Cost Now a Key Factor in the Health Care Equation

When Dr. Cynthia Point was a medical resident 15 years ago, there was a sure-fire way to win favor with superiors: Every time a patient came into the hospital, the newly minted doctors would order up the biggest battery of tests they could think of.

The more tests, the reasoning went, the more likely it was that the young doctors would be able to diagnose or rule out rare conditions that might be afflicting a patient, even if symptoms could have signaled something as simple and common as heartburn.

Now, Point says, that rarely happens. As early as medical school, would-be doctors are learning to conserve resources, earning their brownie points by judiciously testing patients just for the most common conditions--and, if necessary, any life-threatening illnesses--before ordering more complicated and expensive tests for rare diseases.

The inspiration for this shift--welcomed by many as the only way to keep health care costs from spiraling out of control--is that old bugaboo, managed care. After more than a decade under its often oppressive yoke, many doctors and hospitals instinctively consider the cost of treatment when deciding how best to take care of patients.

“The culture of medicine is changing,” said Dr. Earl Washburn, a pediatrician who practices in Placerville.

Managed care plans applaud this development, saying that it allows them to step back from micromanaging patient care and concentrate on providing services to physicians and patients.

In a particularly dramatic example, the nation’s second-largest insurer, United HealthCare Corp. of Minneapolis said last week that it would no longer require doctors to obtain permission before ordering hospital admissions and medical treatment. The company said it was spending more than $100 million reviewing doctors’ decisions. But so few treatments were denied that it was more economical to dismantle the preauthorization bureaucracy than to continue the oversight.

Washburn, who has been practicing since 1976, said he has incorporated a number of managed care practices into his regular routine. For example, he said, because health maintenance organizations rarely authorize prescriptions to run for more than a month at a time, he has simply quit writing long-term medication orders.

One of the biggest changes has grown out of the way both Medicare and managed care pay for hospitalization. Today, most stays in the hospital are minimized, with the patient checking in just hours before a surgical procedure instead of the night before.

Except in some very dramatic cases--such as women sent home just hours after delivering a baby--many doctors have changed their views about the length of time that a patient should be in the hospital.

“I don’t think anybody that I know wants to go back to the way it was 30 years ago, when even for a simple procedure everyone was in the hospital for several days,” said Washburn. Patients, he said, can be exposed to infection in hospitals, and many recover better at home. Medicine has changed, he said, “some because we were forced to and some because there has been a general rethinking.”

But some question whether the pendulum will slide inexorably back if health plans loosen their grip, slowly returning doctors and patients to a time when money was no object and health care costs were going through the roof. And there are those who reject the very notion that physicians ought to consider cost when dealing with human lives.

The idea that scarce resources require cost to be considered along with quality runs counter to medicine’s long-held admonition to separate financial concerns from patient care, said Peter Lee, executive director of the Center for Health Care Rights in Los Angeles. But, he said, such a view is no longer realistic.

“That bubble has been burst,” Lee said. “Cost has to be part of the equation.”

The pressure to begin conserving medical resources actually started just before the managed care revolution, when the federal government began changing the way it paid its Medicare bills in the 1980s.

Medicare, for example, began to pay a lump sum for the treatment of certain illnesses, rather than paying for each visit to the doctor or the hospital. This meant that a doctor would in a sense lose money if the patient came in too often.

Managed care companies set up similar programs, designed to provide financial incentives to doctors who saw patients less often or ordered fewer tests. To do this, the health plans would typically pay physicians a set monthly fee out of which all aspects of patient care had to be paid. The more care provided, the less money the doctor made. On top of this, the plans imposed strict preauthorization rules, requiring doctors to get permission before undertaking most treatments and hospital admissions.

Health economists who have studied the changes wrought by managed care say there’s no question that practice patterns--the types and volume of treatments, tests and prescriptions offered to patients--have changed under managed care. But, they say, it is difficult to tell whether those patterns will remain in place if the financial restrictions imposed by health plans and large medical groups are relaxed or eliminated.

The success of the United HealthCare effort, for example, depends in large part on whether other health plans follow suit, said Glenn Alan Melnick, a health economist at USC. If none of the other plans drop their preauthorization policies, then doctors will likely continue to conserve care with United patients, because it could be too much hassle to distinguish one group of patients from another, Melnick said.

But, he predicted, if all of the plans loosen up, doctors could begin to spend more.

“They will not go all the way back, but let’s say they drift 3% a year,” Melnick said. “We have a health care economy of more than $125 billion in California. So a small percentage change will mean a lot of money.”

But, Lee said, the new mind-set of conserving care can be dangerous if the bottom line becomes the only concern--or if patients are not included in the consideration of cost as well as treatment.

“Managed care has succeeded in making cost a part of the equation for doctors, but not part of the equation for patients,” Lee said.

Keeping patients in the dark about cost could affect them whether a doctor is trying to economize or not. For example, some patients might not want to start treatment with a less expensive procedure if they believe a more costly one would be more effective. On the other hand, patients whose doctors prescribe expensive drugs with high co-payments might not be able to afford it, and might ration the medication and possibly endanger their lives.

Others warn that health plans could step back formally from the process of reviewing medical decisions, but in reality simply pass that function on to the large physician groups that provide most managed care services in California.

PacifiCare Health Systems, for example, pays physicians a set monthly fee for each patient, from which they must pay for nearly all aspects of care. Such a move, however, just shifts the review to the board or medical director of the physician group, and provides powerful financial incentives to ration care--some say by too much.

The financial pressure is even worse, physicians say, on doctors in small groups or private practice, because the monthly fees are fixed, and the doctor’s own income could swing wildly depending on the treatments and prescriptions ordered for patients.

“I believe that having prepaid plans for individuals is bordering on unethical,” said Dr. Elliot Lepler, who is a member of a Santa Clara County medical group that pays physicians a salary to insulate them from such shifts in income. “Strong financial incentives have the potential for changing medical care in a way that doesn’t benefit patients.”

Still, said Oliver Goldsmith, medical director for Kaiser Permanente’s Southern California region, “someone has to help doctors do the right thing.”

At Kaiser, he said, there are no stark financial incentives prodding physician behavior and doctors have never been required to get permission before ordering a test or treatment. But the giant HMO’s doctors instinctively act in a way that conserves resources, Goldsmith said, because of the internal culture.

“We have a culture in Kaiser Permanente that physicians have to concern themselves with the overall cost of health care,” he said. “It’s a culture which I must say American medicine needs to learn.”

At United HealthCare, however, there is a sense that the broader culture has already changed, said William W. McGuire, chairman and chief executive of the company’s parent, UnitedHealth Group.

“People have learned a lot over the last 10 years,” McGuire said. “We’ve come a long way.”

The long road may simply lead back to the beginning.

“When my father was practicing medicine, there was no private insurance, so making a decision to go to the doctor meant making a payment,” said Point, a fifth-generation doctor who practices in San Francisco. “So people would self-censor.”

Then, she said, during World War II, companies began to offer health insurance to employees, in lieu of pay raises.

“All of a sudden, a third party was paying all the bills,” Point said. “So the sky was the limit.”