Healthcare not incentivized to eliminate profitable procedures that may not benefit patients

Better care not always better business

By Erin McCann
09:26 AM

Transparency is a touchy subject in healthcare. It's one of the last market strongholds desperately clutching to its principles of price secrecy, and it won't go down without a fight. 

But many experts say this stands as one of many reasons the industry continues to drag its feet in the innovation arena. A provider generally functions as a profit-driven business, and if the consumer remains unable to compare hospital prices and outcomes, the chances of crafting effective incentives to improve quality and reduce costs are effectively nearing zilch. 

Are hospitals with the most prestigious reputation necessarily producing the best outcomes? Can a patient go to another hospital and have a medical procedure done, same quality but for a fraction of the cost? Many emphatically nod their heads yes. But have fun prying the data out of industry's clenched fists.   

There are many reasons for the lack of transparency in healthcare, said Alan Russell, PhD, at the Boston iHT2 Health IT Summit on May 7. Russell, a leader in the field of regenerative medicine, is also the Highmark Distinguished Career Professor at Carnegie Mellon University's Institute for Complex and Engineered Systems where he leads a team researching ways to make healthcare solutions more accessible, affordable and high-quality.

[See also: Most states fail to provide healthcare price transparency to patients.]

Nationwide, providers are struggling financially due to low Medicare and Medicaid reimbursements, declines in patient volumes, upticks in charity cases and bad debt cases. If patients are incentivized to shop around for prices, that may represent enormous implications for a hospital's bottom line. 

"Many of incentives that exist in our healthcare system are not aligned to deliver the right care, at the right time, at the right place," said Russell at the Boston iHT2 Health IT Summit on May 7. The healthcare industry, he explained, has grown up designing therapies to treat symptoms, which is fundamentally flawed but much more lucrative. "Who would make money from (curing a disease)?" he asked. 

Russell cited the work of Blair Jobe, MD, of the Allegheny Health Network, who used regenerative medicine to more effectively treat esophageal cancer, which currently has a 90 percent mortality rate within five years of diagnosis.  

Currently, when a patient is diagnosed with esophageal cancer, often an esophagectomy is recommended. This procedure comes with a 50 percent complication rate and up to a 21 percent mortality rate. In other words, there's opportunity for improvement. 

With numbers like these, "Why is that the treatment?" Russell asked. 

Pricewise, however, the surgery itself can range from $21,000 to $66,000 -- even these numbers are difficult to find -- with overall hospital charges reaching a potential $150,000 due primarily to length-of-stays, which generally average 16 days. 

[See also: IOM report: Informatics, transparency and data to fix healthcare crisis.]

Using a minimally invasive regenerative approach by essentially peeling off the cancerous lining of the esophagus and replacing it with a regenerative cell lining, Jobe has been able to cut patient length-of-stays by up to 40 percent. 

Although the procedure itself may ultimately prove more expensive, the decrease in patient stays has serious implications. The industry, Russell stressed, has reason to fear the implications of such innovation. "Think about how would the hospital system that does 150 esophagectomies a year, 10-day inpatient stays, couple hundred thousand dollars per patient, how would that system react to the surgeon who says, 'Ah, we can just do that in an outpatient procedure and maybe drop those numbers by 50 percent, 75 percent?'" he posed to the audience. "This kind of disruption . . . creates real pressures on the status quo."

But it's disruption that needs to materialize, and many say that can only happen with competition and innovation. 

"Some of the biggest names in healthcare may or may not have the best care," said Michael L. Millenson, president of Health Quality Advisors, and champion of a value-based healthcare system, in an August interview with Healthcare IT News. And both patients and providers should have access to that information. 

[See also: URAC, Leapfrog put the spotlight on hospital transparency .]

Millenson cited Cadillac as a comparative example. Upon its inception, the car marque essentially enjoyed a monopoly in the luxury car market, establishing a big name. However, when competitors emerged and more quality products became available for lower prices, customers soon realized the brand name wasn't always indicative of the best product; thus fewer people were purchasing the cars. 

Others, however, say one can't take what's happening in other markets and flawlessly apply it to healthcare. 

Peter Ubel, MD, behavioral scientist at Duke University, said it's just not that simple. "For starters, most patients have little inclination, or motivation, to shop for health-care bargains, (as) insurance companies pick up most of the tab for patients' healthcare," he wrote in The Atlantic this April. "A patient who pays a $150 co-pay for an MRI (like I do with my insurance) won't care whether the clinic she goes to charges the insurance company $400 or $800 for that MRI."

Paul Ginsburg, healthcare economist at the Center for Studying Health System Change, agrees that price transparency is not necessarily the magic answer. However, he maintains that quality transparency does pack a powerful punch. "The more aware consumers are of the ill effects of poor-quality care, the stronger the movement to build transparency initiatives that help patients choose providers wisely and inspire physicians, hospitals, and other providers to improve their performances," Ginsburg said in a 2010 healthcare workshop series summary. 

He argued, however, that the notion of transparency is far from one-dimensional and extends far beyond access to quality metrics data. The data needs to be presented in a variety of ways for a variety of consumers. "Sophisticated consumers may seek and understand more detailed and complex data, while others might be satisfied with less-detailed descriptions of provider quality."
In Ginsburg's mind, the provider, patient, intermediaries and the government alike all have roles to play in the transparency department, but until they begin playing these roles aggressively, real change isn't going to materialize any time soon.

Nevertheless, in the wake of more states signing legislation requiring increased healthcare price transparency for the consumer and the recent hospital-pricing database released by HHS, the industry appears to be fighting a losing battle -- however sluggish the pace.  

Added Russell, "In medicine, there are many sacred cows that really just shouldn't be as sacred as they are. They've become sacred, and they've become the foundation of paying for healthcare and generating revenue, and so they're very hard to displace."