic Co-operation and Development, the average compensation for U.S. general practitioners is $161,000 while specialists earn $230,000, or 43% more.

Another point: The teaching hospitals claim the U.S. is facing a doctor shortage and that they need more federally subsidized slots. Wennberg and other medical manpower experts disagree. They argue that if our physicians were used properly, the U.S. would have plenty. The problem appears to be disorganized care.

Wennberg cited the example of Massachusetts, where subsequent to the passage of its bill to create near-universal coverage, it became hard to get an initial appointment with a doctor. Why? Because insurance companies, in their efforts to improve "efficiency," have pushed physicians to see a patient every 10 minutes. It's difficult to establish a relationship with a new patient and work out what he or she might need in only 10 minutes.

It is thus far better for the physician to schedule a revisit with an existing patient, even though the "unintended consequence" is an apparent scarcity of physicians. The Massachusetts experience is instructive concerning the pseudo-scarcity phenomenon that arises once the previously uninsured gain access to care. It simply is not a problem of needing more physicians: Of all the 50 states, on a per capita basis, Massachusetts has the most clinically active primary care physicians -- and medical specialists.

Dr. Wennberg, citing the frugal use of physicians by organized systems of care such as the Mayo Clinic, believes that the access problem in Massachusetts arises from the disorganized nature of health care in that state. He warns against the knee-jerk reaction that the solution is to train more physicians. This, he says, is a direct ticket to higher costs and more care of questionable value, without evidence that more is better.

Some medical manpower experts are greatly dismayed by new legislation to increase Medicare-subsidized residencies by 15%.

Mullan and Wiley write:
"The 15,000 resident provision of these pieces of legislation, despite the rhetorical support for primary care, will bring us more of the same subspecialty oriented training patterns well established in the past several decades. In the face of depressed interest in primary care, more cap is unlikely to result in more primary care trainees and will ultimately play out as more subsidized specialty slots. The most likely 'primary care' positions to fill would be internal medicine positions and the majority of these will go on to specialize. ... The provision will add substantially to the cost to Medicare GME and to the cost of Medicare in the future. The money, the signal and the downstream effect will compete with and likely overwhelm other workforce reform strategies."


As Wennberg points out, there are numerous micro and macro issues causing U.S. health care to cost far more than any other country in the world. In the final part of this series, I will discuss the chances the U.S. will get a better health care system in the foreseeable future.
Elliott Morss is an economic consultant and an individual investor in developing countries. He has taught at the University of Michigan, Harvard University, Boston University, among other schools. Morss worked at the International Monetary Fund and helped establish Development Alternatives Inc. He has co-written six books and published more than four dozen articles in professional journals.

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