Doctors Don't  Drive Up Costs: Poverty Does

The short and simple annals of the poor.

Thomas Gray (1716-1771) , Elegy Written in a Country Churchyard

August 11, 2012 -   I am a big fan of Phillip Miller, VP of Communications at Merritt Hawkins and Associates, a physician recruiting firm, and of Richard “Buz” Cooper, MD, Professor of Medicine and Senior Fellow in the Leonard Davis Institute of Health Economics at the University of Pennsylvania.  

Each is a  fine, clear, and direct writer.

Both  firmly grasp what drives up health costs.  

Recently Dr. Cooper made a presentation before an audience of physician workforce consultants at Merritt Hawkins,  and I could not resist reprinting this piece by Phillip Miller. I often read Dr. Cooper’s blogs at buzcooper.com, and I recommend my readers do too. 

Cooper  turns the conventional wisdom of elite policy wonks on its head by saying, in essence, it isn't  “overdoctoring” that drives up costs; it’s sick poor patients who show up in the later stages of their illnesses in economically unstable parts  of the country – like the American South,  remote rural areas.  and  inner urban cities.

For Miller and Cooper,  poverty and economic instability i id  a short, simple, and reasonable explanation for cost varations across the U.S.

To wit:

Do Doctors Really Drive Up Health Care Costs?

By Phillip Miller

The “experts” are wrong. They are simply flat wrong.

That’s the only conclusion I believe a reasonable person can draw after reviewing the data and analysis compiled by Richard “Buz” Cooper, M.D., an oncologist and an internationally noted authority on physician supply and health care utilization studies.

Dr. Cooper recently presented his case before an audience of physician staffing consultants at Merritt Hawkins. His topic was current physician workforce trends, including why there are regional variations in both physician supply and in health care costs.

The conventional wisdom is that regional variations in cost are driven by variations in how physicians practice. Health care is provided relatively inexpensively in the upper Midwest, the argument goes, because physicians practice efficiently and keep utilization down. In other regions, by contrast, physicians “over-doctor,” driving up costs.

In the run-up to health reform it was repeatedly stated by policy makers and analysts that $700 billion in health care spending could be saved if physicians would only practice like they do in the upper Midwest and other low cost regions. Control how physicians practice and you can control healthcare spending, is the underlying basis of much of today’s health care policy.

But as Dr. Cooper clearly shows statistically, doctors don’t practice more efficiently in the Midwest. They practice more efficiently in economically stable parts of the Midwest. They also practice efficiently in economically stable parts of Manhattan, Los Angeles, and just about everywhere else. Dr. Cooper observes that health care costs are 82% of the national average in prosperous parts of New York City. Literally blocks away in less privileged areas, health care costs are three times the national average per capita, even though the hospitals and medical staffs serving patients from both areas are the same. Places where health care costs are thought to be high, such as much of the Northeast, are actually comparable to the Midwest and other low costs areas when you compare apples to apples, i.e., one economically stable population to another.

Though Dr. Cooper conceded there is ample waste and inefficiency in the health care system, he argues that it is economic disparity, not physician practice patterns, that drives health care utilization and therefore health care spending. Poorer people are demonstrably sicker and cost more to treat than do more economically stable people by a large margin. Therefore, the key to lowering health care costs is to reduce poverty and increase wealth. Standing over the shoulders of physicians telling them how to practice is not the answer.

This seems like a straightforward argument, but it is not one that is widely accepted in health policy circles, so perhaps I am missing something. Is the problem of rising health care costs derived mostly from how physicians practice, or mostly a result of economics? Or is there some other driving force? I would like to hear what you have to say on this topic and welcome your comments.

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Phillip Miller is Vice President of Communications for Merritt Hawkins, the leading physician search and consulting firm in the United States and a company of AMN Healthcare. He can be reached at phil.miller@mhagroup.com

Tweet: The principle driver of variation of health costs is economic instability and poverty,  not physician “overdoctoring.”