Regional variations - When Will They Ever Learn?

Where have all the flowers gone?
Long time passing
Where have all the flowers gone?
Long time ago
Where have all the flowers gone?
Girls have picked them every one.
When will they ever learn?
When will they ever learn?

Where Have All The Flowers Gone? Music and Lyrics, Pete Seegar

To slow spending growth, we need policies that encourage high-growth (or high-cost) regions to behave more like low-growth, low-cost regions — and that encourage low-cost, slow-growth regions to sustain their current trends. Our ongoing research program (funded in part by the National Institute on Aging) suggests that there are two broad and closely linked strategies for accomplishing these aims: fostering the growth of more organized systems of care and implementing fundamental payment reform.

Elliot Fisher, MD, Julie Byrun, MD, and Jonathan Skinner, PhD, “ Slowing the Growth of Health Care Costs – Lessons from Regional Variation,” New England Journal of Medicine, February 26, 2009

The Dartmouth Group’s latest work, as laid out in the February 26 New England Journal, on reducing regional variation, as the principle means of culling 30% waste out the system, will fail and will continue to fail.

Why? Stamping out variation violates the tenets of American culture – freedom to develop one’s own local and regional systems based on their culture and responding to the demands of that culture.

When will Dartmouth and other federal policy makers who want to wring variation out of the system ever learn? Ever since Wennberg’s original paper in 1973 on small area variations, Dartmouth’s has been proposing to homogenize and standardize Medicare payments across the U.S. These proposals, rational and scholarly though they may be, have had zero impact on regional cost variations.

Maybe there are lesions to to be learned from 36 years of futility.

When will Dartmouth-led policymakers ever learn,

1. That the U.S. is a vast diverse continental nation where health cost variations vary with local economies, socioeconomic differences of local and regional cultures, costs of living, and the competitive health care environments.

Costs are inherently higher in teeming urban centers with major academic centers. Care costs in Boston, for example, are 30% higher than the rest of the country. To ask Boston hospitals and doctors to lower their fees to match those of rural America defies logic and common sense. It will simply never happen, and it is the height of hypocrisy to pretend that it will.

2. That you cannot homogenize and standardize Medicare based payments without understanding what drives hospitals, doctors, and the local citizenry.

I recall the story of Paul Levy, CEO of Boston Israel Deaconess, in Boston. When asked why his hospital had purchased an expensive surgical robot, he said in a health blog labeled “Uncle!”, “Many months ago, I wrote about the da Vinci Robot Surgical System and expressed doubts about whether there was evidence to support the clinical efficacy of this equipment, as opposed to the marketing efficacy of the company selling it.

Well, the time has come to graciously say, "Uncle!"Without making any representations about the relative clinical value of this robotic system versus manual laparoscopic surgery, I am writing to let you know we have decided to buy one for our hospital. Why? Well, in simple terms, because virtually all the academic medical centers and many community hospitals in the Boston area have bought one.
3. That hospital executives and their boards are appointed to make sure their hospitals remain profitable, offer the latest in technologies, and rise to the top of the local or regional heap.

I wonder how a hospital board would react if a big city hospital CEO gathered his board together and announced: Ladies and Gentlemen, I have decided to lower our overall payments to match those of such and such a hospital in rural Alabama and for the nation as a whole for the common good of American society, even it means taking a loss, laying off employees, abandoning our mission to serve the poor, and jettisoning our expansion plans.

3. That health cost variations are very much a function of managed care market penetration and rules and regulations of a given state and metropolitan area.

In their article, Fisher et al note: “ Per capita Medicare spending from 1992 through 2006 varied in five U.S. hospital-referral regions. During this period, overall Medicare spending, adjusted for general price inflation, rose by 3.5% annually. But there was considerable variation among regions. Per capita inflation-adjusted spending in Miami grew at an annual rate of 5.0%, as compared with just 2.3% in Salem, Oregon, and 2.4% in San Francisco.”

Has it dawned on the authors that San Francisco and Salem, Oregon have heavy managed care penentration, that managed care dampens growth, and that its penentration varies greatly from one region to the next?

4. That other factors the Dartmouth folks mention vary profoundly from one region to the next. Here is their pitch.

“Consensus is emerging that integrated delivery systems that provide strong support to clinicians and team-based care management for patients offer great promise for improving quality and lowering costs. Most physicians already practice within local referral networks around one or more hospitals, which could form local integrated delivery systems with little disruption of practice. Policymakers would need to remove legal barriers to collaboration and offer incentives — such as larger payment updates or subsidies for implementing electronic health records — to providers who were willing to establish real or virtual accountable care systems. Our volume-based payment systems could then be changed to incorporate partial capitation, bundled payments, or shared savings, thereby fostering accountability for overall costs and quality of care. Although much remains to be learned about aligning reforms in delivery systems with payment reforms, early results from demonstration projects have been promising and could provide the foundation for national reform.”

This “integration” between hospitals and doctors and appeal for accountability. quality of care, and alignment of reforms, has a nice ring to it. Still, I wonder how man ymore years it will take to apply thse noble principles to all regions of the country, who may choose to continue to exercise their independence and judgments to their own well-being.